Chapter 5, 8 & 10
Vision Statement
A future-oriented declaration of an organization's purpose and aspirations
Characteristics of the WTO:
- Currently 160 nations - Primary purpose is to serve as a negotiating forum for member nations to dispute, discuss, and debate trade-related matters -Goal - reduce trade barriers and stimulate worldwide trade
Criticisms of NAFTA
- Enables corporations to relocate jobs and exploit low wage workers - Reduced sovereignty of the three nations * Weaker economies reduce neighboring economies * Destroys weaker markets in countries - All three countries have violated various NAFTA terms * U.S.'s refusal to allow Mexican trucks on U.S. highways * Mexico's violation worker's freedom of association * Canada's attempts to hinder American print advertisement
Four main types of regional economic trade blocks:
- Free Trade Area (NAFTA) - Customs Union (GCC) - Common Market (COMESA) - Economic Union (EU)
How do these Trade Agreements and Efforts Impact Business?
- Global businesses have benefited from the regional trade agreements by having more consistent criteria for investment and trade as well as reduce barriers to entry. - The challenges for businesses include finding themselves outside of a new trading bloc or having the "rules" for their industry change as a results of new trade agreements.
Pros of Regional Economic Integration
- Trade Creation - Employment Opportunities - Concensus and Cooperation - More Consistent Criteria for investment and trade - Reduced barriers to entry
Administrative distance
- absence of colonial ties - absence of shared monetary or political association - political hostility - government policies - institutional weakness
Strategies for Handling Institutional Voids
-Adapt its business model -Change the institutional context -Stay away
Non-ownership entry methods
-Exporting -Licensing -Franchising
These play sheriff to some degree
-GATT/WTO: General Agreement on Tariff and Trade / World Trade Organization. -ILO - International Labour Organization - World Bank -IMF - International Monetary Fund
Ownership entry methods
-Greenfield -Acquisition -Joint Venture
Economic Logic:
-How will we obtain our returns? ---Lowest costs through scale advantages? ---Lowest costs through scope and replication advantages? ---Premium prices due to unmatchable service? ---Premium prices due to proprietary product features?
NAFTA on Labor
-Right to Assemble -The right to collective Bargaining -The right to strike and refuse Labor -Child and young person labor sanctions -Minimum wage requirements -The expulsion of employment discrimination -Gender equality -Occupational hazard prevention -Compensation for occupational injury and/or illness -Protection for migrant workers
Rationale for International Expansion
-To Improve the cost-effectiveness of their operations -To expand into new markets for new customers -To follow global customers
When conducting a SWOT analysis, a firm asks four basic questions about itself and its environment:
-What can we do? -What do we want to do? -What might we do? -What do others expect us to do?
International Strategies
-multidomestic strategy -global strategy -transnational strategy
Three steps in the PESTEL analysis
1. Consider the relevance of each of the PESTEL factors to your context 2. Identify and categorize the information that applies to these factors 3. Analyze the data and draw conclusions
WTO Example Case
2007 - Brazilian ban on retread tires was inconsistent with WTO laws. 2010 - EU Subsidies to Airbus were inconsistent with WTO rules. Current - EU ban on seal products
Most-favored-nation clause (MFN)
A GATT provision that required member countries to automatically extend to all member countries the same benefits, usually tariff reductions, they agreed on with any other countries
What does the term "spaghetti bowl" mean?
A network of bilateral and multilateral trade agreements.
What is the UN Global Compact?
A platform for businesses to illustrate that they are good global corporate citizens
Scenario Planning
A process of analyzing possible future events by considering alternative possible outcomes (scenarios)
General Agreement on Tariffs and Trade (GATT)
A series of rules governing trade, created in 1947 by 23 countries. Most-Favored-Nation (MFN) clause requires members to automatically extend eh same benefits to all members.
Sustainable competitive advantage
A situation where an organization's strengths cannot be easily duplicated or imitated by other firms, nor made redundant or less valuable by changes in the external environment
Economic Integration (Asia)
ASEAN (Association of Southeast Asian Nations) - Focused on economic, social, cultural, and technical cooperation - Promotes regional peace and stability APEC (Asia-Pacific Economic Cooperation) - Only regional trading group that uses the term member economies, rather than countries, in deference to China.
