Part 6 - International business functions

Six Sigma

A business process for improving quality, reducing costs, and increasing customer satisfaction

Bill of exchange

A draft, sometimes referred to as a bill of exchange, is the instrument normally used in international commerce to effect payment. A draft is simply an order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time

Draft

A draft, sometimes referred to as a bill of exchange, is the instrument normally used in international commerce to effect payment. A draft is simply an order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time

A geocentric staffing policy

A geocentric staffing policy seeks the best people for key jobs throughout the organization, regardless of nationality.

Global distribution center

A global distribution center (or warehouse) is a facility that positions and allows customization of products for delivery to worldwide wholesalers or retailers or directly to consumers anywhere in the world. When warehousing shifted from passive storage of products to strategic assortments and processing, the term distribution center became more widely used to capture this strategic and dynamic aspect of not only storing, but also of adding value to products that are being warehoused or staged

The polycentric staffing policy

A polycentric staffing policy requires host-country nationals to be recruited to manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters. This is a way of coming about the shortcomings of the ethnocentric staffing policy and avoid cultural myopia.

pull strategy

A pull strategy depends more on mass media advertising to communicate the marketing message to potential consumers.

push strategy

A push strategy emphasizes personal selling rather than mass media advertising in the promotional mix. Although effective as a promotional tool, personal selling requires intensive use of a sales force and is relatively costly

A push strategy

A push strategy emphasizes personal selling rather than mass media advertising in the promotional mix. Although effective as a promotional tool, personal selling requires intensive use of a sales force and is relatively costly.

Server factory

A server factory is linked into the global supply chain for a global firm to supply specific country or regional markets around the globe. This type of factory—often with the same standards as the top factories in the global firm's system—is set up to overcome intangible and tangible barriers in the global marketplace

Sight draft

A sight draft is payable on presentation to the drawee

country of origin effects

A subset of source effects is referred to as country of origin effects, or the extent to which the place of manufacturing influences product evaluations. Research suggests that the consumer may use country of origin as a cue when evaluating a product, particularly if he or she lacks more detailed knowledge of the product.

Time draft

Allows for delay in payment. Normally 30, 60, 90 or 120 days. It is presented to the drawee, who signifies acceptance of it by writing or stamping a notice of acceptance on its face. Once accepted, the time draft becomes a promise to pay by the accepting party. When a time draft is drawn on and accepted by a bank, it is called a banker's acceptance. When it is drawn on and accepted by a business firm, it is called a trade acceptance.

An exclusive distribution channel

An exclusive distribution channel is one that is difficult for outsiders to access. For example it could be that it is hard to get shelf space for a new product in supermarkets, because they value the established manufactures with national reputation, rather than gamble on products of unknown firms. In fragmented systems, exclusivity of channels might be very high.

Expatriate manager

An expatriate manager is a manager from a country, who goes abroad to work in on of the firm's subsidiaries. HRM must decide when to use expatriates, determine whom to send on expatriate postings, be clear about the reasons why, compensate expatriates appropriately, and make sure that they are adequately debriefed and reoriented once they return home.

Just-in-time (JIT)

An inventory-management approach in which supplies arrive just when needed for production or resale

Outpost factory

An outpost factory can be viewed as an intelligence-gathering unit. This means that an outpost factory is often placed near a competitor's headquarters or main operations, near the most demanding customers, or near key suppliers of unique and critically important parts.

Channel length

Channel length refers to the number of intermediaries between the producer (or manufacturer) and the consumer.

Channel quality

Channel quality refers to the expertise, competencies, and skills of established retailers in a nation and their ability to sell and support the products of international businesses.

Corporate culture

Corporate culture is the organisation's norms and value systems. A strong corporate culture can help a firm implement its strategy. Some companies are not just concerned with potential employee's skill set but also the fit into the corporate culture.

Countertrade

Counter trade is a measure that a company can undertake if a country has a nonconvertible currency. This means that the country cannot exchange currency. This is a problem when exporting, because this implies that the exporter might not be paid in his or hers home country currency and when it is non-convertible you cannot use the currency outside of that country. Countertrade is a solution to this problem. These are an arrangement if barter-like agreements: Its principle is to trade goods and services for other goods

Expatriate failure

Expatriate failure is the premature return of an expatriate manager to his or her home country

Export-import bank

Export-import bank is a wholly owned U.S. government corporation that was established in 1934. Its mission is to assist in the financing of U.S. exports of products and services to support U.S. employment and market competitiveness. Based on its charter and mandate from the U.S. Congress, the Ex-Im Bank's financing must have a "reasonable assurance of repayment" and should supplement, and not compete with, private capital lending. The Ex-Im Bank also follows the international rules for government-backed export credit activity under the Organisation for Economic Co-operation and Development (OECD).

