Test 2 Flashcards
What did China do with regards to precious metals?
implement export quotas; claimed to be concerned about environmental impact, but resulted in higher prices for domestic Chinese manufactures; sued by WTO
Free Trade
a situation in which a government does not attempt to restrict what its citizens can buy from or sell to another country
Instruments of Trade Policy (7)
- Tariffs
- Subsidies
- Import Quotas
- Voluntary export restraints
- Local content requirements
- Antidumping Policies
- Administrative Policies
Who benefited on the tariffs placed on Chinese tires? Who was hurt?
Domestic and foreign tire producers excluding China benefited. Domestic consumers were badly hurt.
How efficient are government subsidies generally?
Not very; they tend to promote excess capacity and inefficient companies
Tariff Rate Quota
lower tariff rate is applied to imports within the quota than those over the quota
The recent U.S. farm bill passed will:
cut food stamps, decrease support to farmers, restructure insurance
Local Content Requirement
A requirement that some specific fraction of a good be produced domestically
Political Arguments for governmental trade intervention: (6)
- preserving jobs
- protecting industries deemed important for national security
- retaliating against unfair foreign competition
- protecting consumers from “dangerous” products
- furthering the goals of foreign policy
- advancing the human rights of individuals in exporting countries
Economic Arguments for governmental trade intervention: (2)
- Infant Industry
2. Strategic Trade policy
Trade barrier implications for managers: (3)
- Plant location decisions
- export decisions
- suppliers
“Greek TV” Case
bar owner circumvented high local Premier League rate, brought on lawsuit. lawsuit overturned, segmentation in Europe declared illegal
The total number of regional trade agreements currently in force is:
more than 500
Levels of Economic Integration: (5)
- Free Trade Area (NAFTA, EFTA)
- Customs Union (common external trade policy)
- Common Market (factors of production move freely)
- Economic Union (common currency, tax rates; EU)
- Political Union (central political/federal body; US, Euro Parliament)
What are 90% of regional trade agreements?
Free Trade Areas
Political Pros/Cons for Economic Integration (2 each)
- Reduce potential for violent conflict
- Gain more political weight
- ——————————————————- - Threats to national sovereignty
- job losses
Trade Diversion
Trade diverted due to regional economic
integration; occurs when low-cost foreign suppliers outside a free trade area are replaced by higher-cost foreign suppliers in a free trade area (switching importing textiles from Brazil to importing from Mexico at higher cost)
The EU is the result of two political factors:
(1) the devastation of western Europe during two world wars, and the desire for a lasting peace
(2) the European nations’ desire to hold their own on the world’s political and economic stage
Five European Political Institutions
- European Commission
- The Council of the European Union
- The European Parliament
- The Court of Justice
- Central European Bank (ECB)
European Commission
proposes and implements legislation; monitors compliance with EU regulations; 28 commissioners appointed
Council of the European Union
approves legislations proposed by commission; 28 members varying by topic; votes proportional to country’s population
European Parliament
754 members; debates legislation proposed by commission; can veto some laws; 2009 treaty of Lisbon made EP more powerful
Court of Justice
one justice from each country; act as independent judges; supreme EU law body
Central European Bank
manages monetary policy to ensure price stability; determining interest rates
NAFTA provisions include: (3)
- Abolition of 99% of tariffs
- Intellectual Property Rights
- Environmental Standards
Mexican Trucking Case:
US unions wanted trucking jobs, feared loss to Mexican workers.
Opportunities from regional integration: (2)
- More accessible previously protected markets
2. Reduces cost and bureaucracy
Threats from regional integration: (2)
- increased competition in group and out (“trade fortress”)
2. M&A may be restricted
How did Ford change its international strategy?
standardized design and car manufacturing across the globe to make use of economies of scale and cut overall costs
What two things will increase the overall value of a firm?
higher Profitability and higher profit growth
Efficiency Frontier
shows all of the different positions that a firm can adopt with regard to adding value to the product (V ) and low cost (C)
Two ways to increase profitability:
- reduce costs
2. add value and raise prices
Two ways to increase profit growth:
- sell more in existing markets
2. enter new markets
What two business aspects support strategy?
- Operations Strategy
2. Organizational Structure
Core Competence
Firm skills that competitors cannot easily match or imitate
Low pressure for Cost Reductions; Low pressure for Local Responsiveness
International Strategy
Low pressure for Cost Reductions; High pressure for Local Responsiveness
Localization Strategy
High pressure for Cost Reductions; Low pressure for Local Responsiveness
Global-Standardization Strategy
High pressure for Cost Reductions; High pressure for Local Responsiveness
Transnational Strategy
Advantages of Strategic alliances (4)
- foreign entry
- shared fixed costs
- share skills/assets
- set industry standards
Disadvantage of Strategic alliances
hollowing out of technology or core competence
Pressures for Cost Reductions (4)
- Low product differentiation
- Competitors based in low-cost locations
- Excess industry capacity
- Low switching costs for consumers
Pressures for Local Responsiveness (5)
- National differences in consumer tastes
- Different Infrastructures
- Different Technical Standards
- Different distribution channels
- Different host-government demands
Factors affecting entry modes (5)
- Transportation costs
- Trade barriers
- Political Risks
- Economic Risks
- Company Strategy
Six modes of entry
- Exporting
- Turnkey Projects
- Licensing
- Franchising
- Joint Ventures
- Wholly owned subsidiaries
Activities of Human Resource Management (6)
- determining human resource strategy
- staffing
- performance evaluation
- management development
- compensation
- labor relations
Ethnocentric Staffing Approach
all key management positions are filled by parent-country nationals
Polycentric Staffing Approach
requires host-country nationals to be recruited to manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters
Geocentric Staffing Approach
seeks the best people for key jobs throughout the organization, regardless of nationality
Four Characteristics of Expat Managers
- Self-Orientaiton
- Others orientation
- Perceptual Ability
- Cultural toughness
Types of training for expat managers (3)
- Cultural
- Language
- Practical