Corporate Strategy
Address three questions: -In what businesses should we compete? -How can the parent company add value to the subsidiaries? -How can diversifying our business or entering a new industry help us compete in our other industries?
Absence of colonial ties would represent ________________ distance in Ghemawat's CAGE framework.
Administrative
Which of the following was the only agreed-upon sector for export subsidies in the GATT?
Agricultural Products
Potential Candidate Countries
Albania, Bosnia and Herzegovina, Kosovo under UN Security Council Resolution 1244, Montenegro, Serbia
Which of the following is an example of vertical scope?
An automaker buys the company that supplies tires for its vehicles
PESTEL analysis
An important and widely used tool that helps present the big picture of a firm's external environment in political, economic, sociocultural, technological, environmental, and legal contexts, particularly as related to foreign markets; analyzes for market growth or decline and the position, potential, and direction for a business
Acquisition
An international entry mode in which a firm gains control of another firm by purchasing its stock, exchanging stock, or, in the case of a private firm, paying the owners a purchase price
Strategic Alliance
An international entry mode involving a contractual agreement between two or more enterprises stipulating that the involved parties will cooperate in a certain way for a certain time to achieve a common purpose
Greenfield Venture
An international entry mode involving the establishment of a new, wholly owned subsidiary
Licensing
An international entry mode involving the granting of permission by the licenser to the licensee to use intellectual property rights, such as trademarks, patents, or technology, under defined conditions
Global Strategy
An international strategy in which the home office centralizes and controls decision-making authority and seeks to maximize global efficiency
Transnational strategy
An international strategy that combines firm-wide operating efficiencies and core competencies with local responsiveness tailored to different country circumstances and needs
Mission Statement
An organization's statement of purpose that describes who the company is and what it does
Which of the following is the free trade agreement signed in 1969 between Bolivia, Chile, Colombia, Ecuador, and Peru?
Andean Community
Which of the following elements is related to the question of where an organization will be active?
Arena
According to WTO reports which two counties have been at the forefront of antidumping investigations?
Argentina and India
Countries in the EU
Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.
Which of the following international business arrangements is most likely to involve the greatest financial commitment and the greatest risk? a. exporting goods to a foreign country b. licensing a technology to a foreign firm c. investing directly in a foreign firm d. importing goods from a foreign country
C. Investing Directly in a Foreign Firm
_____ analysis yields insights in the key differences between home and target markets, allows companies to assess the desirability of that market, and identifies institutional voids, which might otherwise frustrate internationalization efforts.
CAGE
_____ offers businesses a way to evaluate countries in terms of the "distance" between them.
CAGE framework
Markets for Products
Certification agencies -Consumer reports -Regulatory authorities (e.g., the Food and Drug Administration_ -Extrajudicial dispute resolution services
Which of the following countries is a permanent member of the Security Council?
China
What is the principle function of the UN Procurement Division?
Conducting business with vendors across the globe
Outsouring
Contracting with a third party to do some of company's work on its behalf
Setting performance standards is part of which of the following?
Controlling
_____ is the degree to which the company's existing practices, resources and capabilities fit the new market.
Corporate Fit
_____ is the degree to which the company's existing practices, resources, and capabilities match the new market.
Corporate Fit
Candidate Countries
Croatia, The former Yugoslav Republic of Macedonia, Turkey and Iceland
Americans use the English language as the primary means of communication whereas Asian Indians have a host of local languages that serve as the means of communication. This difference between the two countries would be categorized as:
Cultural Distance
Firms that engage in importing must learn about:
Customs requirements Informed compliance with customs regulations Entry of goods Invoices Classification and value Determination and assessment of duty
Which of the following conditions will likely cause international trade to decline? a. Imposition of new tariffs b. Enforcement of new import quotas c. Announcement of new trade embargoes d. All of above
D. All of the above
Factors affecting foreign market entry
Degree of control, Resource Commitment, Dissemination Risk, Systemic Risk
Which of the following is correct with reference to international market due diligence?
