Chapter 3 The Global Marketplace

staffing

Acquiring and retaining human resources.

stereotyping

assigning a wide range of generalized attributes to an individual on the basis of membership in a particular culture or social group

two key measurements of a nation's level of international trade

balance of trade, balance of payments

World Trade Organization

permanent forum for negotiating, implementing, and monitoring international trade procedures and for mediating trade disputes among its 160 member countries

standardized products

selling the same product everywhere in the world

subsidize

to support financially; provide a grant or contribution

balance of payments

total flow of money into the country minus the total flow of money out of the country over a period of time

trade surplus

when a country exports more than it imports

common law

A legal system based on custom and court rulings

ethnocentrism

Belief in the superiority of one's nation or ethnic group.

Major organizations that facilitate international trade and the major trading blocs around the world

World Trade Organization WTO, The International Monetary Fund, The World Bank

embargo

a complete ban on the import or export of certain products or even all trade between certain countries

floating exchange rate system

a currency's value or price fluctuates in response to the forces of global supply and demand

culture

a shared system of symbols, beliefs, attitudes, values, expectations, and norms for behavior

joint venture

an agreement between two or more companies to share a business project some countries foreign companies are prohibited from owning facilities outright or from investing in local business, so establishing a joint venture with a local partner may be the only way to do business in that country

promotion

an attempt to increase sales

what are the importance of understanding cultural and legal differences in the global business environment

awareness of and respect for cultural differences is essential to avoiding communication breakdowns and fostering positive working relationships. understanding differences in legal systems and specific laws and regulations in other countries is another vital aspect of successful international business

how is international trade measured

balance of trade, balance of payments

foreign direct investment FDI

buying an established company or launching a new company in another country typically gives companies greater control, but it carries much greater economic and political risk and is more complex than any other form of entry in the global marketplace

importing and exporting

buying and selling goods and services across national borders, without establishing a physical or legal business presence in other countries

importing

buying products from another country

keeping up with competitors

companies are sometimes forced to engage on a global scale simply because their competitors are doing so

focusing on relative strengths

comparative advantage suggests that each country should specialize in those areas where it can produce more efficiently than other countries, and it should trade for goods and services that it can't produce as economically

sanctions

embargoes that revoke a country's normal trade relations status; they are often used as forceful alternatives short of war can include: arms embargoes, foreign-assistance reductions and cutoffs, trade limitations, tariff increases, import-quota decreases, visa denials, air-link cancellations, etc...

economies of scale

enables companies to produce goods and services at lower costs by purchasing, manufacturing, and distributing higher quantities

International Monetary Fund

established to foster international financial cooperation and increase the stability of the international economy primary functions are monitoring global financial developments, offering technical advice and training to help countries manage their economies more effectively, and providing short-term loans to member coutries

keeping up with customers

expansion in order to keep or attract multinational customers

tax haven

favorable banking laws and low tax rates give companies the opportunity to shield some of their income from higher tax rates in their home countries or other countries where they do business not necessarily illegal but controversial practice

Six reasons help explain why countries and companies trade internationally

focusing on relative strengths, expanding markets, pursuing economies of scale, acquiring materials, goods, and services, keeping up with customers, keeping up with competitors

International strategic alliances and joint ventures

forming a long-term business partnership with a local company in a new market or creating a new company with a local partner partners typically share ideas, expertise, resources, technologies, investment costs, risks, management, and profits some cases a strategic alliance might be the only way to gain access to a market

World Bank

group of 5 financial institutions whose primary goals are eradicating the most extreme levels of poverty around the world and raising the income of the poorest people in every country as a way to foster shared prosperity for everyone

what are the major forms of international business activity

importing and exporting international licensing international franchising international strategic alliances and joint ventures foreign direct investment

what are strategic choices that must be considered before entering international markets

include the basic organizational strategy that defines what kind of company the firm will be in each country and a variety of functional strategies involving such aspects as products, customer support, promotion, pricing, and staffing

