MGT 331 Final

_________ ________ _______ •Economic and political demands imposed by host country governments may necessitate a degree of local responsiveness

host government demands

The euro is used by __ of 28 member states

19

The volume of cross-border acquisitions has been growing at a rapid rate for two decades. Over most of the past decades, between ____ and ____ percent of all foreign direct investment (FDI) inflows have been in the form of mergers and acquisitions.

40 80

What agreement? •United States, Canada, and Mexico •Abolished tariffs on 99% of goods traded •Removed barriers on the cross-border flow of services •Protects intellectual property rights •Removal of most restrictions on FDI among members •Application of national environmental standards •Established two commissions to impose fines and remove trade privileges when environmental standards or legislation involving health and safety, minimum wages, or child labor are ignored

(North American Free Trade Agreement) NAFTA

What is new renegotiation of NAFTA called?

(United States-Mexico-Canada Agreement) USMCA

•An ______ _____ _____ ______ (2003) between the six original members of ASEAN came into full effect to reduce import tariffs among members •Vietnam, Laos, Myanmar, and Cambodia have all joined •In 2010, ASEAN signed a free trade agreement with China to remove tariffs on 90 percent of all traded goods

ASEAN Free Trade Area (AFTA)

Regional Trade blocs in ______ •There are 19 trade blocs on the ____ continent •Progress toward the establishment of meaningful trade blocs has been slow •Many countries believe they need to protect their industries from unfair foreign competition, making it difficult to create free trade areas or customs unions •In 2001, East _____ Community relaunched bloc •In 2015, Tripartite Free Trade Area was established •In 2018, Continental Free Trade Area (CAFTA) was established

Africa

The ________ ______ •Based on the EU model •More or less failed by the mid-1980s •In the late 1980s, Latin American governments began to adopt free market economic policies •In the 1990s, the Andean Pact was relaunched as the ____________ __________ , and now operates as a customs union •In 2003, it signed an agreement with Mercosur to restart negotiations towards the creation of a free trade area •Current members include Bolivia, Ecuador, Peru, and Columbia

Andean Community

___ _ ____ ____ ___ (______) Fosters freer trade between member countries and cooperation in their industrial policies •Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Myanmar, Laos, and Cambodia

Association of Southeast Asian Nations (ASEAN)

______ exit from European Union (?) •Voted to leave on June 23, 2016; two years to negotiate •Not comfortable with loss of national sovereignty •Immigration has become a key issue •Britain is EU's second largest economy and is seen as a counterweight to Germany •Britain will likely see significant short- to medium-term costs based on this decision •Less likely to attract inward investment from foreign multinationals •Exports to EU may fall Some MNCs may move operations to other EU countries

British (Brexit)

_____: •(1973): a customs union between English-speaking Caribbean countries

CARICOM

consists of the following countries: ]•Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic

Central American Common Market

US joined Central American Common Market in 2004 to create the __ ___ ___ _____ ____

Central American Free Trade Agreement (CAFTA)

Area of European Union that: the supreme appeals court for EU

Court of Justice

______ ______ •Eliminates trade barriers between member countries and adopts a common external trade policy •Most countries that enter a (Same) desire further integration in the future •____ _______ ___________(between Bolivia, Columbia, Ecuador, and Peru) What level of economic integration?

Customs union, the andean community

Who: •Criticized NAFTA, saying it cost America millions of jobs •Initiated renegotiation of NAFTA, known as United States-Mexico-Canada Agreement, or USMCA •Requires automakers to produce 75 percent of vehicle's content in North America •Imparts a minimum wage of $16 an hour •May increase production in U.S., but may increase costs

Donald Trump

•The forerunner of the EU was the ______ _______ ____ ______ ______(formed in 1951)

European Coal and Steel Community

Area of European Union that is: the ultimate controlling authority within the EU

European Council

Area of European Union that: debates legislation proposed by the commission and forwarded to it by the council

European Parliament

•The _____ _____ is the result of: •The devastation of two world wars on Western Europe and the desire for a lasting peace •The desire by the European nations to hold their own on the world's political and economic stage

European Union (EU)

1.It can be costly—while a nation as a whole may benefit from a regional free trade agreement, certain groups may lose 2.It results in a loss of national sovereignty What are these?

