GBU 355- Final Exam

The purchase of securities in one market for immediate resale in another to profit from a price discrepancy.

Arbitrage

What drives the choice of which markets to enter?

Assessment of long run growth and profit potential

This term refers to the quality and belief that a country should be self-sufficient and avoid trade and/or external assistance with other nations.

Autarky

The simultaneous purchase and sale if a given amount for foreign exchange for two different value dates.

Currency swap

Values of a set if currencies are fixed against each other at some mutually agreed on exchange rate.

Fixed exchange rate

Exchange rate in which the foreign exchange market determines the relative value of a currency.

Floating exchange rate

The right to exchange one currency for another at some point in the future at a predetermined exchange rate.

Foreward contract

Occurs when parties agree to exchange currency and execute the deal at some specific point in the future.

Forward exchange

What is a price floor?

A legal minimum on the price at which a good can be sold.

Advantages & disadvantages of of strategic alliances

A long-term partnership between two or more companies established to help each company build competitive market advantages. Advantages: - May facilitate entry into foreign markets - Share fixed costs and associated risks of developing new products or processes - Bring together complementary skills and assets neither company would easily develop on its own. Disadvantages: - There are several risks associated

Rewards

Incentives

Who came to Icelands rescue in their banking crisis?

International Monetary Fund (IMF)

The institutional arrangements that govern exchange rates.

International Monetary System

The overall firm

Organization architecture

Formal division into subunits, location of decision-making, and integrating mechanisms

Organization structure

Values and norms in the organization

Organizational culture

A factory than can be viewed as an intelligence-gathering unit is a/an:

Outpost factory

The amount of currency needed to purchase one ounce of gold

Par value

Exchange rate in which the value of the currency is fixed relative to a reference currency

Pegged exchange rate

Costs that an early entrant to the market must bear that a later entrant does not have are known as:

Pioneering costs

The benefit-cost-risk trade-off to a firm entering a foreign market is likely to be most favorable in:

Politically stable countries with market systems

When fuel prices increase, what effect does it have on the prices of imports and exports?

Prices rise

How decisions are made and work performed

Processes

All activities involved in creating a product are known as:

Production

The part of the supply chain that includes the worldwide buying of raw material, component parts, and products used in manufacturing of the company's products and services.

Purchasing

Describe the purpose of the World Bank's Logistics Performance Index, and what are the 6 categories measured in the index?

Scores countries on how efficiently they move goods across and within boarders. 6 Categories: 1. Timeliness 2. Logistics services quality 3. Ease of international shipments 4. Tracking and tracing 5. Infrastructure 6. Customs

A factory linked into the global supply chain for a global firm to supply specific country or regional markets around the globe is a/an:

Server factory

This statistically based philosophy aims to reduce defects, boost productivity, eliminate waste, and cut costs throughout a company.

Six sigma

A factory whose primary purpose is also to drive down costs in the global supply chain is a/an:

Source factory

The rate at which a foreign exchange dealer converts one currency into another currency on a particular day.

Spot exchange rate

The integration and coordination of logistics, purchasing, operations, and market channel activities, from raw material to the end-user customer is:

Supply chain management

The value of currency is determined by the interaction of ______, ___________.

Supply, demand

A firm agrees to set up an operating plant for a foreign client and hand over the plant when it is fully operational. This is known as:

Turnkey

An advantage of this entry mode is its ability to earn returns from process technology skills in countries where FDI is restricted

Turnkey

The portion of the supply chain from raw materials to the production facility is known as the ______________supply chain.

Upstream

A firm owns 100% of its stock through a new operation or an acquisition of another firm

Wholly subsidiary

If a firms competitive advantage is based in technology it will most likely choose to enter a foreign market in which way?

Wholly subsidiary (?)

[fill in the blank] Barter, counter purchase, offset, switch trading, buyback are all forms of

countertrade

Costs/ Disadvantages of having a single currency in the EU

-Loss of control over monetary policy. -Perhaps not an optimal currency area due to dissimilarities in wage rates, tax regimes, business cycles and economic shocks

Benefits of having a single currency in the EU

-Lower foreign exchange and hedging costs. -Easier to compare prices. -Long run gains in efficiency. -Pan-European capital market

List the 4 main institutions in the political structure of the European Union

1. European Commission 2. European Council 3. European Parliament 4. Court of Justice

What are 2 potential negative effects to regional economic integration?

1. Job loss 2. Loss of national sovereignty

The Goal of Regional Trade Agreements (4)

1. To reduce and eliminate barriers to trade 2. To increase and protect national sovereignty 3. To increase tariffs and non-tariff barriers on foreign firms 4. To benefit governments

How many members does the EU currently have?

28

The movement of traders like a herd all in the same direction at the same time in response to each other's preconceived actions

Bandwagon effect

Mission is to support central banks' pursuit of monetary and financial responsibility through international cooperation. It is the central bank for central banks.

Bank for International Settlements (BIS)

The instrument normally used in international commerce to effect payment is a:

Bill of exchange

The _____ is issued to the exporter by the common carrier transporting the merchandise, and acts as a recipient, a contract, and a document of title

Bill of landing

The short term movement of funds from one country into another in hopes of profiting from shifts in the exchange rates.

