GB 370 test 2 - Units 4-7

top 3 countries US trades with

1) Canada 2) Mexico 3) China

going abroad is much more efficient

1) Global Efficiency -cheaper to produce abroad 2) Flexibility 3) Worldwide Learning -get better ideas ex: green tea frappucinos -> Japan

Putting a loan in motion

1) State: -exactly how much money you need -what you'll use it for -how you'll pay it back 2) Draw up the legal papers -an agreement stating that the person will indeed put money into the business

Ways to find nonaffiliated angels:

1) advertising 2) business brokers 3) telemarketing 4) networking 5) intermediaries:

strategic alternatives for international business

1) home replication 2) multi-domestic strategy 3) global strategy 4) transnational strategy

economic arguments for government intervention in international trade include:

1) infant industry arguments 2) strategic trade policy 3) majority of Chicago school (modern) economies focuses on free-trade being a net positive -no one has really good data on what tariffs will not hurt domestic firms

3 purposes of a bill of landing

1) is a receipt 2) is a contract 3) is a document of title

political arguments for intervention

1) protecting jobs 2) protecting industries deemed important for national security 3) retailing to unfair foreign competition 4) protecting consumers from "dangerous" products 5) furthering the goals of foreign policy 6) protecting human rights independent in exporting countries

affiliated/nonaffiliated angels & professional capitalists are looking for:

1) strong management 2) proprietary strength 3) window of opportunity 4) market potential 5) return on investment

7 main instruments of trade policy

1) tariffs 2) subsidies 3) import quotas 4) voluntary export restraints 5) local content requirements 6) antidumping policies 7) administrative policies

General Agreement on Tariffs and Trade (GATT)

1st 50 years - framework was known as this

1999

1st protests were _________ in Seattle & have continued space

secured and unsecured

2 forms that loans can come in: have no collateral pledged as a secondary payment source should you default on the loan

China

2014/2015 Trade with ________ started to level out again -last year spiked back up again -reason for Canada not being trading partner (big) trade with China (total) -3 billion dollars

"selling" a lender on your business

After you have an understanding of the different types of loans available, you're better equipped for the next step:

big

Big firms that require ____ fixed costs do well in big countries ex: Apple - selling electronics Britain - selling steel during Industrial Revolution

lenders

Carefully choosing the _____________ you target can increase your odds of success when seeking debt financing.

Internal and Global Strategies

Developing International & Global Strategies Global efficiencies: 1) location efficiencies - seeking lower input cost locations 2) economies of scale - larger facilities result in lower costs 3) economies of scope - broadening product lines

International & Global Strategies

Developing International & Global Strategies 1) Global Efficiencies 2) Multimarket Flexibility 3) Worldwide Learning

instruments of trade policy

How do governments intervene in international trades? 7 main instruments of trade policy: 1) tariffs 2) subsidies 3) import quotas 4) voluntary export restraints 5) local content requirements 6) antidumping policies 7) administrative policies ex: emission rules on cars ex: can't import used cars to Chile or old iPhones to India

draft

How is payment actually made in an export transaction? most export transactions involve a draft, also called a bill of exchange

Export-Import Bank

How to be an exporter: 1) can get financial aid from the ________-_______ _______

Individual Retirement Account

IRA

Export Credit Insurance

In US, _________ ___________ _______________ is provided by Foreign Insurance Contributions Act

two

Most countries have adopted ______ recommendations for trade disputes

services

Since established, WTO has emerged as an effective advocate & facilitator of future trade details, particularly in such areas as _____________

WTO Experience to Date

Since established, WTO has emerged as an effective advocate & facilitator of future trade details, particularly in such areas as services most countries have adopted 2 recommendations for trade disputes WTO has brokered negotiations to reform global telecommunications & financial services industries 1st protests were 1999 in Seattle & have continued space agriculture - not covered by WTO