Impediments to integration

Research seems to confirm that the probability of survival )__________ if an international business enters a national market after several other foreign firms have already done so. The late entrant may ________ by observing and learning from the mistakes made by early entrants.

Increases benefit

Regional economic integration only makes sense when the amount of trade it creates exceeds the amount it diverts The case _____ regional integration

against

The Case _____ ____ •Jobs could be lost and wage levels could decline in the U.S. and Canada •Pollution could increase due to Mexico's more lax standards •Mexico fears its loss of sovereignty

against NAFTA

•In 1992, the ______ ________________ committed EU members to adopt a single currency, the euro

Maastricht Treaty

___________ •Free trade pact (Brazil and Argentina) •Expanded to include Paraguay and Uruguay in 1990 •Venezuela joined in 2012 but was suspended in 2016 for human rights violations •Has been successful at reducing trade barriers between member states •Critics worry that (SAME) may be diverting trade rather than creating trade, and local firms are investing in industries that are not competitive on a worldwide basis

Mercosur

Who created the two basic strategies for value creation?

Michael Porter

_______ and _____ •Despite positive results, there is political criticism of NAFTA from both the right and left •In September 2018, Trump signed new deal called the United States-Mexico-Canada Agreement (USMCA) •Compels North American automakers to source fewer parts from Germany, Japan, South Korea, or China •The Trump Administration hopes these provisions will increase the production of automobiles and component parts in the U.S. •Critics see results in trade diversion rather than trade creation, and consequences may include higher costs to North American automobile producers and higher prices for consumers

NAFTA USMCA

Which president: •: U.S. pursuing Trans Pacific Partnership with 11 other Pacific Rim countries and Transatlantic Trade and Investment Partnership (TTIP) with the European Union

Obama

Regional Economic Integration ______-_______ Formerly protected markets are now open to exports and direct investment •The free movement of goods across borders, the harmonization of product standards, and the simplification of tax regimes means firms can realize potentially enormous cost economies •Centralize production in those locations where the mix of factor costs and skills is optimal •Enduring differences in culture and competitive practices might limit companies

Threats, opportunities

What increased power in the european parliament?

Treaty of Lisbon

•The _____ _ _____ established the European Economic Community in 1957 •The name was changed to the EU in ______

Treaty of Rome, 1993

Which president?: : U.S. pulled out of TPP and negotiations on hold for TTIP

Trump

who is left standing at the door when it comes to the European Union?

Turkey

who is trying to enter mercosur but as early 2016 they were still not ratified?

Venezuela

Pros and Cons of ______________ •Are quick to execute •Enable firms to preempt their competitors •Can be less risky than greenfield ventures However, many are not successful

acquisitions

•Why Do ______ Fail? •The firm overpays for the assets of the acquired firm •There is a clash between the cultures of the acquiring and acquired firm •Attempts to realize gains by integrating the operations of the acquired and acquiring entities run into roadblocks and take much longer than forecast There is inadequate prescreening •Reducing the Risks of Failure -Through careful screening of the firm to be acquired -By moving rapidly once the firm is acquired to implement an integration plan

acquisitions

The ________ and __________ of each entry mode are determined by: •Transportation costs •Trade barriers •Political risks •Economic risks •Business risks •Costs •Firm strategy

advantages disadvantages

MAKING ALLIANCES WORK: _________ _________ •Can be designed to make it difficult to transfer technology meant to be transferred •Contractual safeguards can be written into alliance agreement to guard against risk of opportunism •Both parties can agree in advance to swap skills and technologies that the other covets

alliance structure

the right of foreign truckers to pick up and deliver goods within another member state's borders

cabotage

•Six members formed the ____ _____ _____ _____ ____ (_____) in 2006 to lower trade barriers and harmonize macro-economic and monetary policy

caribbean single market and economy (CSME)

