bus 321 dr. novi test 2

internalization advantages

are those that made it desirable for a firm to produce a good or service itself rather than contracting with another firm to produce it

proactive motivation

are those that pull a firm into foreign markets as a result of opportunities available there

specific tariffs

assessed as a specific dollar amount per unit of weight or other standard measure

differentiation strategy

attempts to establish and maintain the image (either real or perceived) that the SBU's products or services are fundamentally unique from other products or services in the same market segment

national defense argument

-Country must be self-sufficient in critical raw materials, machinery, and technology or else be vulnerable to foreign threats -Appeals to general public -Protects steel, electronics, and machine tools industries, and merchant marines

issues in international franchising

-Does a differential advantage exist in the domestic market? -Are these success factors transferable to foreign locations? -Has franchising been a successful domestic strategy?

turnkey projects disadvantages

-Financial risks *Cost overruns -Construction risks *Delays *Problems with suppliers

turnkey projects advantages

-Focus firm's resources on its area of expertise -Avoid all long-term operational risks

management contract advantages

-Focus firm's resources on its area of expertise -Minimal financial exposure

FDI disadvantages

-High financial and managerial investments -Higher exposure to political risk -Vulnerability to restrictions on foreign investment -Greater managerial complexity

Foreign Direct Investment (FDI) advantages

-High profit potential -Maintain control over operations -Acquire knowledge of local market -Avoid tariffs and NTBs

Infant Industry Argument

-Imposition of tariffs to give U.S. firms temporary protection from foreign competition until firms are fully established -Powerful economic development strategy -Which industries should be protected? For how long?

Maintenance of Existing Jobs

-Jobs in high-wage countries threatened by imports from low-wage countries -Forms of assistance *Tariffs *Quotas

factors affects international strategic management

-Language -Culture -Politics -Economy -Governmental interference -Labor -Labor relations -Financing -Market research -Advertising -Money -Transportation/ communication -Control -Contracts

franchising disadvantages

-Limited market opportunities/profits -Dependence on franchisee -Potential conflicts with franchisee -Possibility of creating future competitor

licensing disadvantages

-Limited market opportunities/profits -Dependence on licensee -Potential conflicts with licensee -Possibility of creating future competitor

franchising advantages

-Low financial risks -Low-cost way to assess market potential -Avoid tariffs, NTBs, restrictions on foreign investment -Maintain more control than with licensing -Franchisee provides knowledge of local market

licensing advantages

-Low financial risks -Low-cost way to assess market potential -Avoid tariffs, NTBs, restrictions on foreign investment -Licensee provides knowledge of local markets

contract manufacturing advantages

-Low financial risks -Minimize resources devoted to manufacturing -Focus firm's resources on other elements of the value chain

five largest soga soshas

-Mitsubishi Corporation -Mitsui & Company -Marubeni -Sumitomo Group -Itochu Corporation

management contract disadvantages

-Potential returns limited by contract expertise -May unintentionally transfer proprietary knowledge and techniques to contractee

factors in assessing new market opportunities

-Product-market dimensions -Major product-market differences -Structural characteristics of national market -Competitor analysis -Potential target markets -Relevant trends -Explanation of change -Success factors -Strategic options

contract manufacturing disadvantages

-Reduced control (may affect quality, delivery schedules, etc.) -Reduce learning potential -Potential public relations problems

exporting advantages

-Relatively low financial exposure -Permit gradual market entry -Acquire knowledge about local market -Avoid restrictions on foreign investment

issues in international licensing

-Set the boundaries of the agreement -Establish compensation rates -Agree on the rights, privileges, and constraints conveyed in the agreement -Specify the duration of the agreement

exporting disadvantages

-Vulnerability to tariffs and NTBs -Logistical complexities -Potential conflicts with distributors

motivations for exporting

-proactive -reactive

mission statements

-Clarifies the organization's purpose, values, direction -Communicates firm's strategic direction -Specifies firm's target customers and markets, principal products, geographical domain, core technologies, concerns for survival, plans for growth and profitability, basic philosophy, and desired public image

