FVC1 GLOBAL BUSINESS study guide Modules 1-12

What are the benefits and costs of global expansion from MNCs' perspective?

1. Global companies can increase the size of their market and achieve economies of scale, which can result in cost savings. 2. Ethical issues, governmental policies, and economic restrictions are all likely when a company moves into an unfamiliar global space.

List and explain each international trade theory. Focus on the features of each theory.

1. Global strategic rivalry theory-- The global strategic rivalry theory focused on multinational corporations and their efforts to gain a competitive advantage against other global firms in their industry. 2. Country similarity theory--The country similarity theory states that intra-industry trade will be standard and that most trade in manufactured goods will be between countries with similar per capita incomes. 3. Factor endowment theory-- The factor endowment theory stated that countries would produce and export goods that required resources or factors that were in abundant supply. 4. Merchantilism 5. Absolute advantage 6. H-o theory 7. Comparative advantage

What are the 4 drivers of globalization?

1. Market 2. Cost 3. Competition 4. government

What are the WTO's major functions, rules, rounds of negotiations, and criticisms?

1. Oversee Agreements: Oversee the implementation and administration of the trade agreements between nations that are under the WTO's scope of authority. The WTO trade agreements cover goods, services, and intellectual property. 2. Transparency of Trade Policy: All WTO organization members must publish, undergo a review of, and notify any changes in their trade regulations. 3. Assist Developing Nations: Many developing countries and emerging markets lack the experience and technical expertise needed to deal with extensive and very comprehensive trade agreements. The WTO provides them with critical training and support, thereby ensuring that the WTO is inclusive and equitable toward both the wealthiest and most impoverished nations in the world.1 4. Provide Outreach: Maintain a dialogue with nongovernmental agencies, the media, and the general public to aid in transparency about WTO procedures, enhance cooperation, and increase awareness about WTO activities. 5. Settle Disputes: Provide a forum for negotiations and the settling of disputes among nations. (WTO, n.d.). Ensure Non-discrimination: Most-favored-nation (MFN) status requires that a WTO member must apply the same terms and conditions to trade with all other WTO members. In other words, if a country grants another country (even a non-WTO member) a special favor, then every other WTO member must get the same treatment

How does tariff impact import prices, quantity of imported product, consumers, domestic businesses, and the government?

1. Tariffs are fees placed on imports to raise the price of foreign goods and services. They are used to protect domestic producers. If foreign goods can be sold at a lower price than domestic goods, consumer demand will go up, but the domestic price will do down. The decrease in price drives down the profit margin for domestic suppliers. 2. With tariffs, domestic producers and the government gain and consumers and foreign producers lose overall

What are the World Bank's major functions, goals and criticisms?

1. The primary focus of the World Bank centers on three priorities: helping build sustainable economic growth, investing in people, and building resilience to shocks and threats. 2. The World Bank provides low-interest loans, interest-free credits, and conditional grants to developing countries in which a government (or sovereign) guarantees repayment. 3. The World Bank Group is comprised of private lending banks as well as the World Bank. 4. Some criticisms of the World Bank include: an imbalance of leadership power, enforced conditionality, and environmental impacts.

List different economic systems and differentiate. How does each economic system impact business operation and economic production?

1. Traditional economies are found in rural countries where the primary occupation is farming. 2. In a command economy found in a communist country, most of the economic system is controlled by a centralized power. In a planned economy found in a socialist country, the factors of production are used for the common good. 3. A market economy is a decentralized economy in which firms and households determine how resources are allocated based on how best to satisfy their needs. 4. A mixed economy has less government intervention than a command economy. Supply and demand control the economy

What are the different forms of international business?

1. businesses, 2. governmental agencies, 3. NGOs.

List different legal systems and differentiate.

1. civil law: have more detailed, prescriptive laws in which the role of the judge is to investigate whether a law has been broken. 2. Common law is based on precedence. 3. Religious law is based on religious beliefs.

What are the 5 stages of entering a global market? Explain each stage.

