Global business

**Enron

(Major energy and communications company)—*Assigned debt and losses to overseas subsidiaries that it purposely failed to disclose in financial statements. *Abused mark-to-market accounting to make future profits look like they were already earned, which eventually led to bankruptcy and the loss of 20,000 jobs as well as a loss of value of its stock. *Resulted in the Sarbanes-Oxley act that made it more difficult and costly to release fraudulent financial statement.

**WorldCom

(Telecommunication's company)—*Under reported line costs and recorded them as assets. Overstated revenues by recording fraudulent transactions.

**The financial account (major account)of the BOP consist of three sub accounts:

(a) US owned assets abroad. (b) Foreign owned assets in the United States. (c) Net Financial derivatives. Each of these accounts reports the inflow (+ sign) or outflow (- sign) of funds to and from the country being analyzed.

Chap 2 What is the rationale for managing trade?

**Socio-Economic Attempts to mitigate real or perceived negative impacts on society or the economy: —Countertrade-An agreement to import goods of the same value as those of exports. An agreement for an equal trade of goods between countries. Often seen as a benefit to countries that have a difficult time acquiring foreign currency to purchase imports. —Export Cartel-A group of exporting countries that agreed to coordinate supply of a good, typically a commodity such as oil, cotton or copper. The most widely known cartel is OPEC, The organization of the petroleum exporting countries, which attempts to manage the supply of crude oil in the world market. In order to be successful, cartel members must abide by their agreements to set limits on production. Cartels work best when there are no substitutes for the good and when demand is inelastic. —Health & Safety Concerns-Prompt countries to manage trade. Countries may decide to limit or exclude imports of unsafe goods. This is most often food products. —Environmental Impacts-This usually Pitts developed countries with higher standards against developed countries that either lacks protection or where enforcement is lax. Some of the labor issues are wages below subsistence level, child labor, extremely long work hours or unsafe working conditions. Environmental hazards, namely pollution or unsustainable agriculture practices also prompt concern in developing nations. **Geo-Political Attempts to achieve political objectives: —National Security-typically reduce our prohibition exports of defense technologies to unfriendly nations. Example: the prohibition on exporting products with military use to nations such as North Korea and Iran. Dual use products are also typically prohibited. —Strategic Industries-typically one that predicts dire consequences for the National economy such as massive employment or financial instability if the industry in question is not protected. —Embargoes-meant to be punitive and are aimed at economically harming a country that has exhibited unwanted behavior. The most well known embargo is probably the one against Cuba that aims to punish the country for its communist form of government. Implemented for political reasons, they may harm people who have little or no say in how their governments function.

Chap 12 What are the similarities and differences between marketing research and marketing intelligence systems?

*Both involve the collection of data. *Marketing research: collected at one specific time. *Marketing intelligence system: collected regularly over time. Marketing research study is prompted by information that the company's marketing intelligence system provides. Example: a study analyzing why households have stopped purchasing a company's products (marketing research) may be initiated because the company's marketing intelligence system(MIS) has revealed that its market share has decreased in a particular foreign market.

Chap 12 What are the key terms for marketing strategies and their definitions?

*standardization- marketing strategies used in international markets by a company that are the same as those used in its domestic market. —-> Standardization has an advantage related to cost. Another benefit is that the standardization strategy can be quickly implemented because companies will not need to spend time developing new ways to market their products to foreign markets. "No change." *adaptation marketing strategies -used in international markets by a company that are different from those used in its domestic market —-> While the adaptation strategy will be more costly than standardization, it has the advantage of obtaining higher sales because it recognizes the needs and wants of customers and non-domestic markets. "Change." *glocalization -Uses a standardize strategy in the foreign markets when possible and an adaptation one when necessary. —> A "combination of both."

**Wholly Owned Subsidiaries

- (Most risky with highest return) A new firm owned by the parent company. As such, they are highly capital intensive, and therefore the riskiest form of market entry. One benefit is that the new firm will meet the specifications of the parent company, in terms of physical assets, the level of technology, and its management structure. However, the new firm may face challenges in the foreign market. A subsidiary will face competition from local companies, local companies and it will need to develop supply chains, and distribution networks.

**interpersonal controls:

- (management while walking around)Involve executives engaging in personal contact with subordinates as a way of managing an organization. Example: Michael Dell, the founder of Dell computer corporation, famously interacted directly with every single employee during the early days of the company.

**Heckscher-Ohlin

- A theory that attributes the comparative advantage of a nation to its factor endowments. Factor conditions: land, labor, and capital

**Output controls and measurement:

- Involve establishing specific goals on given metrics and then measuring to what extent these goals are being achieved at certain time intervals (quarterly, annually). Performance-profit, market share, etc.

**Absolute Advantage

- One country can produce a good more efficiently than the other. Encourage free trade. Ex: Brazil produced coffee more efficiently than the U.S. but the U.S. produces corn more efficiently than Brazil.

** Porter's Diamond Model

- Recognizes the international trade occurs between firms in one country and firms in another country. - Integrates the theory of the firm with trade theory. Characteristics: 1. factor conditions(land, labor, capital, transportation, and communication). 2. Demand conditions (forms and industries with strong demand tend to produce new and innovative products. By offering these high quality products, firms are more likely to be competitive in international markets. 3. Firm strategy, structure, and rivalry (refers primarily to the management of the firm as well as its organization. Also, in highly competitive industries, firms have pressure to innovate and develop new products and to produce them efficiently. 4. Related and supporting industries (suppliers and firms offering support services. Firms and the suppliers often locate near one another or create supply networks).

**bureaucratic controls:

- Search controls are often implemented to help maintain consistent procedures within an organization. Example: a rule that all employees in the organization including the CEO must fly coach when they travel all airlines represents a consistent bureaucratic control within an organization. They help to allocate resources within an organization through budgeting or they help to reduce risk by instituting systems of checks and balances.

** Comparative Advantage

- The country that produces for the least cost not the absolute cost. Most efficient. Ex: Brazil produces coffee (5 times) and corn (only 2 times) more efficiently than the U.S. so Brazil should concentrate on just producing coffee.

**Mercantilism (oldest form of trade theory)

- Wealth determined by accumulation of gold and silver. - Focus on producing a trade surplus to export. - Did not recognize that's both trading partners

** Factor Price Equalization

- When factors (labor) of production are allowed to move freely among nations as a result of international trade, the prices of identical factors of production will be equalized across said nations.

Chap 13 How do the Internet and enterprise resource planning systems affect global supply chains?

-Integrate major business processes -Multi language, multi national, multi currency(facilitated communication)

Chap 12 What are some specific marketing methods?

1. Advertising(on tv, radio, newspapers magazines, or direct mail) reaches a wider audience so its lowest cost per contract; 2. Personal Selling(sales calls or someone knocks on your door to sell you pest control services) higher cost of contract because takes more time; 3. Sales Promotion(coupons, store displays,trade shows, contests, sponsorships) local event or sponsorship by a certain business and they give u product or money to sponsor; 4. Publicity(stories found in the media), and they're often coordinated by the PR department; can be positive or negative. Unpaid.

Chap 11 What issues are involved in performance appraisal and employee compensation around the world, including cultural differences, cost of living, and expatriate status?

1. Assessing performance 2. Cultural differences in performance appraisal 3. Compensation and national differences in cost of living 4. Expatriate issues in compensation 5. Executive pay 6. Balance sheet approach

Chap 12 What is the sequence for developing and managing products in international markets?