Compound tariffs

include both an ad valorem and a specific component

synergy

-Answer: How can different elements of our business benefit each other? -goal is to create a situation where the whole is greater than the sum of the parts

distinctive competence

-Answer: What do we do exceptionally well, especially as compared to our competitor? -represents important resource to the firm

scope of operations

-Answer: Where are we going to conduct business? -Aspects of scope *geographical region *market or product niches within regions *specialized market niches

foreign market analysis

-Assess alternative markets -Evaluate the respective costs, benefits, and risks of entering each -Select those that hold the most potential for entry or expansion

transnational strategy

(high,high) firm combines benefits of global scale efficiencies with benefits of local responsiveness

global strategy

(high,low) firm views the world as single marketplace. Goal is to create standardize products.

greenfield strategy

-Best site -Modern facilities -Economic development incentives -Clean slate

foreign direct investment

-Building new facilities (the greenfield strategy) -Buying existing assets in a foreign country (acquisition strategy) -Participating in a joint venture

multi-domestic strategy

(low,high) firm operates as a collection of relatively independent subsidiaries

home replication

(low,low) firm uses core competency or firm specific advantage

resource deployment

-Answer: Given that we are going to compete in these markets, how will we allocate our resources to them? -resources specifics *product lines *geographical lines

fundamental questions

-What products and/or services does the firm intend to sell? -Where and how will it make those products or services? -Where and how will it sell them? -Where and how will it acquire the necessary resources? -How does it expect to outperform its competitors?

Embargoes

-are an absolute ban on the export (or import) of goods to a particular location -They may be used by a country as a disciplinary measure

Foreign trade zones (FTZ)

-are geographic areas in which imported or exported goods receive preferential tariff treatment -used by governments to encourage regional economic development

Quotas

-are numerical limits on the quantity of a good that may be imported into a country during some period of time -are frequently used to protect industries that are politically powerful

Ad valorem tariffs

-assessed as a percentage of the market value of the goods -developed nations typically assess this tariff

single-business strategy

-calls for a firm to rely on a single business, product, or service for all its revenue -most significant advantage of this strategy is that the firm can concentrate all its resources and expertise on that one product or service

specialized entry modes for international business

-contract manufacturing -management contract -turnkey project

levels of international strategy

-corporate strategy -business strategy -functional stratgies

steps in international strategy formulation

-develop a mission statement -perform a SWOT analysis -set strategic goals -develop tactical goals and plans -develop a control framework

business strategy

-differentiation -overall cost leadership -focus

components of international strategy

-distinctive competence -scope of operations -resource deployment -synergy

national trade policies

-economic development programs -industrial policy -public choice analysis

types of export intermediaries

-export management company -Webb-Pomerene association -international trading company -other intermediaries

economic development program

-export promotion strategy -import substitution strategy

modes of entry

-exporting -international licensing -international franchising -specialized modes -foreign direct investment

voluntary export restraints (VERs)

-exporting countries adopt this in an effort to maintain a friendly relationship with trading partners -a promise by a country to limit its exports of a good to another country to a pre- specified amount or percentage of the affected market

Maquiladoras

-factories located in the free trade zone in Mexico along the U.S. border that import finished goods or component parts and re-export them to The United States, are the second largest source of foreign exchange earnings in Mexico -have been the target of environmentalists, who claim that the factories allow U.S. firms to escape environmental laws in their own country

functional strategies

-financial -marketing -operations -research and development (R&D) -human resources

sources of competitive advantage

-global efficiencies -multinational flexibility -worldwide learning

considerations for exporting

-governmental policies -marketing concerns -logistical considerations -distribution issues

strategic alternatives

-home replication strategy -multi-domestic strategy -global strategy -transnational strategy

tariff rate quota (TRQ)