1. market entry: companies enter new countries using business models similar to the ones deployed in their home markets. To gain access to local customers, however, companies often need to establish a production presence, either because of the nature of their businesses, such as in-service industries like food, retail, or banking, or because of local countries' regulatory restrictions, such as in the auto industry. 2. product specialization: companies transfer the full production process of a particular product to a single, low-cost location and export the goods to various consumer markets. In this scenario, different locations begin to specialize in different products or components and trade in finished goods. 3. value chain disaggregation: represents the next step in the company's globalization of the supply chain infrastructure. In this stage, companies disaggregate the production process and focus on completing each activity in the most advantageous location. Individual components of a single product might be manufactured in several different places and assembled into final products elsewhere. Examples include the PC industry market and the decision by companies to offshore some of their business processes and information technology services.2 4. value chain reengineering: companies seek to further increase their cost savings by reengineering their processes to suit local market conditions by substituting lower cost labor for capital. General Electric's (GE) medical equipment division, for example, has tailored its manufacturing processes abroad to take advantage of low labor costs. Not only does it use more labor-intensive production processes, but it also designs and builds the capital equipment for its local plants.2 Finally, in the fifth stage (creation of new markets), the focus is on market expansion. This allows companies to substantially lower their sticker prices in both old and new markets and to expand demand. Significantly, the value of new revenues generated in this last stage is often greater than the value of cost savings in the other stages.

Power distance

A national culture attribute that describes the extent to which a society accepts that power in institutions and organizations is distributed unequally.

Uncertainty avoidance

A national culture attribute that describes the extent to which a society feels threatened by uncertain and ambiguous situations and tries to avoid them.

What is globalization?

A process that involves the entire world and results in making something worldwide in scope.

Licensing and Franchising

Advantages Fast entry, low cost, low risk Disadvantages Less control, licensee may become a competitor, legal and regulatory environment (IP and contract law) must be sound

Exporting

Advantages Fast entry, low risk Disadvantages Low control, low local knowledge, potential negative environmental impact of transportation

Acquisition

Advantages Fast entry; known, established operations Disadvantages High cost, integration issues with home office

Subsidiary (Greenfield Venture)

Advantages Gain local market knowledge; can be seen as insider who employs locals; maximum control Disadvantages

International Joint Venture

Advantages Shared costs reduce investment needed, reduced risk, seen as local entity Disadvantages Higher cost than exporting, licensing, or franchising; integration problems between two corporate cultures

Strategic Alliance

Advantages Shared resources to gain more market share. Disadvantages Very vulnerable relationship - because any one entity could exit at any time

1. floating exchange rate 2. A fixed exchange rate system, or pegged exchange rate system, 3. The Pegged Float Exchange Rate

Define 3 exchange rate policies and give an example of each.

functional: a traditional type of organizational structure. Each functional area is referred to as a "silo" since each operates in relative isolation. matrix: allows for specialization that can both increase depth of knowledge and assign individuals according to project needs. divisional: employees are divided into departments based on product areas, markets, and/or geographic regions. team: made up of people with complementary skills working together for a common purpose.

Define 4 types organizational structures. List advantages and disadvantages for each.

Corporate social responsibility (CSR) can be defined as a company's obligations to society, including a wide range of stakeholders: people and places affected by company activities

Define Corporate Social Responsibility. What is the goal of the CSR?

a specific branch aimed at dealing with worldwide environmental problems

Define National Environmental Protection Act. What is the major function of NEPA?

push model is where manufacturers, suppliers, distributors, and marketers have most of the power pull model is less centered around product and more directly focused on the individual consumer.

Define Pull and Push model. (Pay attention on differences)

In centralized companies, many important decisions are made at higher levels of the hierarchy, whereas in decentralized companies, decisions are made and problems are solved at lower levels by employees who are closer to the problem in question.

Define and compare Centralized VS. Decentralized decision-making methods. List advantages and disadvantages for each.

Investments made by international companies with the intention of controlling those assets in a foreign market represents foreign direct investment. Portfolio investment refers to act of investing in a company's stocks, bonds, or assets, but not to control or direct the firm's operations or management.

Define and compare portfolio investment and foreign direct investment.

When a firm brings the goods or components back to its home country (i.e., acting as a supplier), this is referred to as backward vertical FDI. When a firm sells the goods into the local or regional market (i.e., acting as a distributor), this is termed forward vertical FD

Define and differentiate backward vertical FDI and forward vertical FDI?

