Ch. 1 What Is International Business

Question 1

What is International Business

Answer 1

International Business is the trade and investment activities by companies across national borders (Expansion of IBUS activities)

Question 2

What is Globalization of markets

Answer 2

Refers to the ongoing economic integration, and growing interdependency of countries worldwide

Question 3

Two ways to invest Internationally

Answer 3

Passively (portfolio investment-, financial assets) or Actively (Foreign Direct Investment, capital, technology, land, labor, plant and equipment) aaaa

Question 4

Exporting

Answer 4

manufacturing a product or service in one country and selling it to another. (outbound activity) -entry strategy involving the sale of products/ services to customers located abroad

Question 5

Importing

Answer 5

Global sourcing; inbound activity)-the procurement of products/services from foreign suppliers for consumption in the home country or a third country

Question 6

Why do Firms go International

Answer 6

Primarily to increase sales and profits and other reasons like earn higher margins and profit, seek opportunities for growth through market diversification, and gain new ideas about products, services and business methods, better serve key customers and be closer to supply sources, confront intl competitiors and gain rewarding relationship with foreign partners

Question 7

Globalization

Answer 7

Integration, interdependency and interconnectedness of internationalization (4 I’S) FOR EXAMPLE Increasing exports vs Sourcing value-chain activities strategically around the globe to leverage factor efficiencies

Question 8

Internationalization

Answer 8

refers to the tendency of COMPANIES to systematically increase the international dimension of their business activities

Question 9

Cross-cultural risk

Answer 9

occurs when a cultural misunderstanding puts some human value at stake. Cross-cultural risk arises from differences in language, lifestyles, mindsets, customs, and religion.

Question 10

Country risk

Answer 10

refers to the potentially adverse effects on company operations and profitability caused by developments in the political, legal, and economic environment in a foreign country. Country risk includes the possibility of foreign government intervention in firms’ business activities.

Question 11

Commercial risk

Answer 11

refers to the firm’s potential loss or failure from poorly developed or executed business strategies, tactics, or procedures. Managers may make poor choices in such areas as the selection of business partners, timing of market entry, pricing, creation of product features, and promotional themes.

Question 12

Currency risk (also known as financial risk)

Answer 12

refers to the risk of adverse fluctuations in exchange rates. Fluctuation is common for exchange rates—the value of one currency in terms of another. Inflation, foreign taxation, asset valuation and currency exposure key points

Question 13

Who Participates in IBUS

Answer 13

SME MNE and Born Global Firms

Question 14

Why study IBUS

Answer 14

Comparative Advantage for you and your firm FACILITATOR to global economy and interconnectedness and Contributor to Economic well being

Question 15

IBUS is both a cause and result of increasing

Answer 15

national prosperity

Question 16

Trends that characterized Globalization

Answer 16

Cross border transactions-unprecedented growth rate-from 100 billion per year in 1960 to current numbers of 14 trillion —TRADE—Development of highly sophisticated global financial systems —Greater collaboration among nations through multilateral regulatory agencies (WTO and Intl monetary Fraud)

Question 17

6 KEY Dimensions of International Business

Answer 17

1. Globalization of markets 2. International trade 3. International investment 4. Risks 5 Participants: Firms distribution channel intermediaries, facilitators and govts. 6. International entry strategies, including exporting and direct invest ment** . GLOB**

Question 18

International Portfolio Investment

Answer 18

(short term) is the passive ownership of foreign securities such as stocks and bonds for the purpose of generating financial returns.

Question 19

Foreign Direct Investment

Answer 19

FDI) (typically long-term) is a foreign-market entry strategy that gives investors partial or full ownership of a productive enterprise. The firm establishes a physical presence abroad through the acquisition of productive assets such as capital, technology, labor, land, plant, and equipment. Asset ownership and long time frame is the ultimate commitment-level of internationalization, and thus this text focuses primarily on FDI (most common mode of entry strategy) as opposed to International Portfolio investment. Know the Motivations for firm FDI: Know how these fit into the value chain