The _____ for _____ Mexico •Increased jobs as low-cost production moves south and more rapid economic growth The U.S. and Canada •Access to a large and increasingly prosperous market and lower prices for consumers from goods produced in Mexico •U.S. and Canadian firms with production sites in Mexico are more competitive in world markets

case NAFTA

______ ______ •No barriers to trade between member countries, a common external trade policy, and the free movement of the factors of production •Requires significant harmony among members in fiscal, monetary, and employment policies •_____________ (between Brazil, Argentina, Paraguay, and Uruguay) hopes to achieve this status What level of economic integration?

common market, mercosur

The strategy, operations, and organization of the firm must all be consistent with each other if it is to attain a _________ advantage and garner _______ profitability.

competitive superior

what area of organization? ____________- •metrics used to measure the performance of subunits and make judgments about how well the subunits are run

controls

•Success depends on the type of goods and services and the firm's ________ _________ - the skills within the firm that competitors cannot easily match or imitate •Enable the firm to reduce the costs of value creation •Create perceived value so that premium pricing is possible •They are the source of a firm's competitive advantage

core competence

Pressures for _________ ________ •Strong in industries producing commodity-type products that fill universal needs: needs that exist when the tastes and preferences of consumers in different nations are similar if not identical •When major competitors are based in low-cost locations •Where there is persistent excess capacity •Where consumers are powerful and face low switching costs

cost reductions

____ __ ___ ____ •Membership implies a loss of control over monetary policy •The EU is not an optimal currency area: an area where similarities in the underlying structure of economic activities make it feasible to adopt a single currency and use a single exchange rate as an instrument of macro-economic policy •Countries may react differently to changes in the euro

costs of the euro

strategy that focuses primarily on increasing the attractiveness of a product

differentiation

what are michael porter's two basic value creation strategies?

differentiation low cost

•A product's production costs decline by some quantity about each time cumulative output _______

doubles

•Regional economic integration is an attempt to achieve additional gains from the free flow of trade and investment between countries beyond those attainable under international agreements such as the WTO •Since it is easier to form an agreement with a few countries than across all nations, there has been a push toward regional economic integration _______ case __ integration

economic for

____ ________ Involves the free flow of products and factors of production between members, the adoption of a common external trade policy, and in addition, a common currency, harmonization of the member countries' tax rates, and a common monetary and fiscal policy •Involves sacrificing a significant amount of national sovereignty •The ________ ______ (EU) What level of economic integration?

economic union, european union

________ _ _______: reductions in unit cost achieved by producing a large volume of a product •The ability to spread fixed costs over a large volume •Unable to attain efficient scale of production unless serving global markets •Bargaining power increases with suppliers, which may allow economies of scale in purchasing

economies of scale

________ of European Union •Many countries, particularly from Eastern Europe, have applied for membership •Ten countries joined in 2004 expanding the EU to 25 states •In 2007, Bulgaria and Romania joined •Croatia joined in 2013 bringing membership to 28 •Turkey has also applied for membership, but it is not clear whether it will be accepted

enlargement

Benefits of ______ •Handling one currency, rather than many •Easier to compare prices across Europe •Increased competition promotes greater efficiencies in production •The pan-European capital market should further develop •Range of investment options open both to individuals and institutions should increase

euro

4 sections of political structure of european union

european commision, european council, european parliament, court of justice

Area of European Union that: 1.proposes EU legislation, implements it, and monitors compliance

european commission

2 trade blocs in Europe

european union (28 members), european free trade association (4 members)

Managers must consider: •The benefits of expanding into foreign markets •Which strategies to pursue in foreign markets •The value of collaboration with global competitors •The advantages of strategic alliances When _____ _________

expanding internationally

systematic reductions in production costs that have been observed to occur over the life of a product What does this explain? _______ ________

experience curve

Which entry mode? •Often the first method firms use to enter foreign market •Advantages •Relatively low cost •Firms may achieve experience curve and location economies •Disadvantages •Lower-cost manufacturing locations may exist •Transport costs can be high •Tariff barriers can make it uneconomical •Foreign agents fail to act in the exporter's best interest

exporting

6 modes to enter foreign markets

exporting turnkey projects licensing franchising joint ventures wholly owned subsidiaries