Discrepancies are accounting errors that are not intentional. Irregularities are the misrepresentation of accounting data with the intention to defraud.

Define and differentiate discrepancies and irregularities.

vertical structure - legitimate law-creating authority at the top and the people to be governed at the bottom horizontal structure - one sovereign state is not legally dominant over the other.

Define and differentiate the vertical and horizontal legal structure.

patent it never reveal it

Define and elaborate on 3 ways to protect intellectual properties.

They are legally enforceable promises that, if breached, result in compensable damages. In contracts, this usually means that the party who breaches the contract must pay the injured party an amount that would make that party whole again.

Define contract.

citizens living and working outside of the country

Define expatriates, third country nationals, and host country nationals.

Greenfield FDIs occur when multinational corporations enter into developing countries to build new factories or stores. A brownfield FDI is when a company or government entity purchases or leases existing production facilities to launch a new production activity.

Define greenfield and brownfield FDIs. Give an example for each.

Horizontal FDI occurs when a company is trying to open a new market Vertical FDI is when a company invests internationally to provide input into its core operations

Define horizontal FDI and vertical FDI. Give an example for each.

Monopolies are characterized by a lack of economic competition in the production of a good or service and a lack of viable substitutes for that good or service. Consumers are vulnerable when there is little market competition because corporations can control prices.

Define monopoly and explain how monopoly hurt consumers.

Corporations that move resources, goods, services, and skills across national boundaries without regard to the country in which their headquarters are located are multinational corporations.

Define multinational companies. Identify benefits of being a multinational company. Identify impacts of multinational companies.

Regional economic integration is an agreement among a geographical region of nations to reduce or eliminate trade barriers among the nations at a minimum and to have a single political, economic, and trade policy identity at its maximum.

Define regional economic integration

In foreign exchange markets, demand and supply become closely interrelated because a person or firm who demands one currency must, at the same time, supply another currency—and vice versa.

Define supply and demand of a currency.

6.MNCs use various strategies to maximize profits by minimizing the amount of taxes they must pay. Some of these strategies involve transferring assets across borders to countries with better tax rates. Corporations also use fronting loans as a way of taking advantage of the tax benefits while transferring funds to subsidiaries.

Define transfer pricing and fronting loans. Describe how they impact the tax payment for companies.

Unlike the Kyoto Protocol, which established legally binding emissions reduction targets (as well as penalties for noncompliance) for developed nations only, the Paris Agreement requires that all countries—rich, poor, developed, and developing—do their part and slash greenhouse gas emission

Differentiate the Kyoto Protocol and the Paris Agreement.

Global integration is the degree to which the company is able to use the same products and methods in other countries. Local responsiveness is the degree to which the company must customize its products and methods to meet conditions in other countries.

Explain the trade-offs between global integration and local responsiveness. Use the global integration and local responsiveness level to measure the export, standardization, multi domestic and transnational strategies. Identify when to use which strategy.

What are the arguments for and against globalization from country's perspective?

Firms have benefitted from globalization by being able to specialize and focus more on research and development, by having access to a broader market, and by gaining access to cheaper labor. Globalization has also brought challenges, such as a need to understand and conform to foreign legal and political policies. In this lesson, you will explore the business opportunities and challenges presented by globalization.

What are the concerns on free trade's impact on manufacturing jobs in developed nations and labor rights in developing nations?

Free trade can increase the wages and availability of jobs in some sectors but have the opposite effect in other sectors.

Define GDPR and its features

General Data Protection Regulation protects user data for EU

Antitrust laws are aimed at regulating consumer affairs and safeguarding the market from anti competitive practices, particularly from large companies that may hold a monopoly.

How are Antitrust Laws implemented in the U.S.?

To prevent irregularities, companies can implement numerous internal controls. These include segregating employee duties, assigning specific duties to each employee, rotating employee job assignments, using mechanical devices, and maintaining complete and accurate accounting records. Global corporations should also place increased focus on employee training and education, including at the top executive level.

How can one prevent discrepancies and irregularities?

In many high-context cultures, it is essential to understand body language in order to accurately interpret a situation, comment, or gesture. People may not understand your words, but they will certainly interpret your body language according to their accepted norms

How can verbal language and body language cause issues in business communication? Use examples to illustrate.