-imposes a low tariff rate on a limited amount of imports of a specific good, but then subjects all imports of the good above that threshold to a prohibitively high tariff

forms of exporting

-indirect exporting -direct exporting -intracorporate transfers

Turnkey projects

-is a contract under which a firm agrees to fully design, construct, and equip a facility and then turn the project over to the purchaser when it is ready for operation -may be for a fixed price, in which case the firm makes its profit by keeping its costs below the fixed price. Or the contract may provide for payment on a cost-plus basis, which shifts the risk of cost overruns from the contractor to the purchaser.

harmonized tariff schedule (HTS)

-is a detailed classification scheme for imported goods -Companies use this to try to determine what tariffs will be assessed on their goods.

intracorporate transfers

-is the sale of goods by a firm in one country to an affiliated firm in another -They account for about 40 percent of all U.S. merchandise exports and imports -Many MNCs constantly engage in such transfers, importing and exporting semifinished products and component parts in order to lower their production costs

advantages of related diversification

-less dependence on single product -greater economies of scale -entry into additional markets more efficient and effective

global efficiencies

-location efficiencies -economies of scale -economies of scope

more export intermediaries

-manufacturers' agents -manufacturers' export agents -export and import brokers -freight forwarders

tactical goals and plans

-middle management issues -details of implementation -examples: *hiring *compensation *career paths *distribution and logistics

industry-level arguments

-national defense -infant industry -maintenance of existing jobs -strategic trade

direct exporting

-occurs through sales to customers—either distributors or end-users—located outside the firm's home country -a firm's initial direct exporting to a foreign market is the result of an unsolicited order -the firm gains valuable expertise about operating internationally and specific knowledge concerning the individual countries in which it operates

indirect exporting

-occurs when a firm sells its product to a domestic customer, which in turn exports the product, in either its original form or a modified form -A firm also may sell to a foreign firm's local subsidiary, which then transports the first firm's products to the foreign country

Export-Import Bank of the United States (Eximbank)

-offers assistance to U.S. exporters in the form of direct loans and loan guarantees -may also arrange for commercial insurance services

corporate strategy

-single-business strategy -related diversification -unrelated diversification

developing international strategies

-strategy formulation -strategy implementation

SWOT analysis

-strengths -weaknesses -opportunities -threats

strategy implementation

-the firm develops the tactics for achieving the formulated international strategies - is usually achieved via the organization's design, the work of its employees, and its control systems and processes

strategy formulation

-the firm establishes its goals and the strategic plan that will lead to the achievement of those goals -managers develop, refine, and agree on which markets to enter (or exit) and how best to compete in each

related diversification

-the most common corporate strategy, calls for the firm to operate in several different but fundamentally related businesses, industries, or markets at the same time -This strategy allows the firm to leverage a distinctive competence in one market in order to strengthen its competitiveness in others

contract manufacturing

-used by firms, both large and small, that outsource most or all of their manufacturing needs to other companies -This strategy reduces the financial and human resources firms need to devote to the physical production of their products

licensing process

1. licensor-- leases the rights to use its intellectual property 2. licensee-- uses the intellectual property to create products for local sale 3. licensee-- pays a royalty back to the licensor 4. licensor-- earns new revenues with relatively low investment

Webb-Pomerene Association

Association is a group of U.S. firms that operate within the same industry and that are allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws

strategic business units (SBUs)

Firms that pursue corporate strategies of related diversification or unrelated diversification tend to bundle sets of businesses together into

international licensing

Licensing is when a firm, called the licensor, leases the right to use its intellectual property—technology, work methods, patents, copyrights, brand names, or trademarks—to another firm, called the licensee, in return for a fee

ownership advantages

are tangible or intangible resources owned by a firm that grant it a competitive advantage over its industry rivals.