•Firms facing strong pressures for cost reductions are likely to pursue some combination of ________ and ______ ______ __________ •Allows the firm to achieve location and scale economies as well as retain some degree of control over worldwide product manufacturing and distribution •Firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries

exporting wholly owned subsidiaries

•Firms entering a market early can gain _______-________ _____________. •The ability to pre-empt rivals and capture demand by establishing a strong brand name •The ability to build up sales volume in that country and ride down the experience curve ahead of rivals and gain a cost advantage over later entrants •The ability to create switching costs that tie customers into their products or services making it difficult for later entrants to win business

first-mover advantages

•the disadvantages associated with entering a foreign market before other international businesses

first-mover disadvantages

which entry mode? •A form of licensing in which the franchisor sells intangible property and requires the franchisee agree to abide by strict rules as to how it does business •Advantages •It can avoid costs and risks of opening up a foreign market •Disadvantages •It may inhibit the firm's ability to take profits out of one country to support competitive attacks in another •The geographic distance of the firm from its foreign franchisees can make poor quality difficult for the franchisor to detect

franchising

Levels of Economic Integration

free trade area, customs union, common market, economic union, political union

____ ____ ____ •All barriers to the trade of goods and services among member countries are removed, but members determine their own trade policies with regard to nonmembers •Accounts for almost 90 percent of regional agreements •The ____ _______ ____ _________ (between Norway, Iceland, Liechtenstein, and Switzerland) began in 1960 What level of economic integration?

free trade area, european free trade association

what strategy? ______ _______ _____ •Focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies •The goal is to pursue a low-cost strategy on a global scale •Makes sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal

global standardization

four strategies in global market

global standardization, localization, transnational, international

•Multinationals that take advantage of location economies create a _______ ____ of value creation activities

global web

Pros and Cons of _______ ______ •attractive because they allow the firm to build the kind of subsidiary company that it wants •Are slower to establish •Are risky because they have no proven track record •Can be problematic if a competitor enters via acquisition and quickly builds market share

greenfield ventures

3 characteristics of a good ally

helps achieve goals, shares the firm's vision, unlikely to exploit

transnational strategy _____ pressures for cost reduction _____ pressures for local responsiveness

high;high

global standardization strategy _____ pressures for cost reduction _____ pressures for local responsiveness

high;low

what area of organization? __________ •devices used to reward appropriate managerial behavior

incentives

the evolution of strategy •As competition _________, international and localization strategies become less viable •To survive, firms may need to shift to a global standardization strategy or a transnational strategy in advance of competitors

increases

•When there are differences in infrastructure and/or traditional practices, a need to customize products _________

increases

which strategy? •involves taking products first produced for the domestic market and then selling them internationally with only minimal local customization •Makes sense when there are low cost pressures and low pressures for local responsiveness

international

firms that operate _________ 1.Expand the market for their domestic product offerings by selling those products in international markets 2.Realize location economies by dispersing individual value creation activities to locations around the globe where they can be performed most efficiently and effectively 3.Realize greater cost economies from experience effects by serving an expanded global market from a central location, thereby reducing the costs of value creation 4.Earn a greater return by leveraging any valuable skills developed in foreign operations and transferring them to other entities within the firm's global network of operations

internationally

which entry mode? •Establishment of a firm that is jointly owned by two or more otherwise independent firms •Advantages •A firm can benefit from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business systems •The costs and risks of opening a foreign market are shared with the partner •Join ventures with local partners can help firms minimize the risk of nationalization or other adverse government interference •Disadvantages •The firm risks giving control of its technology to its partner •The firm may not have the tight control over subsidiaries that it might need to realize experience curve or location economies •Shared ownership can lead to conflicts and battles for control if goals and objectives differ or change over time

joint ventures

____ ______: cost savings that come from learning by doing •Labor productivity increases when individuals learn the most efficient ways to perform particular tasks and management learns how to manage the new operation more efficiently