2

US exporters can draw on ______ forms of government backed assistance to help their export programs

trade

United States is not a big _________ company, but we fight a lot

negotiations

WTO has brokered __________ to reform global telecommunications & financial services industries

unsecured loan

When your lender knows you well and is convinced that your business is sound and that the loan will be repaid on time, he or she may be willing to write a(n): considers you a low risk as a new business, you are highly unlikely to qualify for this type of loan generally requires a track record of profitability and success

tariff

a tax levied on imports that effectively raises cost of imported products relative to domestic products

time draft

allows for delay in payment normally 30, 60, 90, or 120 days

Export-Import Bank (Eximbank)

an independent agency of US government (similar institutions lots of places) mission: to provide financial aid that will facilitate exports, imports, & exchange of commodities between us & other countries

transitional strategy

attempting to combine benefits of scale efficiencies pursued by a global corporation, with the benefits & advantages of local responsiveness of a multi-domestic corporation

local content requirements

benefit domestic producers & jobs, but consumers face higher prices

economies of scope

broadening product lines

administrative policies

bureaucratic rules designed to make it difficult for imports to enter a country

administrative policies

bureaucratic rules that one designed to make it difficult for imports to enter a country often product safety standards cause issues policies hurt consumers possibly superior foreign products these policies hurt consumers by denying access to possibly superior foreign products often really weird - FedEx had to open every package in Japan

debt financing

capital in the form of a loan, which must be paid back receiving money in form of a loan that you have to repay many sources of this: -banks -commercial lenders -personal credit cards

equity financing

capital received in exchange for part ownership of the company

trade is not a small thing

declined during the Great Recession total world trade is about $18.4T growth running about 7% a year for the last 10 years "Samurai-land" -Disney park -ask for copy park from Disneyland

local content requirement

demands that some specific fraction of a good be produced domestically -requirement - can be in physical/value terms -one of the big changes in renegotiable NAFTA

angel investor

describes a private individual who invests money in a business

worldwide learning

diverse operating environments of multinational corporations (MNCs) contribute to organizational learning that can be transferred to other operating environments

products where there's not actually that much money to be made by trying to coordinate across the globe

don't require you to change what you're doing when you go into a different market "copy & paste" business you do here & move it nationally ex: cement -> Farage & CEMEX -buy up cement plants all over the place

how to be an exporter

first --> find customers 1) can get financial aid from the Export-Import Bank 2) can get export credit insurance from Foreign Credit Insurance Association US exporters can draw on 2 forms of government backed assistance to help their export programs

venture capital

generally refers to institutional venture capital firms that invest other people's money and manage it for them the people that do this typically seek a high degree of involvement and expect a high rate of return in a short time

Brexit

globalization makes people upset Britain has voted to leave EU All trade deals need to be renegotiated -Britain doesn't have any Manufacturing might improve -economies might be too integrated for simplistic answers like in/out

domestic policies

governments can be influenced by special interests consequently, a government's decision to intervene in a market may appear a certain group but not necessarily the support the interests of the country as a whole problems -one group hurts a lot while all benefit some

7%

growth running about _________ a year for last 10 years

Alabama

has the most trade with South Korea because of buying cars internationally

Since Brexit

hasn't been panic moment many predicted more like a slow train wreck -Tory government = weak -no one can decide what they want -might end up adopting EU even after they voted to quit the body that writes them because..... trade

Foreign Credit Insurance Association

how to be an exporter: 2) can get export credit insurance from ________ _______ _____________ ____________

multidomestic

in lots of markets but you have to change lots when you go into those markets

multimarket flexibility

international businesses may respond to a change in one country by implementing a change in another country

bill of landing

issued to exporter by common carrier transporting the merchandise serves 3 purposes: 1) is a receipt 2) is a contract 3) is a document of title

economies of scale

larger facilities result in lower costs

Canada, China

largest export trading partner with the US was once, but now is

not

last year was the 1st time in a while that the US trading partner was ____ Canada

specific tariffs

levied as a fixed charge for each unit of a good imported

ad valorem tariffs

levied as a proportion of the value of the imported good

how lenders generally structure loans

line-of-credit loans installment loans balloon loans interim loans secured and unsecured loans

interim loan

loan in which bankers are concerned with: 1) who will be paying off the loan 2) whether the commitment to paying off the loan is reliable used to make periodic payments to contractors building new facilities when a mortgage on the building will be used to pay off this type of loan