1. Idea generation-First, decide on the sources of new product ideas. 2. Evaluate idea- Evaluate new product ideas against a set of variables related to product success. 3. Concept testing- Subject new product ideas to concept testing— presenting the idea to a small sample of the market to gauge its reaction. 4. Business analysis- Move to the business analysis step, when projections of potential revenues and profits are made. 5. Physical design- Develop the physical product; product design is an important part of this step. 6. Marketing strategy- Subject the product to market testing—development of the marketing mix for the product. 7. Commercialization-The last step is commercialization of the new product, when it is manufactured and introduced to the foreign market. •Product life cycle-Is a depiction of the sales and profits for a new product over its lifetime. —The PLC helps international markets decide when to modify their marketing strategy. 4 stages: introduction (growth of sales but possible loss); growth(keeps increasing); maturity(reach the peak and starts to decline); decline (significantly reduce the marketing for this product because sales keep declining)

Chap 14 What are sources of funds to finance international trade and investment?

1. International banking: Large money center that settle short term international transactions—CHIPS(Clearinghouse interbank payments system); SWIFT(Society oh worldwide interbank Financial telecommunications) 2. International bond markets: Raise money for long term investment projects; 3 kinds: •Domestic bond—debt contracts sold by firms domiciled in a country (US) in the home currency (US Dollar) ••Foreign bonds—issued by foreign firms (Toyota, based in Japan) in another country (US) in the home currency of that country (US Dollars)•••Eurobonds—sold in any country outside (Australia, Germany, Thailand, India, etc.) the home country (US), but in the Home country's currency(US Dollar) 3. International stock markets, 4. Government financing:• Export-Import (Ex-Im) Bank— Government export finance agency for US firms exporting to other countries. ••Bank of International Cooperation (JBIC)—supports exporters globally that have at least 30% Japanese content in their products. •••IMF••••World back—Loans provided to government; not international banking.

Chap 15 What is the function of generally accepted accounting principles(GAAP)?

1. To provide all the financial information needed internally by management for business decision making, known as management accounting. 2. To provide financial information to various external users concerned with the financial activities of the organization, known as financial accounting.

Chap 6 What are the business implications for conducting international business in different economic ideologies?

3 ideologies: • Communism—A system in which the state owns and controls the factors of production. There are is no private ownership. Government controlled and owned. Classless society (everyone working for government). • Socialism—The state plays a strong role in the economy but it does not aspire to promote a classless society. Even so, the government of socialist leaning countries often on stakes in certain businesses often called state-owned enterprises. • Capitalism— Total opposites of communism; The economic system in which the state or government has a very small role to play. The government has almost no interference in the economy apart from enforcing property rights and providing security.In practice, capitalist economies do allow for some government intervention such as the regulation of business practices and the provision of some type of social safety net. Free trade.

Hollow Corporation

A company that only completes product design and out sources all the other production process functions.

Chap 10 What is meant by stateless corporations?

A new phase in the evolution of the multinational corporation, where work is sourced wherever it is most efficient and the corporation transcends nationality altogether. Located everywhere. —> Difficulty: finding the home country.

**What can internal controls protect honest employees from?

Accidentally making errors

**Which aspects of economic geography affect international trade?

Advantage of location and size of the countries involved.

Chap 8 What are the benefits of foreign direct investment from the host(country that is receives the inflows of capital) perspective?

Along with significant financial inflows, FDI promotes economic growth, creates new jobs, allows access to new technologies, and facilitates the transfer of important management (and employee) skills. Government revenues are also increased through taxes on the business which means they can provide more services in infrastructure. Additionally, large firms that invest abroad may contribute to infrastructure projects in order to support their operations. Reduces poverty.

**EU (European Union)

An economic and political union of 28 European nations. With a combined GDP of over 15 trillion, it is largest and most advanced regional block. The EU began with the creation of the European coal and steel community in 1951, which was an association of 6 western European nations committed to lowering tariffs on coal and steel. By 1957, it had evolved into the European economic community that illuminated trade barriers among its members and established a common external tariff. In 1992, the current European Union was established as a common market with 12 nations permitting the free movement of goods, services, capital, and labor. Currently, of the EU includes 28 nations after the admission of central and eastern European countries.

**Which arrangement best outlines Miles and Snow's for basic types of longer-term strategic implementation?

Analyzers, prospectors, defenders, and reactors

**How are standardization strategies defined?

Approaches in which marketing strategies used in international operations will be the same as those being used domestically.

**ASEAN

Association of Southeast Asian Nations—Economic and political organization of 10 Asian and pacific rim nations that covers over 600 million people. It's the largest regional trading block in terms of population. Two objectives are the stimulation of economic growth, social progress, and cultural development along with the promotion of regional peace and stability. In order to achieve these goals the ASEAN community has established three pillars, the ASEAN political security community(Provides a forum for discussing common security issues nuclear nonproliferation, counterterrorism and control of international crime.), the ASEAN economic community(Address is the free flow of goods, services, and capital among members and in the illumination of trade barriers)., and the ASEAN on socio-cultural community(Promote social issues including education, health, and poverty reduction)..

BRIC — low cost labor that slows them to produce goods and services relatively cheap.

Brazil, Russia, India, China

**How do knowledge management and systems overcome impediments to strategic implementation of global business?

By allowing for wider dissemination of tacit and explicit knowledge.

**How does foreign direct investment create jobs and enhance skills of workers?

By creating inflows of capital from abroad

**How do options contracts hedge exchange rate risks?

By giving an investor the right to buy or sell a specified amount of currency at a future date at a predetermined price.

Chap 7 Total opposites of communism; The economic system in which the state or government has a very small role to play. The government has almost no interference in the economy apart from enforcing property rights and providing security.In practice, capitalist economies do allow for some government intervention such as the regulation of business practices and the provision of some type of social safety net. Free trade.

Capitalism

Chap 9 What are the purposes for writing mission statements?

Categorized as shareholder oriented or stakeholder oriented: Explains why a company exist and what its goals are. They may also define quality standards or financial goals. —The shareholder model of strategy formation reflects an overall goal of maximizing shareholder wealth (maximizing profits—Owners) —The stakeholder maximize profits got customers, employees , and suppliers.

Attending a relationship between subordinates and superiors(Guanxi)

China

Chap 7 A system in which the state owns and controls the factors of production. There are is no private ownership. Government controlled and owned. Classless society (everyone working for government).

Communism

**Current account:

Component of the BOP and is largely driven by activities of consumers and business. It consist of four sub accounts: trade (or goods) balance, services balance, income balance, and net transfers.

**Which issue can result from creating international divisions in global business?

Conflicts between domestic and international operations.

**Financial account (2nd component of BOP) same level of the current account:

Consist of domestic country owned assets abroad, foreign owned assets in the domestic country, and Net financial derivatives.

**Tacit knowledge:

Consist of information that is difficult to communicate or put into writing. Typically informal and customary ways of doing things, that gets communicated in casual ways such as through socialization in the workplace.

**Explicit knowledge:

Consists of knowledge that is easy to communicate and is usually written down as policies and procedures.

Chap 6 What are the reasons why intellectual property (A commercially valuable product of the human intellect, in a concrete or abstract form) protection's are critical in today's global business environment?

Critical: -Difficult to make or conceive and very easy to copy. -Protect the creation of intellectual property. To encourage: innovation, creativity, investment of these ideas. We protect them: To give them potential monopoly power to cover or reimburse their big R&D cost upfront and to encourage innovation and creation in the future. Definition: Limited monopoly rights legally granted by a nation to the creator of the intellectual property. Different forms: Parents- Trademarks- Copyrights-

**What is not a tax issue that multinational corporation's face?

Culture tax

**Organizations that implement basic market strategies of concentrating upon "existing" operations and defending their home turfs are called________________.

Defenders

**Location decision

Determining if products made in house will be produced in one or more facilities and if these facilities should be located in one or more countries.

**Third country nationals

Employees not from a parent or host country being employed in a given host/foreign country. Example: construction workers from France working in Great Britain for a company headquartered in the United States.

**How does regional integration affect countries

Enhanced social welfare

Chap 7 What are some famous scandals and the events related to each scandal?

