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International Business > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

What is strategy?

A

A firms strategy refers to the actions that managers take to attain the goals of the firm.

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2
Q

What can firms do to increase profitability and profit growth?

A
  • add value
  • lower costs
  • sell more in existing markets
  • expand internationally
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3
Q

What can increase profits?

A

•using differentiation strategy
-adding value to a product so customers are willing to pay more for it.
•using low cost strategy
-lowering costs.

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4
Q

How are a firms operations configured?

A

Value creation activities. Can be categorized as:

  1. primary activities
    - R&D
    - production
    - marketing and sales
    - customer service
  2. Support activities
    - information systems
    - logistics
    - human resources
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5
Q

How can firms increase profits through international expansion?

A
  1. Expand their market.
  2. Realize location economies.
  3. Realize greater cost economies from experience effects.
  4. Earn a greater return.
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6
Q

How can firms leverage their products and competencies?

A

Can increase growth by selling goods or services developed at home internationally.

Success in expanding depends on:
•goods or services sold
•firms core competencies

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7
Q

Core competencies

A

Skills within the firm that competitors cannot easily match or imitate.

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8
Q

Economies of scale

A

The reductions in unit cost achieved by producing a large volume of a product

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9
Q

Sources of economies of scale include what?

A
  • spreading fixed costs over a large volume
  • utilizing production facilities more intensively
  • increasing bargaining power with suppliers
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10
Q

Two competitive pressures

A
  1. Pressures for cost
    • force the firm to lower unit costs
  2. Pressures to be locally responsive
    • require the firm to adapt its product to meet local demands in each market (this can raise costs)
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11
Q

Four basic strategies firms can choose.

A
  1. Global standardization strategy
  2. Transnational strategy
  3. International strategy
  4. Localization strategy
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12
Q

Global standardization

A

Increase profitability and profit growth through economies of scale, learning effects, and location economies (pursue low-cost strategy on a global scale).

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13
Q

When does it make sense to use global standardization?

A

When there are strong pressures for cost reductions and demands for local responsiveness are minimal.

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14
Q

Localization strategy

A

Increase profitability by customizing goods or services so that they match tastes and preferences in different national markets.

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15
Q

When does localization strategy make sense?

A

When there are major differences across nations with regard to consumer tastes and preferences and cost pressures are not too intense.

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16
Q

Transnational strategy

A

Tries to simultaneously achieve low costs through location economies, economies of scale, and learning effects.

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17
Q

When does transnational strategy make sense?

A

When both cost pressures for local responsiveness are intense.

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18
Q

International strategy

A

Take products first produced for the domestic market and sell them internationally with only minimal local customization.

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19
Q

When does international strategy make sense?

A

When there are low cost pressures and low pressures for local responsiveness.

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20
Q

Organizational structure

A
  • the division of the organization into subunits.
  • location of decision-making responsibilities within that structure.
  • establishment of integrating mechanisms to coordinate the activities of subunits including cross-functional teams or pan-regional committees.
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21
Q

Control systems

A

The metrics used to measure performance of subunits.

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22
Q

Incentives

A

The devices used to reward managerial behavior.

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23
Q

Processes

A

How decisions are made and work is performed within the organization.

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24
Q

Organizational culture

A

Norms and values that are shared among the employees of an organization.

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25
Q

People

A

The employees and the strategy used to recruit, compensate, and retain those individuals and the type of ppl they are in terms of their skills, values and orientation.

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26
Q

What are the dimensions of organizational structure?

A

Vertical differentiation
Horizontal differentiation
Integrating mechanisms

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27
Q

Vertical differentiation

A

The location of decision making responsibilities within a structure.

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28
Q

Horizontal differentiation

A

The formal division of the organization into sub-units.

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29
Q

Integrating mechanisms

A

The mechanisms for coordinating sub-units.

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30
Q

Centralized decision-making

A
  • facilitates coordination
  • ensures decisions are consistent with the organizations objectives
  • gives managers the means to bring about organizational change
  • avoids duplication of activities
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31
Q

Decentralized decision-making

A
  • relieves the burden of centralized decision-making
  • has been shown to motivate individuals
  • permits greater flexibility
  • can result in better decisions
  • can increase control
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32
Q

Global matrix structure

A

Tries to minimize the limitations of the worldwide area structure and the worldwide product divisional structure.