Deploying ethnographers and sociologists to understand the market
Economic Distance
Differences in consumer incomes, costs, and human and natural resources
Cultural distance
Different languages Different ethnicities; lack of connective ethnic or social networks Different religions Different social norms
Which of the following began in 2001 and is actually considered part of the WTO?
Doha Development Round
Economic Integration (Europe)
EU (European Union) - Most Integrated form of economic cooperation - Created by the Treaty of Maastricht in 1993 - 28 countries, 500M People, 23 languages. (Croatia was added over the summer, making it 28 instead of 27)
The GDP of France is 2.113 trillion USD whereas Sierra Leone's GDP is approximately 4.812 billion USD. According to the CAGE framework, this is a case of:
Economic Distance
What is the central point of profit creation?
Economic Logic
_____ refers to a kind of economic cooperation wherein countries enter into an economic agreement to remove barriers to trade and adopt common economic policies.
Economic Union
Which of the following is an advantage of an acquisition?
Eligibility for any financial help from the target company
Which of the following is affected by the absence of colonial ties in the CAGE framework?
Emotional Distance
A reputed company that produces home appliances has decided to produce customized items for the luxury segment and has an economy of scale over its competitors. The demand for differentiated products is high among consumers of luxury goods, according to market research. Which of the following statements holds true for the company with reference to SWOT analysis?
Exploiting the market demand poses an opportunity for the company
T/F A country is not allowed to borrow money for investing in domestic projects such as investing in the public sector or building infrastructure
False
T/F: A multidomestic strategy is appropriate where the flat-world thesis is applicable.
False
T/F: Acquisition is a bad strategy when an industry is consolidating.
False
T/F: An organization, when it is planning to expand in a foreign country, needs to view the country as a monolith.
False
T/F: Entrepreneurs and small businesses are most likely to avoid the use of exporting as a way to get their products into markets around the globe because the cost of exporting is higher than that of the other entry modes.
False
T/F: GATT's initial focus was on non-tariff barriers of trade
False
T/F: If the acquiring firm is in a country with a strong currency, acquisitions becomes expensive for the acquiring firm.
False
T/F: Importing is an open and public form of international entry, because the factors that favor globalization can also lead to a higher level of imports.
False
T/F: Intellectual property rights (IPR) law does not deal with the financial aspect of a creation of an individual.
False
T/F: Licensing is an international-expansion method which is cost effective but involves a slow entry into new markets as it is highly risky.
False
T/F: MERCOSUR is committed to the consolidation of democracy and the maintenance of peace throughout the Asian continent.
False
T/F: Market due diligence relies on published research on the markets rather than interviews with potential customers and industry experts.
False
T/F: Market due diligence relies solely on using published research on the markets, which is sufficient to offer a wealth of information.
False
T/F: Only the primary activities make up a firm's value chain.
False
T/F: Political factors are irrelevant as far as consumer confidence, consumer, and business spending is concerned.
False
T/F: Strategy formulation is the process of performing all the activities necessary to do what has been planned.
False
T/F: The CAGE framework can be applied to consider some first-order distances such as the differences between home-market and foreign-market customer preferences.
False
T/F: The European Union (EU) consists of the same countries as the continent of Europe.
False
T/F: The business competence of an organization renders concepts like political stability and legal security irrelevant.
False
T/F: The more similar markets in different regions are, the lesser the pressure for an industry to globalize.
False
T/F: The rate of industry change remains relatively the same from one industry to the next in one financial year.
False
T/F: There are five primary types of planning.
False
T/F: WOT analysis helps leaders develop a detailed, internally consistent picture of a range of plausible outcomes as an industry evolves over time.
False
T/F: WTO functions as a trade facilitator for the member countries but it has no power to hear disputes or suggest a solution
False
Which of the following is an advantage of exporting?
Fast entry and low risk
Licensing and Franchising (entry mode)
Fast entry, low cost, low risk Less control, licensee may become a competitor, legal regulatory environment (IP and contract law) must be sound
Exporting (entry mode)
Fast entry, low risk Low control, low local knowledge, potential negative environmental impact of transportation
Acquisition (entry mode)
Fast entry; known, established operations High cost, integration issues with home office
Governments
Favorable trade policies Common technological standards Common manufacturing and marketing regulations
_____ refers to a kind of economic cooperation wherein member countries are free to independently determine trade policies with nonmember nations.