Enron (Major energy and communications company)—*Assigned debt and losses to overseas subsidiaries that it purposely failed to disclose in financial statements. *Abused mark-to-market accounting to make future profits look like they were already earned, which eventually led to bankruptcy and the loss of 20,000 jobs as well as a loss of value of its stock. *Resulted in the Sarbanes-Oxley act that made it more difficult and costly to release fraudulent financial statement. WorldCom (Telecommunication's company)—*Under reported line costs and recorded them as assets. Overstated revenues by recording fraudulent transactions. Vivendi Parmalat

What is business's primary goal and how is it different from social responsibility?

Ethical behavior. •Shareholder-Profit •Stakeholder-Customers-Employees-Business partners-Entire society(protect environment)

What is the relationship between ethics and economic progress?

Ethics and economic progress are tightly intertwined. For business activity to occur, trust is essential. If people did not ethically behave, trust would be impossible. Adam Smith, the classical economist, considered economics a branch of ethics. Business activity would grind to a halt without trust, fair dealings, and honest communication.

**Bonds that are sold in any country outside the home country, but in the home country's currency, are called_________________.

Eurobond

Chap 8 What are specific strategies for entering emerging market economies in given scenarios?

Export-import business to licensing— "Least amount of risk", no need for a production in a foreign country, and easy way to increase sales. Lowest financial investment. Ex: when you sell something on Ebay. Licensing—"A company or individual provides" the foreign partner with the necessary means (patented technology, copyright, process, trademark, etc) to manufacture and sell its products in the target country for an annual license fee (Grants rights to use intellectual property). Licensee use his property to produce goods and services and pays licensor for use plus a % of said over the life of the contract. Franchising—"Obligates the parents firm to provide" specialized equipment and/or services to the franchisee. Franchising your fees fees plus an annual fee that is typically a percentage of sales. Some of those prominent franchises are restaurants, such as: McDonald's, Subway, and KFC. These parent companies provide recipes, specialized equipment, and brand-name recognition to the franchisee. Strategic alliances—"Partnership (Between two or more firms)"to share resources and partnerships do not create a new legal entity do not involve equity. Partners may be competitors (loose relationship). International joint venture—Creates a new entity (firm) that is "jointly" owned and includes shared equity. Usually formed by a company from the home country, and one in the foreign market. However, two companies can form a joint venture in a third country. In addition, a firm can also form a joint venture with a government agency, or more than two ferns may create a joint venture. They may be indefinite or they may be a force specified amount of time such as the completion of a project. Benefits of joint ventures include the pooling of investment resources to share the risk, or the pooling of production resources to take advantage of greater economies of scale. Cross-Border Mergers and Acquisition—Mergers our situations in which the home firm and a foreign firm, agreed to combine resources into a new company. Management usually comes from both companies. The acquisition is a situation where the "home firm purchases the foreign firm, and then typically assumes all management functions." Mergers and acquisition's allow firms to acquire new technology, and gain access to foreign markets, supply chains, and distribution networks. Mergers and acquisition's however, presents a substantial risk due to the capital needed to acquire a foreign firm, or to integrate Two firms. Wholly Owned Subsidiaries - (Most risky with highest return) A new firm owned by the parent company. As such, they are highly capital intensive, and therefore the riskiest form of market entry. One benefit is that the new firm will meet the specifications of the parent company, in terms of physical assets, the level of technology, and its management structure. However, the new firm may face challenges in the foreign market. A subsidiary will face competition from local companies, local companies and it will need to develop supply chains, and distribution networks. Risk level gradually goes up after export-import.

Chap 2 What are the benefits of foreign investment?

FDI in a country brings funds and business culture from abroad, created new well-paying jobs, introduces innovative technologies, and enhances the skills of domestic workers (Facilitates technological transfers).

**Workers from Poland are free to work in the United Kingdom to fill shortages there. What is this scenario an example of?

Factor price equalization

**A growing ASEAN concern is the economic ascendancy of turkey, which as a major low-cost manufacturing center, has been one of the worlds most attractive destinations for foreign direct investment.

False—this is a European concern.

**Income balance (subaccount)

Financial investment income received by US investors. Surplus

Chap 7 What are the reasons for having internal controls the facility behavior?

First: Preventive controls— to prevent accidental errors and intentional misrepresentations - also called irregularities - from occurring. Second: Feedback controls— identifying errors and irregularities after they occur so that correct of action may be taken. By having both type of controls businesses can detect fraud by unscrupulous employees as well as protecting honest employees from unintentional mistakes or oversight.

Chap7 What is the function of corporate social responsibility (A firm commitment to ensure the welfare of its stakeholders and the places it does business)?

Focus on providing quality good or service to its customers and treats it's employees with dignity and respect; to take care of the environment (land, air, and water) so as to minimize or illuminate pollution, as well as dealing fairly with its suppliers, creditors, and other business partners.

**Bonds that are sold in any country outside the home country, such as China and in China's currency are called________________.

Foreign bond

**Component of the forward market:

Forward rates

A parent firm provides start up costs, promotional materials, and pricing to add subsidiary firm. Which strategy is this from using for entering emerging markets?

Franchising

Chap 10 What are different organizational structures in their descriptions?

Functional structures - Groups people together because they hold similar positions in a company, perform a similar set of tasks, or use the same kinds of skills. Divisional structure - Groups functions together to serve the needs of products, markets, or geographical regions. (3 structures-product, market, and geographical). Hybrid structure - A "combination" of different organizational structures (Combining functional and divisional structures). Matrix structure - People are grouped "simultaneously" by function and by division. Allows the company to meet multiple demands from the environment.

Chap 14 What are different approaches to hedge exchange rate risks?

Futures (Standardized agreements to buy or sell a specified amount of currency at a date in the future at a predetermined price) Forwards (Futures contracts available in currencies of emerging market countries by large banks in the OTC-over the counter market). Options (To buy— call option or sell which—put option. Call option—An investors right (but not obligation) to buy an asset. example: a currency at a predetermined price. Put option— An investors right (but not obligation) to sell an asset. example: currency at a predetermined price. Swaps (Can be established over a period of up to 10 years. Allow firms to exchange currency at a previously agreed exchange rate). Often combined with interest rate swaps, which are commonly known as plain vanilla currency swap.

**Wholly-owner foreign subsidiary

Generally requires a large capital investment and disassociated with a high degree of risk.

**CEMEX has 3 divisions: (1) North America; (2) South America and the Caribbean; and (3) Europe, Asia, the Middle East. CEMEX has a______________structure.

Geographical region

**What if global business want both outsource and in insource advantages? Advantages of global production:

Global production—Taking advantage of cheaper resources and guarantee delivery and quality of the product.

**Which source of funds to financing international trade and investment is the International Monetary Fund a part of?

Government financing

**What was countries do to create regional economic integration?

Have spatial transformation

**Which appropriate set of steps should companies follow when developing new products for overseas markets?

Identification of sources of new product ideas, evaluation of new product ideas, concept testing, business analysis, development, market testing, and commercialization.

**What's the difficulty about stateless Corporation?

Identifying the home country.

**Vivendi

Improperly adjusting accounting reserves to meet earnings.

Chap 3 Regional integration:

Includes a multitude of economic or political steps that may be taken by member states of the union to increase their global competitiveness. Helps countries expand their supply capacity through regional production networks and become more globally competitive. Free-Trade Area—Encompasses a variety of approaches to improve cooperation among nations in a given geographical area. It can range from a straightforward free trade agreement to a comprehensive union with shared policies and institutions. In general, regional integration may begin by the creation as a free trade area I'm going to a more countries. This involves illuminating trade barriers such as quotas and tariffs between members while maintaining trade restrictions on nonmembers. • Customs Union—A second step may be to harmonize external tariffs so that all members tax imports at the same rate. • Common or Single Market—factor inputs such as labor and capital are allowed to move freely within the member states. • Economic and Monetary Union—For regions wanting an even closer relationship between members, the next step may be the adoption of a common currency and the formation of an economic and monetary union. This requires coordination of social and economic policies as well as shared institutions such as a central bank for the regional bloc. • Political Union— The final stage of regional integration may be the creation of a political union. This involves an alignment of foreign policy and the formulation of the common defense policy. Ultimately, nations and a political union function and interact with nonmembers as a single state.

