CH 7 Flashcards
Increase in international exchange and the growing similarity of laws and cultural values
Globalization
Framework for explaining why countries foster successful multinational corporations, consisting of four factors
Diamond of National Advantage
The nature of home-market demand for the industry’s product or service
Demand Conditions
The conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry
Firm strategy, structure, rivalry
Firms that manage operations in more than one country
Multinational Firms
Arbitrage Opportunities
An opportunity to profit by buying and selling the same good in different markets
New products developed by developed country multinational firms for emerging markets that have adequate functionality at a low cost
Reverse Innovation
Potential threat to a firm’s operations in the country due to ineffectiveness of the domestic political system
Political Risk
A characteristic of legal systems where behavior is governed by rules that uniformly enforced
Rule of Law
Potential threat to a firm’s operations in the country due to economic policies and conditions, including property rights laws and enforcement of those laws
Economic Risk
Selling of trademarked goods without the consent of the trademarked holder
Counterfeiting
Potential threat to a firm’s operations in the country due to fluctuations in the local currency’s exchange rate
Currency Risk
Potential threat to a firm’s operations in a country due to the problems that managers have making decisions in the context of foreign markets
Management Risk
Index that reveals the most corrupt countries
Transparency International Corruption Perceptions Index
Using other firms to perform value-creating activities that were previously performed in house
Outsourcing
Shifting a value-creating activity from a domestic location to a foreign location
Offshoring
A strategy based on a firm’s diffusion and adaptation of the parent company’s knowledge and expertise in foreign markets
International Strategy
A strategy based on firm’s centralization and control by the corporate office, with the primary emphasis on controlling costs, and used in industries where the pressure for local adaptation is low
Global Strategy
Strategy based on firms differentiating their products and services to adapt to local markets, used in industries where the pressure for local adaptation is high and lowering costs is low
Multidomestic Strategy
Strategy based on firms optimizing the trade-offs associated with efficiency, local adaptation, and learning, used in industries where the pressure for adaptation and lowering costs is high
Transnational Strategy
Q. In order to realize the strongest competitive advantage, firms engaged in worldwide competition must:
Pursue a strategy that combines the uniformity of a global strategy and the specificity of a multidomestic strategy
Increasing international exchange of goods, and the increasing similarity of culture
Regionalization
Groups of countries agreeing to increase trade between them by lowering trade barriers
Trading Blocs
Q. A domestic corporation considering expanding into international markets for the first time will typically:
Consider implementing a low risk/low control strategy such as exporting
Producing goods in one country to sell to residents of another country
Exporting
Contractual agreement in which a company receives a royalty in exchange for selling goods
Licensing
Contractual agreement in which a company a company receives a fee for using intellectual property
Franchising
A business in which a multinational company company owns all of the stock
Wholly Owned Subsidiary