Free Trade Area
Which of the following agreements seeks to reduce barriers to trade in services?
GATS
Economic Integration (Middle East & Africa)
GCC (Gulf Cooperation Council) - Focuses on trade, economic, and social issues AEC (African Economic Council) - Organization of the African Union states - Provides staged integration of regional economic agreements
Greenfield Venture (Launch of a new, wholly owned subsidiary)
Gain local market knowledge; can be seen as insider who employs locals; maximum control High cost, high risk due to unknowns, slow entry due to setup time
Duties and customs, taxes, and licensing are examples of:
General Agreement in Trades and Services.
The International Court of Justice associated with cases pertaining to _____.
Genocide
A(n)_____ strategy is centralized and controlled by the home office and seeks to maximize worldwide efficiency.
Global
Four freedoms of movement
Goods, services, people, capital
Which mode of international-market entry allows for maximum control, helps to gain local market knowledge, and is a slow process involving high risks due to unknown variables?
Greenfield Venturing
Major issue of the General Agreement on Tariffs and Trade (GATT)
Had no enforcement
EU Governance
Has its own governing and decision-making institutions •European Council •European Commission •European Parliament •Council of the European Union •Court of Justice
Which of the following is an advantage of a greenfield venture?
High control
Markets
Homogenous customer needs Global customer needs Global channels Transferable marketing approaches
Which of the following is a type of corporate strategy?
Horizontal scope
Differentiators
How being international differentiates the organization from competitors, makes products or services more attractive to future customers, and strengthens the effectiveness of the differentiators in the chosen arenas
Vehicles:
How will we get there? Internal development joint ventures licensing/franchising acquisitions
Differentiations:
How will we win? -Image? -Customization? -Price? -Styling? -Product reliability? -Speed to market?
Economic Logic
How your international strategy contributes to overall economic logic of your business and corporate strategies
_____ involves the sale of products or services in one country that are sourced in another country.
Importing
_____ is a stealth form of international entry, because the factors that favor globalization can also lead to a higher level of imports.
Importing
What is a benefit of globalization?
Increases competition which eventually leads to improvements in the quality and affordability of products
Competition
Interdependent countries Global competitors
_____ refers to work that is contracted to a nondomestic third party.
International outsourcing
Which of the following is true of a multidomestic strategy?
It assumes that markets are different
What is an advantage of a transnational strategy?
It gives both global efficiency and local responsiveness
Which of the following statements is true about MERCOSUR?
It is a South American trade initiative with clear economic and political goals
What is a mission statement?
It is an organization's statement of purpose
Which of the following is true of corporate strategy?
It is concerned with which businesses to compete in
Planning for International Expansion
It is important for firms to prioritize which countries to enter first and to evaluate each country's relative merits because: Many markets look appealing due to their market size or low-cost production
What is a value chain?
It is made up of primary and support activities of a firm
Which of the following is true of the General Agreement on Trade in Services (GATS)?
It sought to reduce the barriers to trade in services
Which of the following conditions will encourage a U.S. company to export its products to Japan?
Japan and the U.S. sign a free trade agreement
Criticisms of the WTO
Large & slow organization, Negotiation "rounds" occur only ever several years, Loopholes that allow disparity, Resolving disputes is complex (Domestic vs. international law, Defining Jurisdiction, Enforcing Compliance), Result: regional trade blocks seek to fill in the gaps.
Costs
Large-scale and large-scope economies Learning and experience Sourcing efficiencies Favorable logistics Arbitrage opportunities High research-and-development (R&D) costs
All Markets
Legal and judiciary (for property rights protection and enforcement)
Which of the following trading blocs is made up exclusively of South American nations?
MERCOSUR
Economic Integration (South America)
MERCOSUR (Mercado Común del Sur) - Brought nations with long-standing rivalries together - Develops members' economies to be internationally competitive - Committed to consolidation of democracy and maintenance of peace throughout the southern cone. Others in Americas - CARICOM (Caribbean Community) and Andean Community - CAFTA-DR (Dominican Republic - Central American Free Trade Agreement)
Markets for managerial talent
Management institute or business schools -Certification agencies -Headhunting firms -Relocation agencies
_____ involves analyzing markets for their potential size, accessibility, cost of operations, and buyer needs and practices to aid the company in deciding whether to invest in entering that market.