Chap 12 What roles do distribution channels play in marketing products internationally?

Indirect strategy —agent: a channel of distribution that represents a firm in a foreign market and is paid by commission. —Distributor: a channel of distribution that purchased products from a firm doing business in a foreign market and then reels them to other buyers ••Uses existing distribution channels to market products and services. ••Requires no upfront investment. ••Market knowledge can assist in introducing products more quickly. ••Channels me also carry competitive products. ••Channel controls marketing efforts. Direct strategy ••Bypasses existing channels of distribution by using marketing and sales offices located in foreign countries. ••Requires upfront investment in recruiting and training a sales force. ••Maintains control over marketing efforts.

Chap1 Overseeing stability of the international monetary system. Promoters exchange rate stability. Provide short term loans to correct BoP(balance of payment) problems.

International Monetary Fund

Chap 1 How do major international institutions facilitate globalization?

International Monetary Fund: Overseeing stability of the international monetary system. Promoters exchange rate stability. Provide short term loans to correct BoP(balance of payment) problems. World Bank Group: Reconstruction and restructuring economies. Provides long term interest loans for development projects. Promotes foreign direct investment. World trade organization: Negotiates and administers trade agreements. Settles trade disputes. For most free-trade policies.

Chap 2 What are the benefits of trade?

International trade benefits consumers and three major ways by providing: •A greater amounts of choice in the availability of goods and services. •Lower prices for goods and services consumed, due to increased competition. •Higher living standards (Increased employment in import and export sectors). •Technological transfers

**International Accounting Standards Board (IASB)

Issues International Financial Reporting Standards (IFRS); Is an independent, privately funded and accounting standard-setter based in London. Board members of the IASB come from nine countries and have a variety of functional backgrounds. Represents more than 100 worldwide accounting and financial organizations for more than 80 countries.

Chap 5 What are facets of culture that are significant for doing business in various countries, including east Asian, Arabian, and Latin American countries?

Japan - Slightly bow, handshake, Do business with high-ranking employees (no strangers), no direct eye contact, tend to make decisions as a group. Korea - Inwa (Harmony among unequals), Elder generation receives full respect., a group orientation rather than an individualistic one, Superiors responsibility for the well-being of subordinates, and the development of personal relationships between business relationships can occur. China - Guanxi (Relationship between superior and subordinates) is the most important cultural aspect of doing business in China, it denotes friendships among unequals. Arab countries - business visitors need to be aware that the left hand is unclean, that asking about Arab business representatives wives is inappropriate, reluctant to deal with women, and that they have a tendency to divert from primary items under discussion, don't be overly effusive when praising the possessions Arab hosts. Latin American Countries - executives want to develop a personal relationship before doing business with foreign executives. They are not conscious about time.

Chap 1 What are the reasons for supporting individuals negatively affected by globalization?

Job loss and wage stagnation Sustainable development problem — from developing countries perspective. We want to help them increase labor productivity.

Chap 11 What issues are involved in outsourcing and offshoring?

Jobs moves overseas cause job losses in home country; quality control and unethical practices of labor.

**Factor Endowments

Land (quantity, quality, and mineral resources beneath it), labor (quantity and skills), capital (cost), and technology (quality).

Chap 5 What are the critical components of culture?

Language, religion, values and attitudes, manners and customs, material elements, aesthetics, education, and social institutions.

Decoupling

Less developed countries that were dependent on trade with developed nations in the past are beginning to grow on their own through expansion of their domestic markets, but also on trade between other developing nations.

Chap 1 What are key policy measures the make globalization sustainable?

Macroeconomic goals: •Good governance •Competitive markets-anti trust law •Property rights-intellectual property rights •Anti-corruption

**Which risk occurs with a change in political governance?

Macropolitical

Chap 3 What are key aspects of economic geography?

Market size, location, and openness to trade.

**Mercosur

Mercado Comun del Sur or the Common market of the south—A regional agreement among Argentina, Brazil, Paraguay, Uruguay, and Venezuela. These large countries with relatively small economies have agreed to tariff reductions, a common external tariff and the eventual creation of a common market. The agreement faces several problems;Economic integration has not proceeding smoothly and there is continued need to improve infrastructure to promote trade activities.

**What is not a rationale for managing trade?

Mercantilism

**Global business typically defined their overall goals in a_________________.

Mission statement

**NAFTA

North American free trade agreement— trilateral trade agreement among the United States, Mexico, and Canada that went into affect in 1994. Both Canada and Mexico have been among the largest trading partners with the US and the agreement aimed to achieve three objectives: 1. To eliminate all trade barriers,2. To protect intellectual property rights such as copyrights, patents, and trademarks, 3. To create institutions to resolve potential problems and to monitor the treaty's implementation.

**Foreign Exchange Market

Often referred to as Forex, which consist of a network of international banks (who work with exporters and importers) and currency traders (who buy, sell, and speculate in currencies); trade different countries currencies.

Chap 9 How does organization culture influence organization activities in given scenarios?

Organizational culture is the shared knowledge, beliefs, values and norms of an organization. Culture can help set standards for the organization and determine how employees act. It can affect employees in positive ways that help them achieve their company's mission, or culture can be a negative force that may ultimately harm the business. Culture is often dependent on the size of the organization. Smaller firms can be affected to have a more uniform culture, as it is easier to communicate among a smaller workforce. Large businesses may have an overall company culture, but different divisions or units may develop their own separate subcultures. Example a sales team-If there is a competitive culture, then employees will try to have the most sales. This can also be an effective control mechanism for the firm. Occasionally, businesses may want to change the way it operates. Existing organizational culture will usually determine whether this type of change is to be resisted or accepted. If people tend to want to do the things where they always have, culture can be an obstacle to organizational change. If however, the culture is accepting of change, it will be easier to implement.

Chap 13 What are the reasons why companies outsource and insource?

Outsource- Cuts cost. Helps to focus more on the business. Insource- Avoid delays caused by outsourced suppliers, cost control. Quality control. Guarantee delivery.

**A US company that hires another US company, such as Automatic Data Processing corporation(ADP) to process all of its corporate payroll functions is engaging in___________.

Outsourcing (not leaving the country)

**Employees from the home countries who are sent to work for their companies overseas are known as_____________.

Parent country nationals.

Chap 12 What are international pricing objectives?

Performance objectives—profits, return on investment, and market share can guide a firms proving decisions. Prevention objectives—To determine competition, firms may try to keep prices to make it harder for competitors to get a foothold in the market. This sometimes has the unwanted affect of attracting government scrutiny as artificially low prices may be an anti-competitive practice (dumping-Where a firm sells a product in the foreign market below the price of charges in the domestic or whole market; Generally prohibited and could lead to an anti-dumping case being brought by the world trade organization). Maintenance pricing objectives—This attempt to maintain the current level of competition in the market. Firms may try to match competitors pricing in order to maintain the status quo. Survival objective—all 3 pricing injectors are ways of achieving survival, meaning that a company will attempt to price its product so that it remains viable in the market place.

Chap 5 What are the primary and secondary sources that can be used to learn about foreign countries cultures?