Different cultures use radically different systems to get things done. Whereas Western cultures are primarily rule-based, most of the world's cultures are relationship-based.

How does culture impacts business ethic standard? Explain and give examples.

Human resource departments need to understand cultural differences, provide appropriate compensation, and understand cost of living and benefit differences between countries.

How does culture influence staffing strategies and performance evaluation?

Reduced inventory: customers receive orders when they need them. Improvement in the order accuracy:guarantee that when orders are shipped, the right items are shipped in the right quantity. Reduced cycle time for product development: the supplier is in a better position to help the customer develop new products far more rapidly. It greatly reduces the product cycle time. Financial benefits: Peace of mind: Having a supplier whom one can trust to accurately deliver items in a timely, low-cost fashion, and who has also developed contingency plans to cope with potential problems, is relatively unique and provides the customer with a high level of comfort.

How does supply chain management improve customer value?

The HR professional would estimate these expenses within the home country and costs for the same items in the host country. The employer then pays differences. In addition, the base salary will normally be in the same range as the home country salary, and an overseas premium might be paid owing to the challenge of an overseas assignment.

How is expatriate's compensation package determined in global business?

Paying bribes is relatively common in many countries, and bribes often take the form of grease payments, which are small inducements intended to expedite decisions and transactions.

Identify examples of unethical practices in business operation.

NAFTA, MERCOSUR, USMCA, CAFTA-DR, EU

Identify features of each major real-world regional integration bloc and differentiate them.

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

Identify the features of the 5 stages of regional economic integration and relate an example to each stage.

manipulating the value.

Identify the reasoning behind strengthening and weakening currency. How does it impact international trade?

Governments seek to promote FDI when they are eager to expand their domestic economy and attract new technologies, business knowledge, and capital to their country 1. financial incentives 2. infrastructure

Identify the reasons and strategies that governments promote FDI.

Governments want to be able to control and regulate the flow of FDI so that local political and economic concerns are addressed. 1. Tax rates and sanctions 2. ownership restrictions

Identify the reasons and strategies that governments restrict FDI.

What are the IMF's major functions, goals, and conditionalities?

The IMF helps maintain liquidity of global funding by providing a straight-forward method for nations to borrow and loan to each other through a mechanism called the special drawing right. The IMF does not require collateral from countries for loans but rather requires the government seeking assistance to correct its financial practices that led to debt in the form of policy reform. If the conditions are not met, the funds are withheld

What are the criticisms on the IMF?

The conditions put on the loan require the recipient country to have a policy of austerity. This policy, which usually results in a cut in funding for social programs, can have a significant effect on citizens who are living in poverty, according to critics of the IMF. Other criticisms of the IMF address a lack of representation by the global south, an overrepresentation by the United States, and environmental damage

What is quota? List and explain the types of quota.

restrictions on the number of goods that may enter a country. The effect on producers and consumers of using quotas is the same as that of using tariffs.

Indulgence versus restraint

the extent to which a society allows relatively free gratification of basic and natural human drives related to enjoying life and having fun

What is the 4th industrial revolution?

the indistinguishable combination of what is human and what is technology such that it is difficult to tell where human ends and technology begins.

List different political systems and differentiate them. How does each political system impact business operation?

· Monarchy § A single person rules until he or she dies or abdicates the throne. § Power can vary by type: absolute, constitutional, or a mix of both. § Constitutional: Canada, Great Britain, Japan § Absolute: Saudi Arabia, Qatar · Oligarchy § A small, elite group holds power § Status not achieved through noble ancestry § Russia § Venezuela § China · Dictatorship § A single person (or a very small group of people) holds power. § Wields complete and absolute authority over a government and population. § North Korea § Cuba · Democracy § Citizens organize political parties and elect leaders § Leaders power organized through constitution and term limits § United States

address the investing public's lack of trust in corporate America by addressing financial accountability issues and requiring public companies to adopt and disclose a code of business conduct and ethics.

What's the function of the Sarbanes-Oxley Act?

Prevent retaliation

Why are protections needed for whistleblowers?