Market Due Diligence
Factors favoring Industry Globalization
Markets Costs Governments Competition
Multidomestic Strategy
Maximizes local responsiveness by giving decentralizing decision-making authority to local business units in each country so that they can create products and services optimized to their local markets
The goal of NAFTA has been to encourage trade between Canada, the United States, and ___?
Mexico
Which of the following countries has benefited the most from NAFTA?
Mexico
What are the major areas of regional economic integration and cooperation?
Middle East and Africa: AEC - An organization of the African Union States -Provides for a staged integration of the regional economic agreements
The strategizing process starts with an organization's mission and vision
Mission Statement
_____ refers to an organization's statement of purpose that describes who the company is and what it does.
Mission Statement
_____ strategy maximizes local responsiveness by giving decentralizing decision-making authority to local business units in each country so that they can create products and services optimized to their local markets.
Multidomestic
Most well known regional economic integration:
NAFTA, EU, MERCOSUR, ASEAN
Are there police customs checks at borders between most EU countries?
No
Which of the following countries is allowed to participate in the EU common market even without a conventional EU membership?
Norway
_____ occurs when a function is taken out of one's country of residence to be performed in another country, generally at a lower cost.
Offshoring
_____, which are a part of the SWOT analysis, assess the external attractive factors that represent the reason for a business to exist and prosper.
Opportunities
Which of the following best describes opportunities in SWOT analysis?
Opportunities assess the external attractive factors that represent the reason for a business to exist and prosper
Which of the following is related to the "vehicles" element in a strategy diamond?
Organic investment and growth, alliances, acquisitions
_____ analysis is an important and widely used tool that helps show the big picture of a firm's external environment, particularly as related to foreign markets; it provides information on the position, potential, and direction for a business.
PESTEL
Geographic distance
Physical remoteness, lack of a common border, lack of sea or river access, size of country, weak transportation or communication links, climates
_____ is the function of management that involves setting objectives and determining a course of action for achieving these objectives.
Planning
PESTEL
Political Economic Social Technological Environmental Legal
"_____" refers to the presence of and adherence to laws related to business contracts.
Rule of law
With some form of internal and organizational analysis using ____ a strategy is formulated into a strategic plan
SWOT
_____ is a strategic-management tool that helps an organization take stock of its internal characteristics and assess the external environmental conditions.
SWOT Analysis
_____ is a technique developed in the 1950s at the global petroleum giant Shell, and is now regarded as a valuable tool for integrating changes and uncertainties in the external context into overall strategy.
Scenario Planning
What is the biggest change that has occurred in the transition from GATT to the WTO?
Settlement of trade disputes between nations
Partnering and Strategic Alliance (entry mode)
Shared costs reduce investment needed, reduced risk, seen as local entity Higher cost than exporting, licensing or franchising; integration problems between two corporate cultures
Which of the following is one of the disadvantages of trade agreements?
Shifts in employment
A company that sells meat products, primarily pork, entered the Iranian market. Pork consumption is discouraged in accordance to Islamic principles. Hence, sales of the company plummeted and eventually it was shut down. With reference to PESTEL analysis, which factor was not considered?
Sociocultural
To which of the following elements in the strategy diamond are speed and sequence of moves related?
Staging
A(n) _____ involves a contractual agreement between two or more enterprises stipulating that the involved parties will cooperate in a certain way for a certain time to achieve a common purpose.
Strategic Alliance
Cisco decided to co-brand with Fujitsu to develop routers for Japan. This was so it could leverage Fujitsu's reputation in Japan for IT equipment and solutions while still retaining the Cisco name to benefit from its global reputation for switches and routers. Which international-expansion method has been employed?
Strategic Alliance
Common International-Expansion Entry Modes
Strategic Alliance Greenfield Venture Licensing Acquisition
A company is trying to enter a new market and has plans to set up operations there for the next 6-7 years. In which of the following should it engage in the very beginning?