Organisation for Economic Co-Operation and Development OECD

international body dedicated to fostering economic prosperity and combating poverty

theocratic laws

law based on religious principles, predominates in countries such as Iran and Pakistan

civil law

legal parameters are specified in detailed legal codes

international licensing

licensing intellectual property such as a design patent to a company in another country, which then produces the product and sells it locally low upfront cost

import quotas

limit the amount of particular goods that countries allow to be imported during a given year

what strategic choices that must be considered before entering international markets

long-term objectives nature of its products characteristics of the markets into which it plans to expand management team's ability to oversee a geographically dispersed operation

customer support

makes sure customers have the support and information they need

expanding markets

many companies have ambitions too large for their own backyards

higher-level strategies

multi-domestic strategy global strategy transnational strategy

acquiring materials, goods, and services

no country can produce everything its citizens need or want

exchange rate

number of units of one currency that must be exchanged for a unit of the second currency

global strategy

offering the same products using the same marketing strategy in all national markets opposite of the multi-domestic strategy managerial control is highly centralized, with headquarters in the home country making all major decisions

Foreign Corrupt Practices Act FCPA

outlaws payments with the intent of getting government officials to break the laws of their own countries or to secure "improper advantage" in gaining or retaining sales allows payments to expedite routine actions such as setting up utilities for a new facility bans outright cash payments and forbids indirect means of influence such as expensive gifts, charitable contributions intended to influence government officials, and travel opportunities that have little or no legitimate business purpose

What 5 principles used by WTO

preventing discriminatory policies that favor some trading partners over others or a country's own products over those of other countries reducing trade barriers between countries making trade policies more predictable and less arbitrary discouraging unfair practices promoting economic progress in the world's less-developed countries

pricing

process of determining the best price at which to sell a product

functional strategies for international expansion

products customer support promotion pricing staffing

customize products

products to accommodate the lifestyles and habits of local target markets increase costs and operational complexity

common markets or trading blocs

regional organizations that promote trade among member nations primary objective is to ensure the economic growth and benefit of members generally promote trade inside the region while creating uniform barriers against goods and services entering the region from nonmember countries

restrictive import standards

requiring special licenses for doing certain kinds of business and then making it difficult or expensive for foreign companies to obtain such licenes

transnational strategy

seeks efficiencies of global operations with attention to local markets uses a hybrid approach as it attempts to reap the benefits of international scale while being responsive to local market dnamics major decisions and business systems are often centralized, but local business units are given the freedom to make on-the-ground decisions that are most appropriate for local markets

exporting

selling domestically produced products to buyers in other countries least risky forms of international business activity

international franchising

selling the rights to use an entire business system, such as a fast-food restaurant, including the brand name and internal processes reduces the costs and risks of expanding internationally while leveraging their investments in branding and business processes

trade deficit

situation in which a country imports more than it exports

common ways to intervene in international trade

tariffs, import quotas, embargoes, restrictive import standards, export subsidies, antidumping measures, and sanctions

two issues that highlight the challenges and complexities of international business law

tax havens and bribery

tariffs

taxes on imported goods can be levied to generate revenue, restrict trade, to punish other countries for disobeying international trade laws

foreign exchange

the conversion of one currency into an equivalent amount of another currency

economic globalization

the increasing integration and interdependence of national economies around the world

anti-dumping measures

the practice of selling large quantities of a product at a price lower than the cost of production or below what the company would charge in its home markets used to try to win foreign customers or to reduce product surpluses

free trade

the removal of trade barriers so that goods can flow freely between countries trade between countries without quotas, tariffs, or other restrictions

Discuss the nature of conflicts in global business

the root cause of trade conflict is that every country has a natural interest in protection its own security and supporting its industries, workers, and consumers

balance of trade

the total value of a country's exports minus the total value of its imports, over some period of time,

protectionism

the use of trade barriers to protect a nation's industries from foreign competition

two key enablers behind the rapid growth in global business

the world's borders are much more open to trade than they were thank to the advent of international trade organizations and a growing awareness by most governments that healthy trade can help their economies advances in communication and transportation technologies have made global trade safer, easier, and more profitable

Transparency International

watchdog group that works to reduce business-government corruption around the world

multi-domestic strategy

when multinational firms enable individual subsidiaries to compete independently in domestic markets helps a company respond more quickly and effectively to local market needs lack of centralized control can lead to situations in which local manager act in ways contrary to corporate strategy or guidelines

two primary questions regarding products

which product should you try to sell in each market should you standardize or customize products