Globalization

Question 1

Define globalization.

Answer 1

The trend whereby national economies are becoming integrated into the world economy. Promotes transportation and communication to allow for the most efficient allocation of resources

Question 2

What are the business environment affecting international trade?

Answer 2

• cultural
• economic
• political and legal

affect the product design, characteristics, packaging and promotion

Question 3

What are the 4 strategies to reach global markets from lower risk to higher risk?

Answer 3

1. Exporting
2. Licensing
3. Franchising
4. Foreign direct investment

Question 4

What is exporting?

Answer 4

Producing products domestically and selling them abroad.

Question 5

What is licensing?

Answer 5

Domestic firm grants a foreign firm the rights to produce and market it product in a defined geographical market.

Question 6

What is foreign franchising?

Answer 6

A firm expands through foreign franchising by offering franchisees the right to duplicate a specific business in other countries.

Question 7

What is foreign direct investment?

Answer 7

Investing in foreign countries to set up manufacturing, distribution systems and sales office in foreign country.

Question 8

What are the barriers to trade?

Answer 8

-Trade protectionism (to limit imports)

1. tariffs: customs duty or tax on imports
2. quotas: limit on the quantity of product that can be imported
3. embargoes: complete ban on the import/export of certain products

Question 9

What are the best ways to achieve cost control?

Answer 9

1. offshoring (low wage labour, less laws and customs, lower cost goods)
2. vertical integration (gain control over supply chain, buying suppliers, producing own parts)

Question 10

Define Balance of trade.

Answer 10

The value of a country’s exports compared to the value of its imports as measured over a particular period of time.

Question 11

Define Trade surplus.

Answer 11

When the value of a country’s total exports exceeds the value of its total imports.

exports > imports

Question 12

Define Trade deficit.

Answer 12

When the value of a country’s total imports exceeds the value of its total exports.
exports < imports

Question 13

Define Balance-of-payments surplus.

Answer 13

When more money flows into a country than flows out.

Question 14

Define Balance-of-payments deficit.

Answer 14

When more money flows out of a country than flows in.

Question 15

What is the Company Life Cyle?

Answer 15

1. Start-up
2. Legal form
3. Business plan (target market, marketing mix, promotional mix, balance sheet, budgets, income statements)
4. Expansion (IPO, exports,…)
5. CSR