Strategic Planning
Controls _____ at EU external borders
Strengthened
_____ refers to the using of the organization's strengths in a way that cannot be easily duplicated by other firms or made less valuable by changes in the external environment.
Sustainable competitive advantage
Which of the following is relatively short-term and is often executed by middle-level managers?
Tactical Planning
_______________, in contrast to strategic planning, has a shorter time horizon, typically one to three years, and specifies fairly concrete ways to implement the strategic plan. Tactical planning is often done by middle-level managers.
Tactical planning
Offshoring
Taking some business function out of the company's country of origin to be performed in another country, generally at a lower cost
Institutional Voids
The absence of key specialized intermediaries found in the markets of finance, managerial talent, and products, which otherwise reduce transaction costs
CAGE Framework
The analytical framework used to understand country and regional differences along the distance dimensions of culture, administration, geography, and economics
T/F: Which of the following is true of outsourcing?
The company delegates an entire process to the outsource vendor
Vehicles
The preference to use organic investment and growth, alliances, or acquisitions as expansion vehicles
Strategy Formulation
The process of deciding what to do; also called stretegizing
Strategy Implementation
The process of performing all the activities necessary to do what has been planned
Importing:
The sale of products or services in one country that are sourced in another country
Organizational Values
The shared principles, standards, and goals that are included in the mission statement or as a separate statement
Arenas:
The specific geographic markets and the channels and value-chain activities in those markets
International Outsourcing
The term for both outsourcing and offshoring work, or outsourcing to a nondomestic third party
Business Strategy
The ways a firm goes about achieving its objectives within a particular business
Which of the following situations outlines the disadvantage associated with partnering as a method of international-expansion?
There is a potential for integration problems between the corporate cultures of the partners
Which of the following is true of a global strategy?
This strategy emphasizes economies of scale
_____, which are a part of the SWOT analysis, include factors beyond one's control that could place the strategy or even the business itself at risk.
Threats
Maquiladora Locations
Tijuana, Ciudad Juarez, Matamoros
Cons of Regional Economic Integration
Trade Diversion, Employment shifts and reductions, Loss of national sovereignty, Having the trade "rules" change with each new trade agreement, Finding oneself "outside" of a new trading bloc
_____ strategy is highly desirable and appropriate for many industries, given the differences across markets and the similarities being fostered by the flatteners.
Transnational
A company wants to develop a "core" car that can be sold in markets across the world. Which of the following international strategies is it likely to follow?
Transnational strategy
_____ refer to the forces of change whose direction and sometimes timing can be predicted.
Trends
T/F Current account deficit refers to imports being greater than exports.
True
T/F Global businesses often have teams of in-house professional monitoring the WTO as well as the regional trade alliances.
True
T/F The national deficit is the amount of borrowing that a country does from either the private sector or other countries
True
T/F You can buy and bring back any goods for personal use when you travel between EU countries.
True
T/F: Acquisitions are appealing because they give the company quick, established access to a new market.
True
T/F: An international strategy has to be adjusted to adapt, overcome, or exploit differences across countries and regions.
True
T/F: Business-level strategies are intended to create differences between a firm's position and those of its rivals.
True
T/F: In outsourcing, the company takes a function out of its home country and places the function in another country, generally at a lower cost.
True
T/F: Managers must consider five elements central to strategic management in order to arrive at decisions.
True
T/F: Neither strategy formulation or strategy implementation can success without the other.
True
T/F: One of GATT's key provisions stated that if the most-favored-nation clause status was granted by a country to another country, then it was automatically extended to all other member countries.
True
T/F: Organizations that promote coherent images and brands globally, realize economies of scope and scale.
True
T/F: Tariffs refer to taxes, which are placed on imports or exports.
True
T/F: The Internet has made exporting easier as even small firms can access critical information about foreign markets, examine a target market, research the competition, and create lists of potential customers.
True
T/F: The advantage of exporting is that firms avoid the expense of establishing operations in the new country.
True
T/F: The disadvantage of a multidomestic strategy is that it cannot take advantage of economies of scale that could help decrease costs for the firm overall.
True
T/F: The multidomestic strategy has been more commonly used by European multinational firms because of the variety of cultures and markets found in Europe.