learning effects

which entry mode? •An arrangement whereby a licensor grants the rights to intangible property to another entity for a specified time period, and in return, receives a royalty fee •Intellectual property includes patents, inventions, formulas, processes, designs, copyrights, and trademarks •Advantages •Firm does not have to bear the development costs and risks associated with opening a foreign market •Firm avoids barriers to investment •It allows a firm with intangible property that might have business applications, but which doesn't want to develop those applications itself, to capitalize on market opportunities •Disadvantages •The firm doesn't have the tight control over manufacturing, marketing, and strategy necessary to realize experience curve and location economies •The firm's ability to coordinate strategic moves across countries by using profits earned in one country to support competitive attacks in another is compromised •There is the potential for loss of proprietary (or intangible) technology or property •To reduce this risk, firms can use cross-licensing agreements or link the agreement with the decision to form a joint venture

licensing

Pressures for _______ _________ 1.Differences in consumer tastes and preferences 2.Differences in infrastructure and traditional practices 3.Differences in distribution channels 4.Host government demands 5.The rise of regionalism Firms facing these pressures need to differentiate their products and marketing strategy in each country

local responsiveness

which strategy? •Focuses on increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets •Makes sense when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense

localization

•Firms should locate value creation activities where economic, political, and cultural conditions are most conducive to the performance of that activity •Firms that successfully do this realize _____ ________: arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be

location economies

strategy that focuses primarily on lowering production costs

low-cost strategy

localization strategy _____ pressures for cost reduction _____ pressures for local responsiveness

low;high

international strategy _____ pressures for cost reduction _____ pressures for local responsiveness

low;low

__________- Know-How •The competitive advantage of many service firms is based upon (FIRST) know-how •International trademark laws are generally effective for protecting trademarks •Since the risk of losing control over management skills to franchisees or joint venture partners is not high, the benefits from getting greater use of brand names is significant

management

MAKING ALLIANCES WORK ______ ____ ___________ •Requires managers from both companies to build interpersonal relationships (relational capital) •Should promote learning from alliance partners •Should promote the diffusion of learned knowledge throughout the organization

managing the alliance

•A firm's _________ strategies may be influenced by differences in distribution channels between countries, which may necessitate delegation of (SAME) functions to national subsidiaries

marketing

Under a global web strategy, different stages of the value chain are dispersed to those locations around the globe where perceived value is ________ or where the costs of value creation are ______ •Introducing transportation costs and trade barriers complicates this picture •Political and economic risks must be assessed when making location decisions

maximized minimized

The ________ of a firm can be thought of as a value chain composed of a series of distinct value creation activities, including production, marketing and sales, materials management, research and development, human resources, information systems, and the firm infrastructure.

operations

what two areas support strategy? _____ _____ and _____ ______-

operations strategy organization architecture

______ ______ •the totality of a firm's organization, including the formal organizational structure, control systems and incentives, organizational culture, processes, and people

organization architecture

what supports operations strategy?

organization architecture

what area of organization? __________ _________ •norms and value systems that are shared among the employees

organizational culture

_________ ___________ •The formal division of the organization into subunits •The location of decision-making responsibilities within that structure •The establishment of integrating mechanisms to coordinate the activities of subunits including cross functional teams and or pan-regional committees

organizational structure

MAKING ALLIANCES WORK: _____ ______ •Collect as much information as possible •Gather data from informed third parties •Get to know the potential partner well before committing

partner selection

what area of organization? ________ employees and the strategy used to recruit, compensate, and retain those individuals

people

_______ ________ •costs that an early entrant has to bear that a later entrant can avoid - such as: •The costs of business failure if the firm, due to its ignorance of the foreign environment, makes some major mistakes •The costs of promoting and establishing a product offering, including the cost of educating customers

pioneering costs

•By linking countries together, making them more dependent on each other, and forming a structure where they regularly have to interact, the likelihood of violent conflict and war will decrease •By linking countries together, they have greater clout and are politically much stronger in dealing with other nations _______ case _____ integration

political for

______ ________ Independent states combined into single union •Requires that a central political apparatus coordinate economic, social, and foreign policy for member states •The EU is headed toward at least partial (SAME) •The United States is an example of even closer (SAME) What level of economic integration?