Primary: Talking to employees who have lived or worked abroad, executives who have travel to other countries, training programs, and consulting firms. Secondary: •The US Department of commerce country commercial guide - provides cultural information for 133 countries; •The economist intelligence unit - contains the same type of information on 180 countries in its country reports; •Culture grams, from Brigham young University Center for international and area studies - Describes customs existing in 174 countries; •Craigsheads international business, travel, and relocation guide to 84 countries - Gives cultural information for these nations. •Price Waterhouse Cooper is doing business in 118 countries - Contains useful about 118 countries.

**Divisional structures:

Product structure—Groups products into divisions according to their similarities or differences. example: Samsung Market structure—Groups products into divisions according to the needs of different customers. Example: water supply company Geographical structure—Groups products into divisions according to the needs of the different geographical regions the company serves.

Output Controls and Management

Profits—defined in terms of a specific profit margin the country tried to achieve on each unit, or it may be a profit goal for a set timeframe. Such as quarterly or annual profit increases. Growth— to find the desired rate of growth for the company and measure whether or not the business is expanding. This may be in terms of number of store locations it has, increasing its sales or increasing its outputs. Example: Starbucks forecast a 10% growth in revenue in 2014. Productivity—Productivity goals measure how companies resources perform. Productivity per worker, per unit or per dollar are common measures. In general, productivity refers to how much of your product or service can be produced within a given level of inputs. Example: the GM plant in Toledo takes 2.98 hours to assemble a transmission, where is the Ford plant in Livonya, takes 3.39 hours. Market Share—And are set so that a company tries to achieve a certain percentage of total sales in a given market. Example: McDonald's may want a market share of 15%. This means it's revenues make up 15% of all sales in the fast food business. Quality—Different based on the particular good or service and the measurements will vary. Goals may be based on satisfaction surveys or by the number of defects per unit of output. Example: Toyota makes that a defect rate of 0.5% for its engines or tolerate one defect per 200 engines produced. Corporate Social Responsibility—Can also very depending on the business. Often these goals can be assessed by third-party organizations that rank companies. Example: fair trade USA, certifies companies based on their commitment to sustainable development.

Chap 9 What are the four basic types of longer-term strategic implementation?

Prospectors - Organizations whose basic strategic implementation involves expanding-new opportunities/market. Defenders - In contrast, implement a basic market strategy of concentrating on existing operations and generally defending their home turf. Not interested in expanding new businesses. Reactors - Those where strategic implementation involves responding in an ad hoc manner to strategic actions initiated by competitors. Analyzers - Companies that take a middle ground between being prospectors and defenders. Looks at both new and existing markets. Operational plan- <1 year Tactical plan- between 1 and 3 yrs Long term strategic implementation- >3 yrs

Management accounting (accounting information system)

Provide information to management;Strictly concerned with the information needs of management— the only internal user of accounting information.

**Trade balance (subaccount)

Records the import and export of a physical product, and must be a merchandise like automobiles, laptops, or t shirts, or sugar, or chocolate. The goods sold. Deficit

**Net transfers (subaccount)

Records unilateral government transfers and private remittances. Gifts/aid. Records the social security distribution, for US citizens who are retired, moved to other countries live there and still receive ss benefits from the US government.

Chap 4 What is meant by the "balance of payments" for a country?

Refers to a statement of account that summarizes all transactions between the residence of one country and the rest of the world for a given period of time, usually one year. Shows how well the economy and government policies are performing. Split into two major components: current account—export(US doesn't get money) credit transaction. financial account—debit transaction(money back to US)

**MERCOSUR

Regional bloc that is dedicated to South America

Chap 14 What are the foreign-exchange risks that affect firms?

Short term-Transactions risks(fluctuations of exchange rate) and translation risk(financial statement-today's rate is different rate in the future). Long term- Economic risk(causes currency depreciation and high inflation rate)

**What is an economic ideology in which the government or state please a strong role in the economy, may own stakes in certain businesses, but does not aspire to be classless?

Socialism

Chap 7 The state plays a strong role in the economy but it does not aspire to promote a classless society. Even so, the government of socialist leaning countries often on stakes in certain businesses often called state-owned enterprises.

Socialism

**_____________refers to the process of allowing efficient geographic distribution of business activities within and among countries.

Spatial transformations

**GAAP (Generally Accepted Accounting Principles)

Standards and practices used by publicly held corporations in the United States and a few other countries in the preparation of financial statements

**Strategic alliances

Strategic alliances—"Partnership (Between two or more firms)"to share resources and partnerships do not create a new legal entity do not involve equity. Partners may be competitors (loose relationship).

**Balance of Payments

Sub accounts — Trade balance, Service balance, Income balance, Balance of transfers Financial account — Shows how current the current account is financed; has 3 sub accounts: US owned foreign assets abroad, foreign owned assets in the US, Net Financial derivatives.

**Balance of payments

Summarizes all transactions between one country and the rest of the world for a given period of time

Financial accounting (accounting information system)

Supplies information to external users; External users account information fall into two major categories: *organizations that require or expect information to be recorded and *organizations that received information on an as-needed basis.

Chap 2 Taxes on imports are known as:

Tariffs

Chap 15 What are tax issues that multinational corporation's (MNC's) face?

Tax rates among selected countries (Countries that have little or no corporate income tax are referred to as tax haven's. Conducting business in tax haven does not mean that there are no taxes, as a company may still have to pay other taxes, such as property taxes, payroll taxes, and sales taxes). Transfer pricing (Refers to the pricing of goods and services that are transferred "bought and sold" internally between members of a corporate family, including from parent to subsidiary, from subsidiary to parent, and between subsidiaries).

Chap1 What are ways that technology bridges the global digital divide?

Telecommunications, Reductions in cost, Resistance

**What can investors who want to compare one company's profit margin to another company's profit margin utilize?

The financial statements to perform financial ratio analysis

**Global outsourcing (Also called offshoring)

The firm and the supplier are located in different countries.

**Global outsourcing — Also called offshoring

The firm and the supplier are located in different countries.

**Domestic outsourcing

The firm doing the outsourcing and the supplier that will provide the outsourced good or services are located in the same country.

**Services balance (subaccount)

The net of exports of services and imports of services (recorded the same info as the trade balance but for services). Surplus.

Chap 10 What are issues involved in creating international divisions in global business?

The potential conflict between domestic and international operations. Managers in the international division may feel like "second class" citizens if they are not at the same hierarchical level as managers in domestic operations. They don't have the same goals so there will be a lack of help or communication.

**Generally Accepted Accounting Principles (GAAP)

The principles by which financial statements are prepared (provides the guidelines by which financial statements are prepared).

**Spatial transformations

The process of allowing efficient geographic distribution of business activities within and among countries.

Globalization

The process through which an increasingly free flow of ideas, people, goods, services, and capital leads to the integration of economies and societies.

Trade - earliest and simplest form of international business

The sale(exports) and purchase(imports) of goods(textiles,wine, spices, smartphones, etc) and services(baking, transportation, education, consulting, etc) across national borders.

**What does trade policy have a direct impact on?

The value of volume of the countries imports and exports

Dunning's Eclectic Theory of FDI:

Three economic advantages that can lead to a firms decision to invest abroad: •Ownership or firm specific advantages: firm characteristics that are transferable to foreign operations at a low cost. Examples are brand identity, intellectual property, and managerial expertise. •Locational or country specific advantages: these are economic, political, and social conditions in the host country. These are things like the cost to production, political stability and cultural attributes. •Internalization advantages: relates to the firms choice of entry strategies such as the likelihood of using FDI increases as the cost of maintaining or monitoring a partnership increase. For example, in a licensing agreement, a firm has little control over the agents of a foreign market. If the cost of such a partnership increase such as maintaining quality control, the firm may decide to operate as a franchisor or some other agreement that allows more control.

**Goal of the International Accounting Standard's Board:

To achieve globally recognized or harmonized standards of accounting and reporting.