Currency speculation

Borrowing in one currency where interest rates are low and using the proceeds to invest in another currency where interest rates are high.

Carry trade

What did the Maastricht Treaty accomplish?

Committed members to adopt a common currency (the Euro) by 1/1/99.

A factor that serves a specific country or region is a/an:

Contributor factory

Metrics used to measure performance and make judgements

Controls

This institution is the ultimate authority in issues of appeal among the EU members.

Court of Justice

What has been the result of sanctions against Russia for its invasion of Ukraine? Its currency ____ against the U.S. dollar.

Depreciated

A country's central bank occasionally intervenes to change the direction of a currency's value

Dirty float

When a country intervenes to hold the value of a currency within a range against a reference currency

Dirty float

The portion of the supply chain from the production facility to the end-customer is the _____________ supply chain.

Downstream

The extent to which a firm's future international earning power is affected by changes in exchange rates.

Economic exposure

The reductions in unit cost achieved by producing a large volume of a product are called

Economies of scale

Market that has no impediments to the free flow of goods and services.

Efficient market

Which institution of the EU proposes legislation, implements the legislation, and monitors compliance with it.

European Commission

The members of this EU institution are elected directly by the populations of their individual countries. Its power increased under the Treaty of Lisbon.

European Parliament

The rate at which one currency is converted into another.

Exchange Rate

Systematic reductions in production costs observed over the life of production

Experience Effects (curve)

An entity sells intangible property (normally a trademark) to another entity, and insists that the recipient abide by strict rules as to how it does business.

Francising

Label and describe the levels of economic integration

Free Trade Area: All barriers to the free flow of goods and services are removed between members, but countries have independent external trade policies. Customs Union: All barriers to the free flow of goods and services are removed between members AND pursuit of a common external trade policy. Common Market: No barriers to trade among member countries, common external trade policy, and free flow of factors of production among members. Economic Union: Free flow of goods and services, common external trade policy, free flow of factors of production, common currency, harmonization of tax rates, common monetary and fiscal policy. Political Union: Free movement of goods, services, & factors of production; common external policy; common currency & tax policy; central government.

Under this system, countries fixed their currency values to an ounce of gold, and agreed to used this as the measure for exchange.

Gold standard

Primary activities in the firm

Have to do with the design, creation & delivery of the product. -R&D (research and development) -Production -Marketing & Sales -Customer Service

Currency conversion and insuring against foreign risks are _______

Hedging

Define Trade Creation as an economic argument against regional economic integration.

High-cost domestic producers are replaced by low-cost foreign producers within a free trade area.

2 or more otherwise independent firms establish a 3rd firm.

Joint venture

A factory intended to create new processes, products, and technologies that can be used throughout the global firm in all parts of the world is a/an:

Lead factory

Cost savings that come from learning by doing

Learning effects

This states that a bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents.

Letter of credit

Rights to intangible are granted by one entity to another for a specified period and in return, the grantor receives a royalty fee. This is known as:

Licensing agreement

The part of the supply chain that plans, implements, and controls the effective flows and inventory of raw material, component parts, and products used in manufacturing.

Logistics

Define Trade Diversion as an economic argument against regional economic integration.

Lower cost external suppliers are replaced by higher cost suppliers within the trade area.

[Fill in the blank] An export specialist firm that acts as the export marketing department or international department for their client is an export ________ company.

Management

The level of output at which most plant-level scale economies are exhausted is the __________.

Mass customization

Explain how value creation is measured.

Measured by the difference between Value and Costs (V-C). A company creates value by converting inputs that cost (C) into a product that consumers place at a value (V).

The term for when people behave recklessly when they know they will be saved.

Moral hazard

A factory that is developed and set up mainly for producing component parts or finished goods at a lower cost than producing them at home or in any other market is a/an:

Offshore factory

Which institution of the EU has representation from each member state, but the representative varies based on the topic being discussed?

The European Council

Which institution of the EU is considered the ultimate controlling authority?

The European Council

What was created as part of the Treaty of Rome?

The European Union (EU)

[written] What is the role of the Ex-Im Bank

The Export-Import Banks assists in the financing of u.s exports of products and services to support u.s. employment and market competitiveness

What is a sogo shosha?

The Japanese word for trading houses

Support activities in the firm

The functions of the value chain that allow primary activities to occur. -Information systems -Firm infrastructure & logistics -Human resources

In competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when the price is expressed in the same currency.

The law of one price

After reviewing figure 12.3, explain why strategic choices in low cost, low value differentiation are not viable.

They are non viable because they aren't efficient/ they don't meet the efficiency frontier

The type of draft that allows for a delay in payment, normally 30, 60, 90, or 120 days is a _____ draft

Time

The extent to which the income from individual transactions is affected by fluctuations in foreign exchange values.

Transaction exposure

The impact of currency exchange rate changes on the reported financial statements of a company

Translation exposure

True or False: Exchange rates affect the price of every country's import and exports.

True

What is value to weight ratio?

a measure of the monetary value a product has per kilogram or pound.