political union

_________ activities of the operations •Involves the design, creation, and delivery of the product; its marketing; and its support and after-sale service •Divided into: research and development, production, marketing and sales, customer service

primary

what area of organization? ________ •manner in which decisions are made and work is performed

processes

define: the percentage increase in net profits over time

profit growth

•Where to locate? Firms need to assess the long-run _______ ________ of each market •The most favorable markets are politically stable developed and developing nations with free market systems, ______ inflation, and low private sector debt •The less desirable markets are politically unstable developing nations with mixed or command economies, or developing nations where speculative financial bubbles have led to excess borrowing •The value an international business can create in a foreign market depends on the suitability of its product offering to that market and the nature of indigenous competition

profit potential low

define: •the rate of return the firm makes on its invested capital

profitability

what two things determine enterprise valuation?

profitability profit growth

•Firms that expand internationally can increase their_________ and ________ _____by: 1.Entering markets where competitors lack similar competencies 2.Realizing location economies 3.Exploiting experience curve effects 4.Transferring valuable skills within the organization

profitability profit growth

what two things does profitability consist of?

reducing costs adding value and raising prices

Past two decades brought in many regional trade blocs that promote _______ ____ ______

regional economic integration

__________ •Regional convergence of tastes and preferences can influence product offerings within a bloc of nations Example: the euro zone

regionalism

the ___ of ____ •Studies of NAFTA's early impact suggest that both advocates and detractors may have been guilty of exaggeration •Canada and Mexico now among top three trading partners of U.S. •Productivity has increased in member nations •Employment effects have been moderate to small •Mexico and U.S. saw small welfare gains while Canada suffered a welfare loss

results NAFTA

•Created the euro zone, the ____ largest currency zone in the world after that of the U.S. Dollar •Countries that participate have agreed to give up control of their monetary policy •_____, _____, _______ opted out

second, britain, denmark, sweden

what two things can contribute to profit growth?

sell more in existing markets enter new markets

•Firms that enter foreign markets on a __________- scale make a major strategic commitment that changes the competitive playing field •Involves decisions that have a long-term impact and are difficult to reverse

significant

____ ____ ____ •Committed EC countries to work toward establishment of a single market by 1992 •Objectives of the act •Remove all frontier controls between EC countries •Apply the principle of mutual recognition to product standards •Institute open procurement to nonnational suppliers •Lift barriers to competition in retail banking and insurance •Remove all restrictions on foreign exchange transactions between member countries •Abolish restrictions on cabotage

single european act

________-scale entry can be attractive because it allows the firm to learn about a foreign market, but at the same time it limits the firm's exposure to that market

small

The Advantages of ________ _______ •Facilitate entry into a foreign market •Allow firms to share the fixed costs and risks of developing new products or processes •Bring together complementary skills and assets that neither partner could easily develop on its own •Can help establish technological standards for the industry that will benefit the firm

strategic alliances

The Disadvantages of _______ ________ -can give competitors low-cost routes to new technology and markets -Unless a firm is careful, it can give away more than it receives

strategic alliances

_____ _____ are cooperative agreements between potential or actual competitors

strategic alliances

_____ _____are cooperative agreements between potential or actual competitors •Examples include formal joint ventures and short-term contractual arrangements •The number of international (SAME) has risen significantly in recent decades

strategic alliances

what does this describe? _______ ________ •The operations of the firm must support the firm's strategy •The organizational architecture of the firm must match the firm's operations and strategy •If market conditions shift, so must the firm's strategy, operations, and organization

strategic fit

What does this describe? ______ ____ •Pick a position on the efficiency frontier that is viable, meaning there is enough demand to support the choice •Configure internal operations to support the position •Have the right organization structure in place to execute the strategy

strategic positioning

_____ ____: •Moving down experience curve allows firm to reduce its cost of creating value and increase its profitability •Once firm has established low-cost position, it can act as a barrier to new competition

strategic significance

define: the actions taken by managers to attain the goals of the firm

strategy

what has to fit market conditions?

