CH7- International Business

Question 1

Why are businesses global

Answer 1

Resources are around the world
Smaller world because of technology
Customers are worldwide

Question 2

Advantages of international trade

Answer 2

• access to factors of production
• reduced risk (interdependance=less conflits)
• inflow of innovation

Question 3

Disadvantages of international trade

Answer 3

• loss of jobs (go to countries with less paid wages)
• loss of industries
• increase in foreign ownership

Question 4

Free trade (definition)

Answer 4

Purchase, sale or exchange of goods and services across national borders

Question 5

Free trade: what can we say about it

Answer 5

• wasteful
• increase in standard of living (low cost in products)
• creates jobs+ opportunities
• helps economic advancement

Question 6

What are the types of competitive advantage

Answer 6

Absolute advantage and comparative advantage

Question 7

Absolute advantage

Answer 7

Produce a good more efficiently than any other nation

Ex: china> canada

Question 8

Comparative advantage

Answer 8

Produce at a lower opportunity cost than an other country

Ex: Germany in the car industry

Question 9

What is national competitive advantage

Answer 9

• gouvernment playing a critical role
• ability of a nation industries to innovate and upgrade
• four elements forming the basis of national competitveness

Question 10

Porters diamond is composed of

Answer 10

• company strategy, structure and rivalry
• related and supporting industries
• demand conditions
• factor conditions

Question 11

PD company strategy structure and rivalry

Answer 11

Competition is good

Allows for more strategy and innovation

Question 12

PD demand conditions

Answer 12

Encourage business to make better goods

Question 13

PD related and supporting industries

Answer 13

Good supporting the growth of the primary industries

Question 14

PD factor conditions

Answer 14

Includes factor of production

Question 15

What are the ways to measure global trade

Answer 15

Balance of trade (deficit/surplus)
Balance payement
Exchange rate
Countertrade

Question 16

Balance of trade

Answer 16

Trade deficit: importing more than exporting

Trade surplus: exporting more that importing (makes more money)

Question 17

Balance payement

Answer 17

Flow of money related to the sell of goods and services
Export: + balance
Import: - balance

Question 18

Exchange rate

Answer 18

Cost of a currency in relation with another currency

Question 19

Countertrade

Answer 19

Bantering one product for another (NO currency involved)

Question 20

different levels of investment

Answer 20

FDI (joint venture, partnership, strategy alliance)

Market entry (global sourcing, exporting/importing, franchising, licensing agreement)

Question 21

What is FDi

Answer 21

Building or buying part ownership of a business in a foreign country

Question 22

FDI joint venture

Answer 22

Two company coming together (local + foreign )

Question 23

Partnership

Answer 23

Two people coming together

Question 24

FDI strategic alliance

Answer 24

Less formal, businesses never merge, help each other with resources and knowledge (ex : airlines)

Question 25

Market entry

Answer 25

Sale of goods or services to foreign markets, but do not require expensive investment

Question 26

ME global sourcing

Answer 26

Finding resources for ur product from different country

Question 27

ME export import

Answer 27

Buying or selling foreign product

Question 28

ME franchising

Answer 28

Franchise in a foreign market , less retail risk

Question 29

ME liscensing agreement

Answer 29

Manufacture issue a patent to create a product in a foreign market

Question 30

Ways to promote trade

Answer 30

Subsides Export financing Foreign trade zones Special government agencies

Question 31

Subsidies

Answer 31

Financial asset to domestic producer for growth (low interest rate/ tax break)

Question 32

Export financing

Answer 32

Promoting export of local product to foreign market (financial or resource help)

Question 33

Foreign trade zone

Answer 33

Place that is exempted from normal taxes, customs : financial advantages (ex: internet city in Dubai)

Question 34

Special gouvernment agencies

Answer 34

Promote business, from partnerships, advertisement

Question 35

Trade restrictions/barriers

Answer 35

Sociocultural differences Economic differences Political and legal differences

Question 36

Sociocultural differences

Answer 36

Often prevents businesses to go into a foreign market (different style of communication, practices)

Question 37

Economic differences

Answer 37

State of the economy and how it affects the buying power of goods and services, the cost of going in a market . They dont have the infrastructure to sells goods and services (telecom: internet/phone line)

Question 38

Political and legal differences

Answer 38

Challenging for businesses to go into a market (laws change from a country to another) International trade restrictions on industries or products to make people not buy products from foreign markets

Question 39

Prevents trades

Answer 39

``` Tariffs Quotas Embargoes Local content requirements Administrative delays Currency control ```

Question 40

Tariffs

Answer 40

Tax on a foreign product If the price point is higher it encourages local products GVT makes money from it

Question 41

Quotas

Answer 41

Restriction on the amount of a product that can be put in the local market (No financial benefits for the GVT)

Question 42

Embargoes

Answer 42

Ban on trades with a country

Question 43

Local content requirements

Answer 43

Tell us that there must be a local product that is included in the final foreign good or service

Question 44

Administrative delays

Answer 44

Prevent the product to come in the country (paperwork)

Question 45

Currency control

Answer 45

Restrict the ability to purchase a foreign currency (sometimes need foreign currency to buy a foreign product)

Question 46

Types of international organizations

Answer 46

GATT WTO World bank International Monetary Fund

Question 47

Common markets

Answer 47

Group of countries who have eliminated tariffs and harmonized trading rules Economy integration (Europe central bank) Common currency Flow of resources (4 factors)

Question 48

Trading blocks

Answer 48

Increase trade, very basic focus on trade, no common currency