True
T/F: The primary difference of the customs union from the free trade area is that members agree to treat trade with nonmember countries in a similar manner.
True
T/F: When an organization plans to expand in a foreign country, it needs to understand what the local consumers look for when making a purchase decision.
True
T/F: •Sometimes mission statements include a summation of the firm's values
True
Which of the following UN bodies is currently inactive?
UN Trusteeship Council
Which of the following countries hosted the rounds of talks that eventually led to the end of GATT and creation of the WTO?
Uruguay
The _____ resulted in the end of GATT.
Uruguay Round
International Strategy
Using corporate strategy to guide the choice of which markets, including different countries, that a firm competes in.
_____ refers to the sequence of activities that include the various steps of the supply chain as well as additional activities, such as marketing, sales, and service.
Value chain
Financial Markets
Venture-capital firms -Private equity providers -Mutual funds -Banks -Auditors -Transparent corporate governance
Which of the following question would help an organization determine the favorability of the sociocultural factors for business expansion in a PESTEL analysis?
What are the dominant local religions, and what influence do they have on consumer attitudes and opinions?
Which of the following questions would help an organization determine the favorability of the environmental factors for business expansion in a PESTEL analysis?
What are the regulations regarding waste disposal and energy consumption?
Which of the following is a question a firm asks about itself and its environment during a SWOT analysis?
What do others expect us to do?
Staging:
What will be our speed and sequence of moves? Speed of expansion? Sequence of initiatives
Staging and Pacing
When you start expanding, how quickly you expand and the sequence of your expansion efforts
Arenas:
Where will we be active (product categories, market segments, geographic areas, core technologies, value-creation stages)
The _____ is the only institutional body charged with facilitating free and fair trade between member nations.
World Trade Organization
Only institutional body charged with facilitating free and fair trade between nations, includes an enforcement body.
World Trade Organization (WTO)
World Trade Organization (WTO)
a trade organization that replaced the old General Agreement on Tariffs and Trade (GATT) in 1995.
Which of the following is NOT one of the trends that has led to the globalization of world markets. a. Countries protecting local firms from foreign competition b. Firms employing worldwide mass marketing and global strategies c. Firms facing increasing competition from foreign firms in their local markets d. Firms looking to increase their sales by selling in foreign markets
a. Countries protecting local firms from foreign competition
A(n) _____ is a transaction in which a firm gains control of another firm by purchasing its stock, exchanging the stock for its own, or, in the case of a private firm, paying the owners a purchase price.
acquisition
International trade and specialization most often lead to which of the following?
an increase in a nation's productivity
Maquiladora
an operation that involves manufacturing in a country that is not the client's and as such has an interesting duty or tariff treatment.
Strategy formulation and strategy implementation
are interdependent from the standpoint that implementation should provide information that is used to periodically modify the strategy
The five elements of strategy:
arenas, vehicles, differentiators, staging, economic logic
Globalization is: a. The process that makes domestic (local) companies more powerful b. The movement of goods, labor, and ideas more freely around the world c. The growth of the internet d. The creation of organizations like the IMF and The World Bank
b. The movement of goods, labor, and ideas more freely around the world
Differentiators are that facet of the strategy diamond which:
comprise features and attributes of a company's products or services that help it beat its competitors in the marketplace
When marketing and managing a business in another country, it is generally believed that business leaders should:
consider the ethical perspectives of the local culture
When it was introduced, NAFTA was highly controversial because:
could lead to the sending of U.S. jobs to Mexico.
CAGE
culture, administration, geography and economics
Companies employ _____ to understand the latent, unarticulated needs of local consumers.
ethnographers
Trends in the context of scenario planning,
forces for change whose direction, and sometimes timing, can be predicted
Uncertainty in the context of scenario planning
forces for change whose direction, and sometimes timing, can be predicted
The United States is separated from Nigeria by 5,840 miles and the Atlantic Ocean. According to the CAGE framework this is a case of:
geographic distance
Alternative to WTO: Regional Economic Integration
has enabled countries to focus on issues relevant to their own development and encourage trade between neighbors.
If a country finds another country's trade practices unfair or discriminatory, WTO could:
hear from both countries and mediate a solution.