**Why is intellectual property protection critical in today's global business environment?

To continue encouraging innovation, creativity and investment.

**What is the goal of corporate social responsibility?

To create a balance between private profits and public goods.

Chap 8 What are reasons why multinational enterprises (MNE) invest abroad?

To maximize profits so that shareholders can receive larger dividends and allow share prices to rise over time. Three major strategies MNE's used to achieve this objective include: revenue maximization, cost minimization, and risk minimization through diversification abroad.

**what are two short term effects of currency movement?

Transaction risk Translation risk

**Parmalat

Used risky derivatives and purchase of its own debt to disguise losses in several of its new international acquisitions.

**Which issues are associated with expatriate compensation?

Variability in taxes between countries

Chap 11 What are challenges involved in staffing foreign operations?

Virtual staffing- It's very hard for virtual expatriates to build strong and trusting relationships with people in the foreign office. They are virtually managing. Consequently, companies in nearly all situations require expatriates to actually move to and live in the place of their foreign assignment. Expatriate staffing- A person who leaves his country to work and live in a foreign country. Parent country nationals—They fail to complete their assignment. Family issue is also an issue. Host country nationals—Skills, language and work standards, difficulty trusting(related to virtual staffing). Training and Development- Firms must make sure their staff have the training to succeed in a host country setting. They must also focus on training and development needs of host country national employees.Internet-based training or in person training and development, individual or group based training. Whether groups and different organizational levels of employees can train together. Needs assessment- Companies engaging in international operations must assess their employee training and development needs from a wide variety of perspectives.

What is not an issue for a business considering outsourcing and off shoring?

Wage equality concerns

Chap 13 How does global operations management function?

When one or more of the production system direct resources originate from or are located in more than one country. Can be grouped into four business functions: •procurement(to buy the supplies or raw materials to make the product), •production(process of transferring the raw material into the final product), •logistics(makes sure the production process is smooth), •research and development(design for the new product).

House country nationals

Workers already living on the foreign or host country where the parent company I'd opening Operation.

Chap1 Reconstruction and restructuring economies. Provides long term interest loans for development projects. Promotes foreign direct investment.

World Bank Group

Chap1 Negotiates and administers trade agreements. Settles trade disputes. For most free-trade policies.

World trade organization

Strategic alliance

a cooperative agreement between business firms

**Export cartels

a group of countries that could effectively control export volume to keep their export prices, revenues, and economic growth stable or high

**Indirect strategy

agent: a channel of distribution that represents a firm in a foreign market and is paid by commission. —Distributor: a channel of distribution that purchased products from a firm doing business in a foreign market and then reels them to other buyers ••Uses existing distribution channels to market products and services. ••Requires no upfront investment. ••Market knowledge can assist in introducing products more quickly. ••Channels me also carry competitive products. ••Channel controls marketing efforts.

Chap 9 How do you specific control systems (bureaucratic controls, interpersonal controls, output controls and measurement) affect global business?

bureaucratic controls - Search controls are often implemented to help maintain consistent procedures within an organization. Example: a rule that all employees in the organization including the CEO must fly coach when they travel all airlines represents a consistent bureaucratic control within an organization. They help to allocate resources within an organization through budgeting or they help to reduce risk by instituting systems of checks and balances. interpersonal controls - (management while walking around)Involve executives engaging in personal contact with subordinates as a way of managing an organization. Example: Michael Dell, the founder of Dell computer corporation, famously interacted directly with every single employee during the early days of the company. Output controls and measurement - Involve establishing specific goals on given metrics and then measuring to what extent these goals are being achieved at certain time intervals (quarterly, annually). Performance-profit, market share, etc.

**WorldCom

misclassified expenditures to overstate assets and profitability.

**Export-import business to licensing

— "Least amount of risk", no need for a production in a foreign country, and easy way to increase sales. Lowest financial investment. Ex: when you sell something on Ebay.

**Licensing

—"A company or individual provides" the foreign partner with the necessary means (patented technology, copyright, process, trademark, etc) to manufacture and sell its products in the target country for an annual license fee (Grants rights to use intellectual property). Licensee use his property to produce goods and services and pays licensor for use plus a % of said over the life of the contract.

**Franchising

—"Obligates the parents firm to provide" specialized equipment and/or services to the franchisee. Franchising your fees fees plus an annual fee that is typically a percentage of sales. Some of those prominent franchises are restaurants, such as: McDonald's, Subway, and KFC. These parent companies provide recipes, specialized equipment, and brand-name recognition to the franchisee.

**Strategic alliances

—"Partnership (Between two or more firms)"to share resources and partnerships do not create a new legal entity do not involve equity. Partners may be competitors (loose relationship).

**Socio-Economic Attempts to mitigate real or perceived negative impacts on society or the economy:

—Countertrade-An agreement to import goods of the same value as those of exports. An agreement for an equal trade of goods between countries. Often seen as a benefit to countries that have a difficult time acquiring foreign currency to purchase imports. —Export Cartel-A group of exporting countries that agreed to coordinate supply of a good, typically a commodity such as oil, cotton or copper. The most widely known cartel is OPEC, The organization of the petroleum exporting countries, which attempts to manage the supply of crude oil in the world market. In order to be successful, cartel members must abide by their agreements to set limits on production. Cartels work best when there are no substitutes for the good and when demand is inelastic. —Health & Safety Concerns-Prompt countries to manage trade. Countries may decide to limit or exclude imports of unsafe goods. This is most often food products. —Environmental Impacts-This usually Pitts developed countries with higher standards against developed countries that either lacks protection or where enforcement is lax. Some of the labor issues are wages below subsistence level, child labor, extremely long work hours or unsafe working conditions. Environmental hazards, namely pollution or unsustainable agriculture practices also prompt concern in developing nations.

**International joint venture

—Creates a new entity (firm) that is "jointly" owned and includes shared equity. Usually formed by a company from the home country, and one in the foreign market. However, two companies can form a joint venture in a third country. In addition, a firm can also form a joint venture with a government agency, or more than two ferns may create a joint venture. They may be indefinite or they may be a force specified amount of time such as the completion of a project. Benefits of joint ventures include the pooling of investment resources to share the risk, or the pooling of production resources to take advantage of greater economies of scale.

**Cross-Border Mergers and Acquisition

—Mergers our situations in which the home firm and a foreign firm, agreed to combine resources into a new company. Management usually comes from both companies. The acquisition is a situation where the "home firm purchases the foreign firm, and then typically assumes all management functions." Mergers and acquisition's allow firms to acquire new technology, and gain access to foreign markets, supply chains, and distribution networks. Mergers and acquisition's however, presents a substantial risk due to the capital needed to acquire a foreign firm, or to integrate Two firms.

Chap 6 What are key political risks when conducting global business?

—Micro political-related to a specific industry(small). - Government confiscation of assets. •Nationalization or expropriation—micro political risk—Certain industries such as Venezuela's nationalization of its oil fields. Nationalization is also called expropriation. —Macro political-concern all sectors in a country(a whole). - Social unrest, Civil war, Change in government leadership.

**Geo-Political Attempts to achieve political objectives:

—National Security-typically reduce our prohibition exports of defense technologies to unfriendly nations. Example: the prohibition on exporting products with military use to nations such as North Korea and Iran. Dual use products are also typically prohibited. —Strategic Industries-typically one that predicts dire consequences for the National economy such as massive employment or financial instability if the industry in question is not protected. —Embargoes-meant to be punitive and are aimed at economically harming a country that has exhibited unwanted behavior. The most well known embargo is probably the one against Cuba that aims to punish the country for its communist form of government. Implemented for political reasons, they may harm people who have little or no say in how their governments function.

Chap 1 What are the 5 characteristics of globalization?

—Remove trade barriers —Culture —IT —Investment —Political system

Chap 15 What are ways that financial statements can be used to evaluate a company's financial situation in relation or relative to other companies?