balloon loans

loans usually written under another name identified by the fact that the full amount is received when the contract assigned only the interest is paid off during the life of a loan, with a "balloon" payment of the principal due the final day is received at signing contract, but only interest is paid off during the life of this type of loan "balloon" payment of principal is due on the final day usually reserved for special situations where business has to wait for a specific date to receive payment for product/service

going global @ McDonald's

lots of great products from abroad -chicken wings: huge in Asia -McCafe: hit in Europe -McChicken - product they used in India -McRib - terrifying to everyone

multi-domestic strategy

managing a corporation as a collection of independent operating subsidiaries frees a firm to customer its products, its marketing campaigns, and operating techniques to meet local customer needs

letter of credit loans

most useful type of loan short-term loan that extends the cash available in your business's checking account to the upper limit of the loan contract intended for purchases of inventory and payment of operating costs for working capital and business cycle needs not intended for purchases of equipment or real estate usually carry the lowest interest rate a bank offers, since they are seen as fairly low-risk

agriculture

not covered by WTO

problems of domestic policies

one group hurts a lot while all benefit some

software

only thing to change after being bought by an international company really profitable business locally

draft

order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of $ at a specified time

installment loans

paid back with equal monthly payments covering both principal and interest may be written to meet all types of business needs you receive the full amount when the contract is signed interest is calculated from the date you sign the contract to the final day of the loan term will always be correlated to its use

sight draft

payable on presentation to drawee

examples of affiliated angels

professionals business associates suppliers/vendors customers employees competitors

examples of nonaffiliated angels

professionals middle managers entrepreneurs

Foreign Insurance Contributions Act

provides export credit insurance in the US provides coverage against commercial risks & political risks

expensive to produce

reason why some companies don't trade internationally ex: phones, laptops --> loss readers

debt financing

receiving money in the form of a loan, which you have to repay can turn to: banks commercial lenders your personal credit cards

secured loan

requires some kind of collateral but generally has a lower interest rate than an unsecured loan

efficient to go international

resources labor costs = expensive

location efficiencies

seeking lower input cost locations

loan agreement

should specify: 1) whether the loan is secured or unsecured 2) what the payments will be 3) when they are due 4) what the interest is

World Trade Organization (WTO)

since 1995, framework has been known as:

development of world trading system

since WWII, an international trading framework has evolved to govern world trade 1st 50 years - framework was known as the General Agreement on Tariffs and Trade (GATT) since 1995, framework has been known as World Trade Organizations (WTO)

WWII

since ________, an international trading framework has evolved to govern world trade

common stock (voting)

stock representing equity ownership in a company entitles holder to elect corporate directors and collect individuals

preferred stocks (nonvoting)

stock that pays a fixed dividend and is given preference ahead of common stockholders in the event of liquidation of assets

liquidation preference

stockholders with liquidation preference are first in line to recover their investment if the company goes under

example of sugar tariffs

sugar cane -big deal to FL voters -big deal to farm belt US uses high fructose corn syrup as sweetener -corn farmers want these to stay high

other loans banks all over the country write:

term loans second mortgages inventory loans equipment loans accounts receivable loans personal loans guaranteed loans commercial loans

finding the right person to borrow money from

the 1st step in getting financing from friends or family

$3 billion

total trade with China

$18.4T

total world trade is about:

letter of credit

typically used in international trade document that allows entrepreneurs to guarantee payment to suppliers in other countries substitutes the bank's credit for the entrepreneur's up to a set amount for a specified period of time

letter of credit

typically used in international trade issued by a bank @ request of importer & states bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents system -attractive because both parties are likely to trust a reputable bank even if they don't trust each other allows entrepreneurs to guarantee payment to suppliers in other companies

homereplication

utilizing a core competency/a firm-specific advantage developed at home as a main competitive weapon in foreign markets

global strategy

viewing world as single marketplace & having as a primary goal the creation of standardized goals & services that will address the needs of customers worldwide

export assistance

where can exporters get financial help?

Trans Pacific Partnership

world's largest free trade agreement not ratified -essentially a US-learning deal for copyrights but not uncontroversial Other countries (Japan led) are doing it without us & dumped the copyright protection