Trade creation refers to the:
increased number of opportunities for countries to trade with one another by removing barriers to trade and investment
CAGE framework considers
inhibitors to trade
A(n) _____ refers to the lack of key specialized intermediaries found in the markets of finance, managerial talent, and products, which otherwise reduce transaction costs.
institutional void
Google decided to launch its search engine services in China in 2000. Since the Chinese government imposed heavy censorship on Internet content, it led to a search delay for Google users. Hence, it encountered market share losses despite a good start. Following this, Baidu, a Chinese search engine, dominated the Chinese market in 2005. Ultimately, due to numerous issues Google backed away from the Chinese market. With reference to CAGE analysis, Google experienced a(n) _____.
institutional void
Dell found that it had to suspend its direct model in India for a temporary period because it needed local intermediaries to help develop both a base of business and acceptable levels of customer awareness and sophistication. This is an example of:
international strategy accommodating local environments
MERCOSUR is an economic trade initiative which:
is committed to the consolidation of democracy and the maintenance of peace throughout Southern America.
Firms export mostly to countries that are close to their facilities because:
lower transportation costs
If the world were flat:
one could sell the same products and services in the same way in every country
Dazzlers Advertising has its offices spread out across various locations in China. It has hired Money Inc., located in India, to take care of the firm's accounting and taxation needs as part of its downsizing efforts. This process is called _____.
outsourcing
Institutional differences refer to differences in the:
political systems of two countries
Maquiladoras refer to the:
production facilities located in border towns in Mexico that take imported materials and produce the finished goods for export, primarily to Canada or the United States.
Raoul's Retail introduced the concept of a loyalty card for shoppers, which was an innovation in the less developed Peruvian market. These cards allow the customers to receive offers from the store (via e-mail, text messages), pertinent to their previous purchasing patterns. In the context of PESTEL analysis, this innovation offered by the company was arrived at after a study of _____ factors.
technological
Trade diversion refers to the:
tendency of the member countries to trade more with each other than with nonmember nations due to the removal of trade barriers.
Outsourcing involves:
the company delegating an entire process to the outsource vendor.
The European Union is an example of an economic union because:
the member countries have adopted common economic policies.
A free trade area is
the most basic form of economic cooperation. Member countries remove all barriers to trade between themselves but are free to independently determine trade policies with nonmember nations. An example is the North American Free Trade Agreement (NAFTA).
City dwellers in Shanghai and Tianjin can afford higher prices than villagers in a western province. This is the part of due diligence where we need to understand ___.
the regional differences
The basic underlying principle of GATT was that
trade should be free and equal
With reference to scenario planning, _____ are said to be forces for change whose direction-and sometimes timing-can be predicted
trends
Common market refers to the:
type of regional economic cooperation wherein there are no restrictions on the movement of labor and capital between member countries.
In the context of scenario planning, forces for change whose direction and pace are largely unknown.
uncertainties
With reference to scenario planning, _____ are forces for change whose direction and pace are largely unknown.
uncertainties
Euro countries refer to those countries that:
use the euro as their currency.
Steps in Scenario Planning
—Choose the target issue, scope and time frame that the scenario will explore —Brainstorm a set of key drivers and decision factors that influence the scenario —Define the two dimensions of greatest uncertainty —Detail the four quadrants of the scenarios with stories —Identify indicators that could signal which scenario is unfolding —Assess the strategic implications of each scenario
Strengths and weaknesses
•Good strategies take advantage of strengths and minimize the disadvantages posed by any weaknesses •Sustainable competitive advantage: A situation where an organization's strengths cannot be easily duplicated or imitated by other firms, nor made redundant or less valuable by changes in the external environment
International Market Due Diligence
•Involves analyzing foreign markets for their potential size, accessibility, cost of operations, and buyer needs and practices to aid the company in deciding whether to invest in entering that market Includes: —Regional differences —Understanding local consumers —How to learn the needs of a new foreign market —Differentiation and capability —Industry dynamics
Opportunities and threats
•Opportunities assess the external attractive factors that represent the reason for a business to exist and prosper •Threats include factors beyond your control that could place the strategy or even the business itself at risk