• Financial Statement Analysis: Evaluation of the financial statements to: identify trends (trend analysis) or relationships (ratios) •Financial Ratio: Shows the relationship of one number on a financial statement to another number: equalize companies of different sizes for —>comparison of financial performance, —>current ratio= current assets divided by current liabilities, —>debt ratio= total liabilities divided by total assets

**Where to locate production facility for components and raw material? Where to locate production facility for final products?

• H-O model (Factory endowment) -Land, labor, technology, etc.—>Determines comparative advantage. • Infrastructure within the country -Sea ports, airports, roads, electricity, and water access • Financial considerations -Transaction risk, translation risk, and economic risk • Political consideration's -Social stability, form of government and public attitudes For final products we need to consider all components above plus 3 more: • Depends if service customers around the world or customized for each country: Toyota has many factories around the world in order to customize for different countries. • Proximity to markets: distance to the major market. Want to be as close as possible. • Location related to the products image: location where the product is made. Why to relocate facility in the long run? Change in cost, cost savings

Chap 15 What is the goal of the International Accounting Standards Board (IASB)?

• Increasing harmonization of accounting standards and disclosures to meet the needs of global market. • Providing an accounting basis for under developed or newly industrialized countries to follow as the accounting profession emerges in those countries. • Increasing the compatibility of domestic and international accounting requirements.

Chap 4 What are the components of the foreign exchange market?

• Spot market—Trades for immediate use. Real time and no delay. • Futures market—Contracts to buy or sell a specified amount of currency at a future date at a predetermined price. —Standardize and traded on exchanges. —Involve Major world currencies. • Forward market—Contracts to buy or sell currencies at a future date at a predetermined price. —Not standardized, traded over the counter. —Available for less popular currency's.

Chap 3 What are the reasons why countries pursue regional integration?

•Benefits of Trade-This includes having a wider range of goods and services for consumers to buy. Expanding trade can increase competition and lead to lower prices. It can also stimulate employment in the import and export sectors of the economy. Creation of a larger market. This benefits producers by increasing the number of potential customers for their products. •Address Issues of Mutual Interest(non economic reasons for regional integration)-countries may want to create common institutions and policies in order to address issues of mutual interest.

Benefits of regional integration:

•Creating a larger pool of consumers with growing incomes and similar cultures, tastes, and social values. •Encouraging economies of scale in production, increasing the regions level of global competitiveness, and enhancing economic growth through investment flows. •Freeing the flow of capital, labor, and technology to the most productive areas in the region. •Increasing cooperation, peace, and security among countries in the region. •Encouraging member states to enhance their level of social welfare to match that of the most progressive states.

Chap 6 What are economic risks when conducting global business?

•Currency inconvertibility or evaluation—Exchange rates will change and that the foreign currency will lose value against the dollar. Large devaluation will render a business substantially worth less than the original investment. Related to this is the risk of restrictions on currency convertibility. This arises when there are limits imposed on the amount of foreign currency that can be converted to another currency such as the dollar. This will affect the ability of a firm to repatriate profits earned in a foreign country or it may limit the ability to move capital out of a poor investment environment. •Weak enforcement of contracts—In countries where contract law is not well developed or not well enforced, firms face the risk of not being able to rely on contracts to protect their interests. Contracts are essential for business as they outlined their responsibilities and obligations to the parties of the contract and provide legal remedies for violation of the term. When contracts are not enforced, parties have no legal recourse when the contract is not fulfilled. This makes it difficult for businesses to function when there is the possibility that agreements will not be honored. . •Labor union strikes—Many countries have stringent labor laws and strikes can occur more frequently than in the US. Business can grind to a halt until the dispute is resolved. This obviously subjects firms to losses when try are not able to operate. Occasionally, labor unions in other sectors of the economy may lead to strike in solidarity with one or more unions, leading to a general labor strike that slows the entire economy. •Inflation— The general increase in the price level. It decreases purchasing power, meaning that the dollar or other unit of currency is worth less. There are some instances where a national economy suffers from hyperventilation where prices are rising at a rapid rate. This introduces uncertainty into the economy. As prices rise so fast, businesses are unsure how much they should charge for goods and services and consumers do not know what they should pay for them. In these instances, currency can devalue so much that it's essentially worthless.

Chap 12 What facets of customer service are required for goods and services that are globally marketed?

•Deliveries (on-time and accurate) •Installation of equipment and machinery •Problem solving •Explaining and honoring warranties, repairs •Accepting returns •Providing emergency shipments, shipping products that are already assembled, handling documentation for exports and imports, and consistency of the order-cycle length •Reliability •Empowerment of employees to take care of customer problems immediately, without having to consult superiors.

Chap 9 What role do knowledge management systems play in addressing impediments to strategic implementation of global business?

•Explicit knowledge-consist of knowledge that is easy to communicate and is usually written down as policies and procedures. •Tacit knowledge-Consist of information that is difficult to communicate or put into writing. Typically informal and customary ways of doing things, that gets communicated in casual ways such as through socialization in the workplace. **Convert tacit knowledge into explicit knowledge Absorptive Capacity-The ability to recognize, assimilate and apply new knowledge. A business needs to have a system in place so that new knowledge can be recorded, analyzed and communicated throughout the organization.

Chap 13 What are considerations for locating and relocating production facilities in givens scenarios?

•Fixed cost: high-1 facility; low-many facilities •Minimum efficient scale and it's comparison to demand (D> MES, several facilities): Demand < MES - 1 facility Demand > MES - many facilities •Value to weight ratio(value divided by weight): Low ratio- many facilities High ratio- 1 facility

**Foreign Direct Investment (FDI)

•Inflows of capital from abroad for investing in domestic plant and equipment for the production of goods and/or services. •Inflows of capital from abroad for buying domestic companies.

What are the cost of Regional economic integration?

•Loss of Sovereignty-the principal that states should have the ultimate authority over their internal affairs. •Loss of Control over Policy-When nations agree to create regional agreements, they are giving up some of their internal control in favor of cooperation with other nations. • Possible Unemployment-Reducing trade barriers among members in a regional bloc may lead to unemployment in industries that were previously protected by national trade policy. • Loss of International Trade with Nonmembers-The Union trends to focus on trade among member nations. Also, external tariffs make good and services from nations outside the region relatively more expensive.

Chap 8 How can countries successfully attract foreign direct investment?

•Macro Economic Policies By creating a positive investing environment. Part of this is through a general macro economic policies that promote growth, promote international trade, maintain exchange rates stability, and a little stable rate of inflation. •Infrastructure In addition, countries should also provide the infrastructure needed to conduct the business. This includes basic services like transportation and communication networks, but it also includes things like education there is a skilled workforce available to businesses. •Good governance Countries also need to engage in transparent governance and reduce corruption, allowing outsiders to the political process to observe and understand government actions and policies, reducing uncertainty and promotes confidence in the process.

Chap 2 What are the major international trade theories and what are key features of each one?

