Economy as a system of Market

Question 1

Factors That Affect the Competitive Environment of the Firm

Answer 1

Barriers to market entry
Market competitiveness
Existence of substitute products
Bargaining power of the customers
Bargaining power of the suppliers
(Porter’s Five Forces)

Question 1

SWOT

Answer 1

Strength, weakness, opportunity and threat
Internal Factors (Strengths and Weaknesses)
External Factors (Opportunities and Threats)

Question 2

Competitive Strategies

Answer 2

The overall competitive advantage of a firm is determined by the value the firm offers to its customers minus the cost of creating that value. Firms that seek to achieve competitive advantage with respect to products will choose from two basic forms of advantage

Cost Leadership Advantage
Differentiation Advantage

Five Basic Types of Competitive Strategies:
Cost leadership focused on a broad range of buyers.
Cost leadership focused on a narrow range (niche) of buyers.
Differentiation focused on a broad range of buyers.
Differentiation focused on a narrow range (niche) of buyers.
Best cost provider

Question 3

Motivations for International Business Operations
(globalization)

Answer 3

Comparative Advantage
Imperfect Markets
Product Cycle

Question 4

Methods of conducting international business operations

Answer 4

International Trade: Exporting/importing products or services

Licensing: Provide the right to use processes or technologies in exchange for a fee

Franchising: Provide marketing service or delivery strategy for a fee

Joint Ventures: Take advantage of comparative advantage of one or both of the participants in marketing or delivering a product

Direct Foreign Investment: Purchasing a foreign company as a subsidiary

Global Sourcing: Synchronization of all levels of product manufacturing, including research and development, production, and marketing, on an international basis

Question 5

Relevant factors of globalization

Answer 5

Political and Legal Influences:
Potential for Asset Expropriation
Taxes and Tariffs
Limitations on Asset Ownership or Joint Venture Participation
Content or Value Added Limits
Foreign Trade Zones
Economic systems
Culture

Question 6

Inherent risks of international economics

Answer 6

Exchange rate fluctuation
Foreign economies
Political risk

Question 7

Business combinations types

Answer 7

1. Horizontal Combination
2. Vertical Combination
3. Circular Combination
4. Diagonal Combination

Question 8

Transaction of combinations

Answer 8

Merger
Acquisition
Tender Offer
Purchase of Assets

Question 9

Divestiture

Answer 9

A divestiture involves the partial or full disposal of a component or business unit of a company. Divestiture transactions include
sell-offs,
spin-offs,
equity carve-outs