strategy

•When consumer tastes and preferences differ significantly between countries, firms face ________ pressures for local responsiveness

strong

Leveraging __________- Skills •Recognize that valuable skills can be developed anywhere within the firm's global network (not just at the corporate center) •Use incentive systems to encourage local employees to acquire new skills •Develop a process to identify when new skills have been created •Act as facilitators to transfer valuable skills within the firm

subsidiary

_____ activities of the operations •Provides the inputs that allow the primary activities to occur •Divided into: information systems, company infrastructure, logistics, human resources

support

_________ Know-How •When competitive advantage is based on proprietary (SAME) know-how, firms should avoid licensing and joint venture arrangements in order to minimize the risk of losing control over the (SECOND) •If a (FIRST) advantage is only transitory, or the firm can establish its (SECOND) as the dominant design in the industry, then licensing may be attractive

technological technology

____ ____ ___-• Since its establishment, the euro has had a volatile trading history with the U.S. dollar •Initially, the euro was valued at $1.17, then fell in value relative to the dollar, but strengthened to an all-time high of $1.54 in March 2008 •In early 2018, the exchange rate was €1=$1.23

the euro experience

____ _____ _____ is expected to become a superpower of the same order as the United States

the european union

_________• Lower trade and investment barriers could lead to increased price competition within the EU and NAFTA •Increased competition within the EU is forcing EU firms to become more efficient and stronger global competitors •Firms outside the blocs risk being shut out of the single market by the creation of a "trade fortress" •Firms may be unable to pursue the strategy of their choice if the EU intervenes and imposes conditions on companies proposing mergers and acquisitions •There is growing opposition to free trade areas

threats

•After a firm identifies which market to enter, it must determine the _______ ____ ______ •Entry is _________ when a firm enters a foreign market before other foreign firms •Entry is _______ when a firm enters after other firms have already established themselves in the market

timing of entry early late

___ ____ occurs when low-cost producers within the free trade area replace high-cost domestic producers

trade creation

occurs when higher cost suppliers within the free trade area replace lower cost external suppliers

trade diversion

what strategy? Tries to simultaneously: •Achieve low costs through location economies, economies of scale, and learning effects •Differentiate the product offering across geographic markets to account for local differences •Foster a multidirectional flow of skills between different subsidiaries •Makes sense when there are both high cost pressures and high pressures for local responsiveness

transnational

Since 1994 trade has ____ between the US, Canada, and Mexico.

tripled

which entry mode? •Involve a contractor who agrees to handle every detail of the project for a foreign client, including the training of operating personnel •At completion of the contract, the foreign client is handed the "key" to a plant that is ready for full operation -most common in the chemical, pharmaceutical, petroleum-refining, and metal-refining industries, all of which use complex, expensive production technologies. •Advantages •Allow firms to earn great economic returns from the know-how required to assemble and run a technologically complex process •Less risky in countries where the political and economic environment is such that a longer-term investment might expose the firm to unacceptable political and/or economic risk •Disadvantages •The firm has no long-term interest in the country •The firm can create a competitor •The firm's process technology is a source of competitive advantage

turnkey projects

needs that exist when the tastes and preferences of consumers in different nations are similar if not identical

universal needs

what is this? _____ _____ •The difference between V (the price that the firm can charge for that product given competitive pressures) and C (the costs of producing that product)

value creation

•Locating ______ ______activities in optimal locations -Can lower the costs of value creation -Can enable a firm to differentiate its product offering from those of competitors

value creation

A firm expanding internationally must decide: ______ markets to enter _______ to enter them _____ __ _______

which when scale of entry

which entry mode? •100 percent ownership of the subsidiary •Set up a new operation in that country, called a greenfield venture •Acquire an established firm •Advantages •They reduce the risk of losing control over core competencies •They allow for the tight control over operations in different countries that is necessary for engaging in global strategic coordination •They may be required if a firm is trying to realize location and experience curve economies •Disadvantages •Firms bear the full costs and risks of setting up overseas operations

wholly owned subsidiary