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33
Q

Knowledge network

A

Network for transmitting information within an organization that is based not on informal contacts between managers and on distributed information systems.

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34
Q

Personal controls

A

Personal contact with subordinates

-most widely used in small firms

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35
Q

Bureaucratic controls

A

A system of rules and procedures that directs the actions of subunits.
-budgets and capital spending rules

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36
Q

Output controls

A

Setting goals for subunits to achieve and expressing those goals in terms of objective performance metrics.
-compare actual performance against targets and intervene selectively to take corrective action.

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37
Q

Cultural controls

A

Exist when employees “buy into” the norms and value systems of the firm.
-strong culture implies less need for other forms of control.

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38
Q

Processes

A

Refer to the manner in which decisions are made and work is performed.

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39
Q

What must firms expanding internationally decide?

A
  1. Which markets to enter
  2. When to enter them and on what scale
  3. Which entry mode to use
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40
Q

What are the different entry modes?

A
  • exporting
  • licensing or franchising to a company in the host nation
  • establishing a joint venture with a local company
  • establishing a new wholly owned subsidiary
  • acquiring an established enterprise
41
Q

What factors affect the choice of entry mode?

A
  • transport costs
  • trade barriers
  • political risks
  • economic risks
  • costs
  • firm strategy
42
Q

Which markets are favorable?

A
  • politically stable
  • have free market systems
  • have relatively low inflation rates
  • have low private sector debt
43
Q

What are less desirable markets?

A
  • politically unstable
  • have mixed or command economies
  • have excessive levels of borrowing
44
Q

Pioneering costs

A

Arise when the foreign business system is so different from that in the home market that the firm must devote considerable time, effort and expense to learning the rules of the game.

45
Q

Turnkey projects

A

The contractor handles every detail of the project for a foreign client, including the training of operating personnel.

46
Q

Franchising

A

A specialized form of licensing in which the franchisor not only sells intangible property to the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business.

47
Q

Greenfield strategy

A

Build a subsidiary from the ground up

48
Q

Acquisition strategy

A

Acquire an existing company.

49
Q

What do exporting firms need to do?

A
  • identify market opportunities
  • deal with foreign exchange risk
  • navigate import and export financing
  • understand the challenges of doing business in a foreign market
50
Q

Export management companies (EMCs)

A

Export specialists that act as the export marketing department or international department for client firms.

51
Q

Letter of credit

A

Issued by a bank at the request of an importer.

52
Q

What is a draft?

A

An order written by an exporter instructing an importer, or an importers agent, to pay a specified amount of money at a specified time.

53
Q

Bill of Lading

A

Issued to the exporter by the common carrier transporting the merchandise. Not a guarantee of whats inside.

54
Q

Countertrade

A

A range of barter-like agreements that facilitate the trade of goods and services for other goods and services when they cannot be traded for money.

55
Q

Barter

A

A direct exchange of goods and/or services between two parties without cash transaction.

56
Q

Counterpurchase

A

A reciprocal buying agreement that occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.

57
Q

Offset

A

Similar to counter purchase- one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale.

58
Q

Buyback

A

Occurs when a firm builds a plant in a country or supplies technology, equipment, training, or other services to the country.

59
Q

Switch trading

A

The use of a specialized third-party trading house in a countertrade agreement.

60
Q

Production

A

Activities involved in creating a product

61
Q

Logistics

A

Procurement and physical transmission of material through the supply chain, from suppliers to consumers.

62
Q

Firms should locate production so that…

A
  • production and logistics can be locally responsive

- production and logistics can respond quickly to shifts in consumer demand

63
Q

When should production be concentrated in a few locations?

A
  • fixed costs are substantial
  • the minimum efficient scale of production is high
  • flexible manufacturing technologies are available
64
Q

When does production in multiple locations make sense?

A
  • both fixed costs and the minimum efficient scale of production are relatively low
  • appropriate flexible manufacturing technologies are not available
65
Q

What are the two product factors that impact location decisions?

