Chapter 1

International business

A business whose activities are carried out across national borders. This definition includes not only international trade and foreign manufacturing, but also the growing service industry in areas such as transportation, tourism, advertising, construction, retailing, wholesaling, and mass communications

Global company

An organization that attempts to standardize and integrate operations worldwide in most or all functional areas.

Multi domestic company

An organization with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences.

Firms often enter foreign markets to protect markets, profits, and sales. How does this relate to each of the following? Lack of foreign exchange

First sign is a delay in payment by importers

Firms often enter foreign markets to protect markets, profits, and sales. How does this relate to each of the following? Following customers overseas

Follow principal accounts overseas to prevent competitors from gaining access to those accounts. Guaranteed customer base

Firms often enter foreign markets to protect markets, profits, and sales. How does this relate to each of the following? Acquiring technology

Foreign firms invest in the United States for the acquisition of technology and management know-how

List the five drivers of globalization. (on final exam)

Political-the progressive reduction of barriers to trade and foreign investment by most governments and privatization of much of the industry in formerly communist nations Technological- vast advancements Market- become global customers Cost- globalize product lines to reduce development, production, and inventory costs Competitive- more competition

Explain how entering foreign markets can increase profits by:

Providing greater revenue: Firms are able to obtain greater revenue by simultaneously introducing products in foreign markets and in their domestic markets as they move toward greater globalization Lower the cost of goods sold: Increasing total sales by exporting not only will reduce research and development costs per unit, but also will make other economies of scale possible. Inducements also help which are reduced taxes or subsidies for R&D

Explain the difference between controllable and uncontrollable forces.

The external forces are commonly called uncontrollable forces. Management has no direct control over them. External forces consist of the following: Competitive, Distributive, Economic, Socioeconomic, Financial, Legal, Physical, Political, Sociocultural, Labor, And Technological Controllable Forces-management does have some control are the internal forces-such as the factors of production (capital, raw materials, and people) and the activities of the organization (personnel, finance, production, and marketing)

Define economic globalization

The tendency toward an international integration of goods, technology, information, labor, and capital, or the process of making this integration happen.

Define self-reference criterion

Unconscious reference to the manager's own cultural values, when judging others in a new and different environment

Firms often enter foreign markets to protect markets, profits, and sales. How does this relate to each of the following? Protectionism

When a government sees that local industry is threatened by imports, it may erect import barriers to stop or reduce these imports