Flexible Machine Cells

Flexible manufacturing technology in which a grouping of various machine types, a common materials handler, and a centralized cell controller produce a family of products.

Global Supply Chain Coordination

Global supply chain coordination refers to shared decision-making opportunities and operational collaboration of key global supply chain activities.

International market research

International market research is defined as the systematic collection, recording, analysis, and interpretation of data to provide knowledge that is useful for decision making in a global company

experience curve pricing

Many firms pursuing an experience curve pricing strategy on an international scale will price low worldwide in attempting to build global sales volume as rapidly as possible, even if this means taking large losses initially.

Packaging

Packaging comes in all shapes, sizes, forms, and uses. It can be divided into three different types: primary, secondary, and transit. Primary packaging holds the product itself. These are the packages brought home from the store, usually a retailer, by the end-consumer. Secondary packaging (sometimes called case-lot packaging) is designed to contain several primary packages. Bulk buying or warehouse store customers may take secondary packages home (e.g., from Sam's Club), but this is not the typical mode for retailers. Retailers can also use secondary packaging as an aid when stocking shelves in the store. Transit packaging comes into use when a number of primary and secondary packages are assembled on a pallet or unit load for transportation. Unit-load packaging—through palletizing, shrink-wrapping, or containerization—is the outer packaging envelope that allows for easier handling or product transfer among international suppliers, manufacturers, distribution centers, retailers, and any other intermediaries in the global supply chain.

Reverse logistics

Reverse logistics is the process of planning, implementing, and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods, and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal

source effects

Source effects occur when the receiver of the message (the potential consumer in this case) evaluates the message based on status or image of the sender

Staffing policy

Staffing policy is concerned with the selection of employees for particular jobs. At one level, this involves selecting individuals who have the skills required to do particular jobs. At another level, staffing policy can be a tool for developing and promoting the desired corporate culture of the firm

ISO 9000

Standards have been made for operating in specific markets. For example in the European Union, the ISO 9000 is a quality standard place on firms operating here.

Supply chain management

Supply chain management is the integration and coordination of logistics, purchasing operations, and market channel activities from raw material to the end-costumer

Letter of credit

The bank's promise to pay on importers behalf, knowing the exporter will trust the bank. This promise is known as a letter of credit

Bill of lading

The bill of lading is issued to the exporter by the common carrier transporting the merchandise. It serves three purposes: it is a receipt, a contract, and a document of title

The concentrated retail system

The concentrated retail system is characterised by a few retailers suppling most of the market. In America there are a large retailors where the population drive to a get everything they need. In Japan small businesses are protected by law and they can block the establishment of a large retail outlet by petitioning their local government

Global Inventory Management

The decision-making process regarding the raw materials, work-in-process (component parts), and finished goods inventory for a multinational corporation.

The ethnocentric staffing policy

The ethnocentric staffing policy is where all key management positions are filled with parent-company nationals. This staffing policy has been wide spread, but today there is evidence that Chinese firms are pursuing this.

The fragmented retail systems

The fragmented retail systems is determined by many retailors where none of the retailers hold a majority market share.

Make-or-Buy decisions

The make or buy decisions are strategic decisions to be made about to produce in house or purchase it from outside supplier. There are both operational (short-term) levels and strategic levels (long-term).

Purchasing

The part of the supply chain that involves worldwide buying of raw material, component parts, and products used in the production of the final product.

Logistics

The part of the supply chain that plans, implements, and controls the effective flows and inventory of raw material, component parts, and products used in manufacturing.

price elasticity of demand

The price elasticity of demand is a measure of the responsiveness of demand for a product to change in price. Demand is said to be elastic when a small change in price produces a large change in demand; it is said to be inelastic when a large change in price produces only a small change in demand.

Production

The process of creating goods and services

Source factory

The purpose of this factory is also to drive down costs but the main difference is the strategic role of the factory, which is more significant for a source factory than an offshore factory. The managers at the source factory have a say in what materials (raw/components) to be used in the production. They also have a say in the production planning, process changes, logistics issues, product customisation, and implementation of newer designs when needed. At the top of this factory is the global supply chain and the factory is treated like the once on the home turf

Marketing Mix

The set of tactical marketing tools - product, price, place, and promotion - that the firm blends to produce the response it wants in the target market

Flexible manufacturing technology

The term flexible manufacturing technology—or lean production(Putting more emphasis on quality control/utilisation of different machines), as it is often called—covers a range of manufacturing technologies designed to (1) reduce setup times for complex equipment, (2) increase the utilization of individual machines through better scheduling, and (3) improve quality control at all stages of the manufacturing process.

mass customization

The term mass customization has been coined to describe the ability of companies to use flexible manufacturing technology to reconcile two goals that were once thought to be incompatible: low cost and product customization. Flexible manufacturing technologies vary in their sophistication and complexity. This is used in the transnational strategy.