A
  1. The products value-to-weight ratio

2. Whether the product serves universal needs

66
Q

Before making the decision to locate production in a foreign location firms must consider the potential for what?

A
  • high employee turnover
  • poor workmanship
  • poor product quality
  • low productivity
67
Q

Why make Vertical integration?

A

Making component parts in-house

  1. Lower costs
  2. Facilitates investments in highly specialized assets
  3. Protects proprietary technology
  4. Facilitates the scheduling of adjacent processes
68
Q

Just-in-time (JIT) systems

A

Economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process.

69
Q

The marketing mix is comprised of?

A
  1. Product attributes
  2. Distribution strategy
  3. Communication strategy
  4. Pricing strategy
70
Q

The current consensus is that while the world is moving towards global markets, global standardization is not possible bc of?

A
  • cultural differences among nations
  • economic differences among nations
  • trade barriers
  • differences in product and technical standards
71
Q

Market segmentation

A

Identifying distinct groups of consumers whose purchasing behavior differs from others in important ways.

72
Q

How can markets be segmented?

A
  • geographically
  • demographically
  • socio-cultural factors
  • psychological factors
73
Q

What are two key market segmentation issues?

A
  1. The differences between countries in the structure of market segments.
  2. The existence of segments that transcend national borders.
74
Q

Distribution strategy

A

The means the firm chooses for delivering the product to the consumer.

75
Q

What are the four main differences in distribution systems?

A
  1. Retail concentration
  2. Channel length
  3. Channel exclusively
  4. Channel quality
76
Q

Retail concentration

A

Concentrated retail system- a few retailers supply most of the market
Fragmented retail system- there are many retailers, no one of which has a major share of the market.

77
Q

Channel length

A

The number of intermediaries between the producer and the consumer.

78
Q

Channel exclusivity

A

How difficult it is for outsiders to access.

79
Q

Channel quality

A

The expertise, competencies, and skills of established retailers in a nation, and their ability to sell and support the products of international businesses.

80
Q

Communication channels available to a firm include?

A
  • direct selling
  • sales promotion
  • direct marketing
  • advertising
81
Q

Cultural barriers

A

It can be difficult to communicate messages across cultures.

82
Q

Source effects

A

Occur when the receiver of the message evaluates the message evaluates the message on the basis of status or image of the sender.

83
Q

Country of origin effects

A

The extent to which the place of manufacturing influences product evaluations.

84
Q

Noise levels

A

The amount of other messages competing for a potential consumers attention.

85
Q

Push strategy

A

Emphasizes personal selling

86
Q

Pull strategy

A

Emphasizes mass media advertising

87
Q

The choice between push vs. pull strategies depends on what three things?

A
  1. Product type and consumer sophistication
  2. Channel strength
  3. Media availability
88
Q

Price elasticity of demand

A

A measure of the responsiveness of demand for a product to changes in price.

89
Q

Expatriate manager

A

A citizen of one country who is working abroad in one of the firms subsidiaries.

90
Q

Staffing policy

A

Concerned with the selection of employees for particular jobs.

91
Q

Corporate culture

A

Orgs. norms and values

92
Q

Ethnocentric staffing policy

A

All key management positions are filled by parent company nationals.

93
Q

Polycentric staffing policy

A

Requires host country nationals to be recruited to manage subsidiaries, while parent country nationals occupy key positions at corporate headquarters.

94
Q

Geocentric staffing policy

A

Seeks the best people for key jobs throughout the organization, regardless of nationality.

95
Q

Expatriate selection

A
  1. Self orientation
  2. Others orientation
  3. Perceptual ability
  4. Cultural toughness
96
Q

Historic cost principle

A

Assumes the currency unit used to report financial results is not losing its value due to inflation.

97
Q

Uncertainty avoidance

A

The extent to which cultures socialize their members to accept ambiguous situations and tolerate uncertainty.

98
Q

Accounting standards

A

Rules for preparing financial statements.

99
Q

Auditing standards

A

Specify the rules for performing an audit.

International Business (1 decks)

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