Final: chapter 9, 11 Flashcards
CHPT11: DEFINITION:
Foreign exchange market
Foreign exchange risk
market for converting one countries currency into another
Adverse consequences of negative changes in exchange rate
CHPT11: What is Currency Conversion?
What is Currency Speculation?
when international businesses use foreign exchange markets to/when
- they have spare cash they wanna invest short term
-when a firm recieves a payment/income from a foreign firm
-when they must pay a foreign company for its prodcuts/services in foreign money
CURRENCY SPECULATION: short term movements of funds from one currency to another in hope of PROFITING from SHIFTS in Exchange rate
CHPT11: What are they 3 ways to insure against foreign exchange risk?
- Spot exchange rates
- watch the market
-forward exchange rates - agreeing to rain check the currency exchange to when the dollar is better
-currency swaps - simultaneous pruchase an sale of a given amount of foreign exhances for 2 difffereentt dates
- watch the market
CHPT11: where is the currency trading capitol of the world?
LONDON
followed by every other cool european city, nyc, and tokyo
CHPT11: What 3 theories determine the prices and exchange rates
what 1 theory determines Interest rates and exchange rates, whats its formula
- law of ONE PRICE
-Purchasing Power Parity
(PPP)
-money supply and inflation
Fisher effect: i = r+l (i =interest rates, r is sum of real rate, l is expected rate of inflation)
CHPT11: what economic fundamentals are analyzed to make forecasts of the market (3) hint: think Macro
- Money supply
-inflation rates
-interest rates
based on those trends come up with ur own idea on them
CHPT11: brief on convertible vs nonconvertible vs externally convertible currencies
- convertible: ultimited access for both foreigns and citizens to purchase with foreign currency (mexico with US)
- Nonconvertible Currency
opposite (CAD with JUAN)
-Externally Convertible currency:
residents ability to convert their currency into foreign is limited, but foreigner can
what is Value creation (2)
- amount of value customers place on the firm’s goods or services
-firms costs of production
more value customers place on a good, more money you can charge
What are the 4 steps of OPERATION in the VALUE CHAIN
R&D, production, marketing/sales, customer service
T or F: Brand equity = Enterprise value
True
internal and external factors of strategic positioning? Def + examples
INternal: things you can mitigate costs of: COGS, maybe rent
External: things that cannot be mitigated by price
What are the 2 main pressures of cost reductions and local responsiveness
- Be locally responsive: American firm going to Canada – things gotta be in French
- Cost reductions
o Responding to pressures for cost reduction requires a firm to try and lower the costs of value creation
What makes up “international marketing research data”?
- Data on the country and potential market segments
- Data to forecast customer demands within a specific country or world region.
- Data to make marketing mix decisions.
CHOOSING A STRATEGY: what is global strategy?
a strategy that focuses on ↑ PROFITABILITY AND PRFOIT GROWTH by establishing ECONOMIES OF SCALE+LEARNING EFFECTS and reaping the COST REDUCING BENEFITS.
Some product differentiation, but staples are the same
EXAMPLE: McDonalds: Big mac, Freddo Cappuccino
CHOOSING A STRATEGY: what is international strategy?
A strategy that takes products first poduced for their domestic market and selling them internationally with MINIMAL customization
Serves a universal NEED, no pressures to reduce costs
Ex: APPLE, Coke