Final: chapter 9, 11

Question 1

CHPT11: DEFINITION:
Foreign exchange market
Foreign exchange risk

Answer 1

market for converting one countries currency into another

Adverse consequences of negative changes in exchange rate

Question 2

CHPT11: What is Currency Conversion?

What is Currency Speculation?

Answer 2

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

Question 3

CHPT11: What are they 3 ways to insure against foreign exchange risk?

Answer 3

• 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

Question 4

CHPT11: where is the currency trading capitol of the world?

Answer 4

LONDON

followed by every other cool european city, nyc, and tokyo

Question 5

CHPT11: What 3 theories determine the prices and exchange rates

what 1 theory determines Interest rates and exchange rates, whats its formula

Answer 5

• 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)

Question 6

CHPT11: what economic fundamentals are analyzed to make forecasts of the market (3) hint: think Macro

Answer 6

• Money supply
  -inflation rates
  -interest rates

based on those trends come up with ur own idea on them

Question 7

CHPT11: brief on convertible vs nonconvertible vs externally convertible currencies

Answer 7

• 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

Question 8

what is Value creation (2)

Answer 8

• 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

Question 9

What are the 4 steps of OPERATION in the VALUE CHAIN

Answer 9

R&D, production, marketing/sales, customer service

Question 10

T or F: Brand equity = Enterprise value

Answer 10

True

Question 11

internal and external factors of strategic positioning? Def + examples

Answer 11

INternal: things you can mitigate costs of: COGS, maybe rent

External: things that cannot be mitigated by price

Question 12

What are the 2 main pressures of cost reductions and local responsiveness

Answer 12

• 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

Question 13

What makes up “international marketing research data”?

Answer 13

• 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.

Question 14

CHOOSING A STRATEGY: what is global strategy?

Answer 14

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

Question 15

CHOOSING A STRATEGY: what is international strategy?

Answer 15

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

Question 16

CHOOSING A STRATEGY: what is multidomestic strategy?

Answer 16

Autonomy and High levels of differentiation between locations

Example: P&G, modifies products for idk wwhat reason. Federal vs Provincial Government.

Question 17

CHOOSING A STRATEGY: what is Transnational global strategy?

Answer 17

A strategy that tries to: achieve LOW COSTS THROUGH LOCATION ECONOMIES+ECO OF SCALE +LEARNING EFFECTS.

Product differentiation across geographic markets/local

Create multidirectional flow of skill between different subsidiaries in the firms network of operations

EXAMPLE: nestle changes GERBER baby food logo for that one country that doesn’t understand marketing

Question 18

Transnational strategy? what are its adv and disadv (4:1)

Answer 18

ADVANTAGES:
Exploit experience curve effects
Exploit location economies
Customize product offerings and marketing in accordance with local responsiveness
Reap benefits of global learning

DISADVANTAGES:
Difficult to implement due to organizational proble

Question 19

multidomestic strategy? what are its adv and disadv (1:3)

Answer 19

ADVANTAGES:
Customize product offerings and marketing in accordance with local responsiveness

DISADVANTAGES:
Inability to realize location economies
Failure to exploit experience curve effects
Failure to transfer core competencies to foreign markets

Question 20

what is international strategy? what are its adv and disadv (1:3)

Answer 20

ADVANTAGES:
Transfer core competencies to foreign markets

DISADVANTAGES:
Lack of local responsiveness
Inability to realize location economies
Failure to exploit experience curve effects

Question 21

what is global strategy?what are its adv and disadv (4:1)

Answer 21

ADVANTAGES:
Exploit experience curve effects
Exploit location economies

DISADVANTAGES:
Lack of local responsiveness

Question 22

What is Socio-Political-economic dissonance as it relates to migration of ETHNOCENTRIC labour forces within a transcontinental foreign market?

Answer 22

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