What is hedging?

a financial strategy designed to reduce risk by balancing a position in the market. For example, an investor that owns a stock could hedge the risk of the stock going down by buying put options on that security or other related businesses in the industry.

Long-term orientation

a national culture attribute that emphasizes the future, thrift, and persistence

Define AUP.

acceptable use policy This policy outlines what is allowed and what is not allowed while someone is using the organization's services.

What is a data management system? How does it improve working efficiency?

allows businesses to store and analyze large amounts of data to identify trends, produce reports, and other analysis.

What are the trends in global business adoption, use and growth in technology?

artificial intelligence, cybersecurity and virtual reality

Individualistic

cultural values such as independence and self-expression

the collective programming of the mind that distinguishes the members of one group or category of people from others

culture is

What is meant by the digital divide and how can technology bridge gaps to promote globalization?

discrepancy in access to information technology (IT) between populations. three stages: the economic divide, the usability divide, and the empowerment divide.

What is an enterprise resource planning system (ERP)?

is a type of software solution design to integrate all a company's data. ERP would integrate data from human resources (HR), employee data, sales information, and development figures.

Pros Trade creation. These agreements create more opportunities for countries to trade with one another by removing the barriers to trade and investment. Employment opportunities. By removing restrictions on labor movement, economic integration can help expand job opportunities. Consensus and cooperation. Member nations may find it easier to agree with smaller numbers of countries. Cons Trade diversion. The flip side to trade creation is trade diversion. Member countries may trade more with each other than with nonmember nations. Employment shifts and reductions. Countries may move production to cheaper labor markets in member countries. Similarly, workers may move to gain access to better jobs and wages. Sudden shifts in employment can tax the resources of member countries. Loss of national sovereignty. With each new round of discussions and agreements within a regional bloc, nations may find that they have to give up more of their political and economic rights.

List and Elaborate on the benefits and costs of regional economic integration.

production method, shipping costs and logistics, available raw materials, quality of workforce, taxes, local costs, business culture, and community incentives.

List and explain the factors in location decisions.

to grow, reduce costs, or innovate.

List and explain the factors in relocation decisions.

The Worst Forms of Child Labor Convention The Maritime Labor Convention The Domestic Workers Convention

List three international labor conventions that help protect workers. Explain the applicable feature of each labor convention.

Masculinity versus femininity

Theory of the relationship between gender and work roles. In masculine cultures, sex roles are sharply differentiated and traditional "masculine values" such as achievement and the effective exercise of power determine cultural ideals; in feminine cultures, sex roles are less sharply distinguished, and little differentiation is made between men and women in the same job.

How is supercomputer applied in business operation?

They are used to analyze big data to gain insights into customer behavior and to improve inventory, production management, and product design

Forward; a firm agrees to pay a specific rate at the beginning of the contract for delivery at a future date. Swap contracts are two-way agreements to exchange currency on different dates. Futures contracts oblige an exchange of a certain amount of currency on a defined date and rate. Option contracts offer the owner the right to a specified exchange rate for a particular quantity of money on a particular date but do not oblige the owner.

What are four contracts to hedging foreign exchange risks?

Standardization is the effort to keep the product the same everywhere and to maintain strict quality control in order to stay true to the brand. Global standardization helps create economies of scale which increases profits. Adaptation is any modification of the domestic product for the foreign market. Sometimes changing the packaging or product is a critical step in adaptation. Glocalization is the process of adapting to local markets while maintaining a global identity.

What are the 3 marketing strategies to enter a foreign market?

Make-to-order: products are customized to meet the needs of the buyers who ordered them. Mass production: also known as make-to-stock strategy, is the practice of producing high volumes of identical goods at a cost low enough to price them for large numbers of customers. Goods are made in anticipation of future demand (based on forecasts) and kept in inventory for later sale. Mass customization: customers are looking for products that are designed to accommodate individual tastes or needs but can still be bought at reasonable prices. To meet the demands of these consumers, many companies have turned to an approach called mass customization, which (as the term suggests) combines the advantages of customized products with those of mass production.

What are the 3 production processes? Define and differentiate.

