Global Management Pt.1 (EXAM 2) Flashcards
Global business
buying and selling goods and services from different countries
Multinational corporation
corporation that owns businesses in two or more countries
Direct foreign investment
investment in which a company builds a new business or buys an existing business in a foreign country
Trade barriers
government-imposed regulations that increase the cost and restrict imported goods
Prtoctectionism
government’s use of trade barriers to shield domestic companies and their workers from foreign competition
Tariff
direct tax on imported goods
Nontariff barriers
nontax methods of increasing the cost or reducing volume of imported goods
What are the types of nontariff barriers?
- quotas
- voluntary export restraints
- government import standard
- subsides
- customs classification
Quotas
limit on number or volume of imported products
Voluntary exported restraints
voluntarily imposed limits on the number or volume of products exported
Government import standard
standard ostensibly to protect the health and safety of citizens but often used in restrict imports
Subsides
loans, grants, and tax deferments given to domestic companies to protect them from foreign competition
Customs classification
classification that affects the size of the tariffs
General agreement on tariffs and trade (GATT)
worldwide trade agreement that reduced and eliminated tariffs, limited government subsides, established protections for intellectual property
World Trade Organization (WTO)
- international organization dealing with the global rules of trade
- ensure that trade flows as smoothly, predictably, and freely as possible
Regional trading zones
areas in which tariff and nontariff barriers on trade between countries are reduced or eliminated
Maastricht Treaty of Europe
Europe
United States–Mexico–Canada Agreement (USMCA)
US, MX, CA
Dominican Republic– Central America Free Trade Agreement (CAFTA-DR)
Central America & the Caribbean
Southern Common Market (MERCOSUR)
South America
Association of Southeast Asian Nations (ASEAN)
Asia
Asia-Pacific Economic Cooperation
Asia
Tripartite Free Trade Agreement (TFTA)
Africa
Free Trade Agreements caused…
- increase choices, competition and purchasing powers
- decrease in expenditures
- create new business opportunities and intensify competition
- managers are responsible to address the competition
Global consistency
multinational company has facilities in different counties and runs them all using the same rules, guidelines, policies, and procedures
Why is Global consistency valued?
it simplifies decisions
What risks do Global consistency have?
using management procedures poorly suited to particular countries markets, cultures, and employees
Local adaptation
modifying rules to adapt to difference in foreign customers, governments, and regulatory agencies
What risks do local adaptation have?
losing cost effectiveness and productivity that result from using standardized rules and procedures
What values do local adaptation bring?
locally sourcing inputs is desired
Exporting
selling domestically produced products to customers in foreign countries
Cooperative contract
foreign business owner pays a fee for the right to conduct business in their country
agreement where a domestic company (license) receives royalty payments. Licensee produce the licensor’s product sell its service or use its brand
Franchise
A collection of networked firms
where the manufacturer or marketer of a product (the franchisor), licenses the entire business to another person (the franchisee)
Strategic Aliances
agreement in which companies combine key resource, costs, risks, technology, and people
Joint venture
strategic alliance in which two companies collaborate to form a third independent company
can be challenging due to multiple cultures
(T/F): Joint companies avoid tariff and nontariff barriers
True
Do companies participating in a joint venture bear only part of the costs and the risks of that business?
Yes
(T/F): Joint companies doesn’t need to share profits as well as costs/risks
False
Wholly owned affiliates
foreign offices and manufacturing plants that are 100 percent owned by parent company
Pros of wholly owned affiliates
parent company receives all of the profits and has complete control over the foreign facilities
Cons of wholly owned affiliates
expense of building new operations or buying existing businesses
Global new ventures
companies that are founded with an active global strategy and have sales, employees, and financing in different countries
What occurs because of global new ventures
easy transportation, low-cost communication technologies, and experienced businesspeople