International Strategic Management

a comprehensive and ongoing management planning process aimed at formulating and implementing strategies that enable a firm to compete effectively internationally

export promotion strategy

a country encourages firms to compete in foreign markets by harnessing some advantage the country possesses, such as low labor costs

environmental scan

a systematic collection of data about all elements of the firm's external and internal environments, including markets, regulatory issues, competitors' actions, production costs, and labor productivity

location advantages

are those factors that affect the desirability of host country production relative to home country production

unrelated diversification

a firm operates in several unrelated industries and markets

acquisition strategy

a second FDI strategy is the acquisition of an existing firm conducing business in the host country (brownfield strategy)

manufactures' export agents

act as a foreign sales department for domestic manufacturers, selling those firms' goods in foreign markets

franchising

agreement allows an independent entrepreneur or organization, called the franchisee, to operate a business under the name of another, called the franchisor, in return for a fee

management contract

an agreement whereby one firm provides managerial assistance, technical expertise, or specialized services to a second firm for some agreed-upon time in return for monetary compensation

Joint ventures (JV)

are created when two or more firms agree to work together and create a jointly owned separate firm to promote their mutual interests

export and import brokers

bring together international buyers and sellers of such standardized commodities as coffee, cocoa, and grains

overall cost leadership

calls for a firm to focus on achieving highly efficient operating procedures so that its costs are lower than its competitors'

strategic

costly, difficult to reserve, well thought out

reactive motivation

exporting are those that push a firm into foreign markets, often because opportunities are decreasing in the domestic market

free trade

implies that the national government exerts minimal influence on the exporting and importing decisions of private firms and individuals

Nontariff barriers (NTBs)

include quotas, numerical export controls, and other nontariff barriers that impede international trade.

value chain

is a breakdown of the firm into its important activities—production, marketing, human resource management, and so forth—to enable its strategists to identify its competitive advantages and disadvantages

export management company (EMC)

is a firm that acts as its client's export department by managing the legal, financial, and logistical details of exporting, and providing advice about consumer needs and available distribution channels in the foreign markets the exporter wants to penetrate

tariff

is a tax placed on a good involved in international trade

Overseas Private Investment Corporation (OPIC)

political risk insurance is provided to U.S. exporters this

Subsidies

reduce the cost of doing business, thus artificially affecting the competitiveness of receiving firms

liability of foreignness

reflects the informational, political, and cultural disadvantages that foreign firms face when trying to compete against local firms in the host country market

manufacturers' agents

solicit domestic orders for foreign manufacturers, usually on a commission basis

export tariff

some are collected on goods as they leave a country

fair trade

sometimes called managed trade, suggests that the national government should actively intervene to ensure that domestic firms' exports receive an equitable share of foreign markets and that imports are controlled to minimize losses of domestic jobs and market share in specific industries

freight forwarders

specialize in the physical transportation of goods, arranging customs documentation and obtaining transportation services for their clients

focus

strategy calls for a firm to target specific types of products for certain customer groups or regions

import substitution strategy

such a strategy encourages the growth of domestic manufacturing industries by erecting high barriers to imported goods

Strategic Trade Theory

suggests that a national government can make its country better off if it adopts trade policies that improve the competitiveness of its domestic firms in such oligopolistic industries

Public choice analysis

suggests that special interest will often dominate the general interest on any given issue because special interest groups are willing to work harder for the passage of laws favorable to their interests than the general public is willing to work for the defeat of laws unfavorable to their interests

import tariffs

tariffs that are collected on imported goods

strategic goals

the major objectives the firm wants to accomplish through pursuing a particular course of action

industrial policy

the national government identifies key domestic industries critical to the country's future economic growth and then formulates programs that promote their competitiveness

strategic planning

the process of developing a particular international strategy

control framework

the set of managerial and organizational processes that keep the firm moving toward its strategic goals

tactics

usually involve middle managers and focus on the details of implementing the firm's strategic goals

international strategies

which are comprehensive frameworks for achieving a firm's fundamental goals