Advantages You maintain control of the product, marketing, and costs. Shorter channel means the product reaches the consumer faster. It is less costly in the long term. It enables stronger connection to the customer base. Disadvantages More expensive in beginning because it requires capital investment to set up facilities and hire staff. Difficult to manage on a large scale. Must deal with issues in areas such as shipping or government restrictions without experience. Must have own logistics team and transportation

What are the advantages and disadvantages of direct distribution strategies?

Advantages There are no up-front costs if you are using an existing channel. Intermediaries may have more knowledge of the markets. Intermediaries can use their expertise to speed up the process. Disadvantages Must trust intermediaries to represent your brand and interact with customers Intermediaries may develop sense of ownership over your products An existing channel may carry competing products Intermediaries will be in control of the marketing efforts Adds layers of cost and bureaucracy with more intermediaries

What are the advantages and disadvantages of indirect distribution strategies?

stress, homesickness, culture shock, and likely a larger workload than the employee may have had at home. Some stress results from insecurity and homesickness. It is important to note that much of this stress occurs in the family as well. The expatriate may be performing and adjusting well, but if the family is not, it can cause greater stress on the employee, resulting in a failed assignment. The success of overseas employees depends greatly on their ability to adjust.

What are the challenges expatriates might encounter?

the need to find growth, take advantage of incentives, reduce costs, and facilitate innovation

What are the considerations for locating and relocating production facilities?

pros 1. Quality over Quantity 2. The Target Country has a Limited Local Talent Pool 3. Your Operation Must Conform to the Standards of your Home Market cons 1. Expats are Expensive & Problematic 2. High Burnout Rate 3. Legal Risks

What are the pros and cons of hiring expatriates?

By outsourcing, companies can turn over business activities to those who have more expertise or shift production to areas that have lower costs. Risks: Outsourcing may not be effective with some business activities, such as human resources or customer relations, so businesses turn to insourcing,

What are the reasons for insourcing and outsourcing? What are the risks of outsourcing?Explain the advantages of outsourcing. Describe the risks associated with outsourcing and explain the reasons for insourcing.

Primary Sources U.S. Department of Commerce. the U.S. government's Trade site. See international population rates on the U.S. Census site. Look up statistics for countries worldwide on the UN Data site. Explore the World Bank's 575 development indicators Find data provided by the government of Canada. Explore what life is like living, working, and traveling in the European Union. Look up statistics, history, politics, and demographics for different countries on Global Edge. Visit ExpatExchange to learn about the opportunities, experiences, and emotions of people living and working in foreign countries and cultures worldwide. Secondary Sources Read advice from the U.S. Department of State on living abroad and guidelines for life events. Read information about opportunities and issues with exporting at the U.S. government's export site. Compare cultural characteristics of different countries using Hofstede's dimensions. Explore cultural analyses of countries worldwide by the Canadian government. Read articles and advice about living abroad.

What are the reputable primary and secondary sources for learning about foreign cultures?

direct financial risks, but political, legal, and sociocultural situations may arise that put a business in jeopardy

What are the risks associated with investing, financing and foreign exchange in global business?

VCs: accumulate capital from a number of speculative investors and seek strong business opportunities still in the start-up phase angel investors: are more often individuals with capital to spare who have taken an interest in a particular business or product. FFF: comes from personal connections Crowdsourcing: Websites such as Kickstarter and Indiegogo are unique and modern formats, where individuals with potential business ideas can raise capital and support prior to producing a given product or service.

What are the sources of financial investment used by small companies? List and explain VC, Angel investor, FFF, and Crowdsourcing

Cash; Loans; Bonds; Equity

What are the sources of financing investment used by large companies?

export, standardization, multi domestic, and transnational.

What are the various strategies and associated risks for entering foreign markets?

aim to develop a global intellectual property infrastructure helps mediate many disputes.

What is WIPO's major functions?

The blueprint for how a business functions, who makes decisions, how work is assigned, and which resources are shared.

What is an organizational structure?

Business ethics refers to contemporary standards or sets of values that govern the actions and behavior of individuals in the business organization and the actions of the business itself.

What is business ethic? Why business ethic is important to global businesses?

process of interlocking activities that use properly designed policies and procedures so ethics and compliance officers can do their due diligence—adequately investigating and enforcing given procedures.

What is internal control? What are the functions of internal control system?

the flow of physical goods and associated information from the source to the consumer.

What is supply chain?