Sogo Shosha

These are Japans great trading houses - These trading houses have offices all over the world proactively seeking export oppotunities for their affiliated companies (large or small)

Market segmentation

This refers to the process of identifying groups of consumers whose needs, wants, and purchasing behaviour differ from others in important ways. This segmentation can be done on the basis of: Geography, demography (gender, age, income, race, education level), sociocultural factors (e.g. social class, values, religion, lifestyle choices), ad psychological factors (personality).

Transportation

Transportation refers to the movement of raw material, component parts, and finished goods throughout the global supply chain. It typically represents the largest percentage of any logistics budget and an even greater percentage for global companies because of the distances involved.

Barter

Type of countertrade: A barter is a direct transaction of goods and services between two parties without any cash transaction. This is not a common way of counter trade, or though it is the simplest measure. Problems - If goods are not traded at the same time, one party ends up financing the other for a period - The companies that engage in this kind of barter run the risk of getting products that they do not need or cannot sell at a reasonable price For these reasons the barter is seen as the most restrictive countertrade arrangement. It is primarily used for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy.

Buybacks

Type of countertrade: A buyback occurs when a firm builds a plant in a country—or supplies technology, equipment, training, or other services to the country—and agrees to take a certain percentage of the plant's output as partial payment for the contract. For example, Occidental Petroleum negotiated a deal with Russia under which Occidental would build several ammonia plants in Russia and as partial payment receive ammonia over a 20-year period. Countries might actually prefer countertrade agreements to cash deals because it secures flow of goods and technology.

Counter-purchase

Type of countertrade: Counter-purchase is a reciprocal buying agreement. It occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.

offset

Type of countertrade: One party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale (like in the counter-purchase agreement). The difference from a counter-purchase is that the exporting party can fulfil the obligation with any firm in the country to which the sale is being made.

Switch trading

Type of countertrade: The term switch trading refers to the use of a specialized third-party trading house in a countertrade arrangement.When a firm enters a counter-purchase or offset agreement with a country, it often ends up with what are called counter-purchase credits, which can be used to purchase goods from that country. Switch trading occurs when a third-party trading house buys the firm's counter-purchase credits and sells them to another firm that can better use them

Offshore factories

Used to produce components or finished products at a lower cost than what is possible at home

Global learning

Valuable knowledge is not only inside a countries domestic market but the international market as well. This knowledge gained from foreign operations might result in gains on the firms domestic market.

Multipoint pricing strategy

When two or more international firms compete against each other in two or more national markets. A firm's pricing strategy in one market may impact a rival in another market.

Lead Factory

a factory that is intended to create new processes, products, and technologies that can be used throughout the global firm in all parts of the world

Contributor Factory

a factory that serves a specific country or world region. The main difference between a contributor factory and a server factory is that a contributor factory has responsibilities for product and process engineering and development.

Noise

anything that interferes with, distorts, or slows down the transmission of information

Intermarket segmentation

forming segments of consumers who have similar needs and buying behaviors even though they are located in different countries

Total Quality Management

managing the entire organization so that it excels on all dimensions of products and services that are important to the customer

Export management company

offers services to companies that have not previously exported products. EMCs offer a full menu of services to handle all aspects of exporting, similar to having an internal exporting department within your own firm. For example, EMCs deal with export documents and operate as the firm's agent and distributor; this may include selling the products directly or operating a sales unit to process sales orders.

Strategic Pricing

pricing aimed at giving a company a competitive advantage over its rivals

predatory pricing

selling a product below cost to drive competitors out of the market

minimum efficient scale

the level of output at which all economies of scale are exhausted

Upstream Supply Chain

the portion of the supply chain from raw materials to the production facility. This includes: suppliers, resources that are involved in the potion of the supply chain from raw materials to the production facility (This is called inbound supply chain)

downstream supply chain

the portion of the supply chain from the production facility to the end-customer(Includes: All of the organisation (wholesaler, retailer) that are involved in the portion of the supply chain (called outbound supply chain))

Human Resource Management (HRM)

the process of determining human resource needs and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling employees to achieve organizational goals