•Mercantilism (oldest form of trade theory) - Wealth determined by accumulation of gold and silver. - Focus on producing a trade surplus to export. - Did not recognize that's both trading partners •Absolute Advantage - One country can produce a good more efficiently than the other. Encourage free trade. Ex: Brazil produced coffee more efficiently than the U.S. but the U.S. produces corn more efficiently than Brazil. •Comparative Advantage - The country that produces for the least cost not the absolute cost. Most efficient. Ex: Brazil produces coffee (5 times) and corn (only 2 times) more efficiently than the U.S. so Brazil should concentrate on just producing coffee. •Heckscher-Ohlin - A theory that attributes the comparative advantage of a nation to its factor endowments. Factor conditions: land, labor, and capital •Factor Price Equalization - When factors (labor) of production are allowed to move freely among nations as a result of international trade, the prices of identical factors of production will be equalized across said nations. •Porter's Diamond Model - Recognizes the international trade occurs between firms in one country and firms in another country. - Integrates the theory of the firm with trade theory. Characteristics: 1. factor conditions(land, labor, capital, transportation, and communication). 2. Demand conditions (forms and industries with strong demand tend to produce new and innovative products. By offering these high quality products, firms are more likely to be competitive in international markets. 3. Firm strategy, structure, and rivalry (refers primarily to the management of the firm as well as its organization. Also, in highly competitive industries, firms have pressure to innovate and develop new products and to produce them efficiently. 4. Related and supporting industries (suppliers and firms offering support services. Firms and the suppliers often locate near one another or create supply networks). —>Two outside forces that economist call external shocks that affect business and trade: •Government (variety of policies that can affect trade competitiveness such as tax policy, monetary policy, trade policy, and regulatory policy. They can either harm trade such as reducing funding for R&D that affects innovations and technological advances, Or they can benefit trade for example by making education more affordable and therefore improving the skill set of the workforce). •Chance (can also affect industry and trade And example of a positive shock is some discovery or technological advance, where is a negative shock can be harsh weather conditions that destroy crops or damage infrastructure.

Chap 3 What are the characteristics of specific regional integration bloc?

•NAFTA: North American free trade agreement— trilateral trade agreement among the United States, Mexico, and Canada that went into affect in 1994. Both Canada and Mexico have been among the largest trading partners with the US and the agreement aimed to achieve three objectives: 1. To eliminate all trade barriers,2. To protect intellectual property rights such as copyrights, patents, and trademarks, 3. To create institutions to resolve potential problems and to monitor the treaty's implementation. •MERCOSUR: Mercado Comun del Sur or the Common market of the south—A regional agreement among Argentina, Brazil, Paraguay, Uruguay, and Venezuela. These large countries with relatively small economies have agreed to tariff reductions, a common external tariff and the eventual creation of a common market. The agreement faces several problems;Economic integration has not proceeding smoothly and there is continued need to improve infrastructure to promote trade activities. •ASEAN: Association of Southeast Asian Nations—Economic and political organization of 10 Asian and pacific rim nations that covers over 600 million people. It's the largest regional trading block in terms of population. Two objectives are the stimulation of economic growth, social progress, and cultural development along with the promotion of regional peace and stability. In order to achieve these goals the ASEAN community has established three pillars, the ASEAN political security community(Provides a forum for discussing common security issues nuclear nonproliferation, counterterrorism and control of international crime.), the ASEAN economic community(Address is the free flow of goods, services, and capital among members and in the illumination of trade barriers)., and the ASEAN on socio-cultural community(Promote social issues including education, health, and poverty reduction).. •EU: European Union— and economic and political union of 28 European nations. With a combined GDP of over 15 trillion, it is largest and most advanced regional block. The EU began with the creation of the European coal and steel community in 1951, which was an association of 6 western European nations committed to lowering tariffs on coal and steel. By 1957, it had evolved into the European economic community that illuminated trade barriers among its members and established a common external tariff. In 1992, the current European Union was established as a common market with 12 nations permitting the free movement of goods, services, capital, and labor. Currently, of the EU includes 28 nations after the admission of central and eastern European countries.

**What are ways that culture influences product management and marketing?

•Product management - Change product to better serve foreign market. Ex: changing the menu for different countries like not serving pork; different countries have steering wheels on different side of the car. •Marketing - Pay attention to numbers, color, wording in advertisement. Ex: in China, people don't have a 4th flour cause that means death and in the US people don't like the 13th floor. In the US the bride wears white and in China the bride wears red. •Management style - Who to hire? How to manage foreign employee's? Ex: In Korea, elders are more respected so if there's a senior position, you would not want to hire a 30 year old.

Chap 8 What are the cost of foreign direct investment from a host country perspective?

•Rush to exploit natural resources which may sacrifice environmental quality, health, and social fabric of the host country. •Exploiting the labor force, preventing human capital development in tarnishing the image of the country. •Lack of corporate social responsibility. •Political interference by the parent country when things do not go the way the foreign company wants.

Chap 8 Benifits of FDI:

•Significant financial inflows •Creates new jobs •Allows access to new technologies •Facilitate transfer of important management (and employee) skills •Increases domestic competition and choice •Generates tax revenues (corporate, income, and sales) for government services •Reduces poverty •Accelerates economic development

Chap 2 What is the impact of trade policy on various stakeholders such as businesses, consumers, and governments?

•Tariffs or Custom duties—Increase the cost of imported goods for the consumer. A specific tariff is a specified dollar amount on each unit of imports, whereas an ad valorem tariff is variable and based on the percentage of the monetary value of the import. Tariffs can be beneficial for domestic producers as they increase the cost of imports, making domestic products relatively cheaper. Tariffs also represent a form of revenue for the government. •Export Subsidies—Decrease the price of exports through a government payment to producers. The subsidies makes exports cheaper, therefore, producers are able to sell more in the export market. Domestic consumers may be harmed as home prices are relatively more expensive and goods become scarcer as they are sold for export. The opposite is an export tax that increases the cost of exports. This reduces the amount of goods exported by making it relatively more expensive, but it may benefit domestic consumers as more of the goods are sold at home. Firms may be harmed as they lose revenue from the export market. •Non tariff barrier— Imports quotas or quantitative restrictions—limit the number of units that can be imported. Once the quota is met, there can be no more inputs of the good. They likely harm consumers by limiting the supply of a good and thereby increasing its price. They may be beneficial for domestic producers by making domestic products relatively cheaper. •Non tariff barrier—VER(Voluntary Export Restraint)—An exporting nation agrees to limit the number of units of a good that it exports to a specific country. This reduces the supply of imports in the market, making domestic goods relatively cheaper. This beneficial to domestic producers as they face less competition from exports but consumers will likely face higher prices. •Domestic Content Provisions— Specified a certain percentage of value of an imported product to be produced in the importing country. For example, a care imported from South Korea may be required to have at least 20% of its value derived from components made in the US. This type of restriction is typically imposed to protect domestic industries by requiring imported products to contain materials produced at home.

Chap 11 What is the relationship between international labor standards and free trade?

•United Nations international labor organization (ILO)has developed minimal labor standards: -Prohibit slave our forced labor -Restrict use of child labor -Mandate basic job safety protections and rights of workers to form unions. •The North American Agreement on labor cooperation is a special agreement outside the main NAFTA agreement which requires each NAFTA countries to strongly enforce it's own labor laws and regulations. It allows parties in the NAFTA countries to approach the labor department in their own country and file a formal complaint about labor standards in another NAFTA country.

Chap 10 What are potential outcomes of organizational structures on business performance?

•What if a company doesn't have an organization structure? •It allows for activities based upon a division of labor(specialize in the area) by departmentalization, standardization, and specialization of functions and tasks. •It facilitates coordination and integration of activities through hierarchical supervision, formal rules and procedures, and training and socialization. •It sets the organizations boundaries and regulates it's contacts with its environment and with other organizations.

Chap 1 What is the rationale of specific anti-globalization arguments?

•Winner and losers •Developing versus developed countries •Sustainable development Arguments against globalization highlight problems such as the cost of disruptive economic change including job losses and stagnant wages, the loss of local control over economic policies and developments, the disappearance of old industries, and related erosion of communities.

**Direct strategy

••Bypasses existing channels of distribution by using marketing and sales offices located in foreign countries. ••Requires upfront investment in recruiting and training a sales force. ••Maintains control over marketing efforts.

Chap 1 Why is it important for political leaders and institutions to be transparent and responding to global competition?

••Full disclosure and openness—allows the public to view and understand the inner workings of processes and institutions. ••Political Stability and Functioning Economy—reducing uncertainty and strengthening trust. ••Honesty