Unit 1 Flashcards
What are the following terms?International business, foreign business and a International company
International Business:+Business carried out across borders
Foreign business:+The operations of a company outside it’s home or domestic market
International company:+A company that operates in multiple nations
What makes International forces important and what are the 3 main forces of concern?
+No domestic firms are ever free from international forces, Globalization
(1)External/ uncontrollable forces
External forces that management has no direct control over
(2)Internal/ Controllable forces
Internal forces that management administers to adapt to changes in uncontrollable forces
(3)Environment
All the forces influencing the life and development of the firm.
What is each of these forces that influence a business?
(1)Environment:+Forces that influence life and development of firm
(2)External:+No control over
(3) internal:+Internal controllable forces that help adapt to uncontrollable forces
Name the 11 external forces.
(1)Competitive:+Competitors ,their locations and actions
(2)Distributive:+Agencies that distribute goods and services
(3)Economic:+Variables such as GNI, unit labor cost, etc. that influence ability to do business
(4)Socioeconomic:+Characteristics and distribution of human population
(5)Financial:+Interest rates, inflation and tax
(6)Legal: +Laws governing how international firms must operate
(7)Physical:+Elements of nature: Climate, etc.
(8)Political:+Elements of political climates: Government, etc.
(9)Sociocultural:+Elements of culture: Beliefs, etc.
(10)Labor:+Skills, attitude of labor
(11)Technological:+Technological skills and equipment
What are the 3 types of external environments?
(1)Domestic environment:+Uncontrollable forces in home country that influence life and development
(2)Foreign environment:+Uncontrollable forces that originate outside home country that influence life and development
(3)International environment:+Interaction between domestic and foreign environmental forces, as well as
interactions between the foreign environmental forces of two countries.
What makes the foreign environment different?
+ foreign and domestic values differ often widely
+ foreign forces often difficult to assess
+ forces are often interrelated
What makes the international environment different?
(1) complicates decision making(need to consider both domestic and foreign forces)
(2) self-reference criterion(referencing to your own culture values when working in a new/other environment)
What are the 5 main forces driving firms to internationalise their operations?
(1)Political drivers:+ political barriers
+Former communist countries opening for Global competition
+Trend towards unification and socialization
(2)Technological drivers:
+Improve technology as increased global demand
+Improved coordination of business
+Physical location less relevant
(3)Market drivers:+Due to market saturation
+To follow big customers
+To protect home Market
(4)Cost drivers:+Economies of scale
+Location economies
+Investments incentives
+Transport
(5)Competitive drivers:+Multi-point competition
+New competitors for developing Nations
+Entry into downstream activities
+ Access to supplies
What is international trade?
+ the exchange of goods and services across national borders
+ i.e. exports and inputs
What is a foreign direct investment?
+Capital investments in foreign assets, large enough to give the Firm significant management
What is the difference between a greenfield investment and a cross-border aquisition?
(1)Green field investment:+Parent company starts a new venture in foreign country by building new operational facilities from the Ground Up
(2)Cross-border acquisition:+When the control of assets and operations is transferred from a local to foreign company after to becoming an affiliate of the letter
What are international trade theories?
+Theories that try to explain why internal trade occurs
+As well as why some goods are important/exported and others not
What are the 3 international trade theories?
(1)Mercantilism:+A belief that a nations wealth depends on cumulated treasure, such as gold
+ and that to improve wealth by encouraging exports and discouraging imports
(2)Absolute Advantage:+A Nation’s ability to produce more of a good or service than another country for the same or less cost(Look at slide for calculations)
(3)Comparative advantage:+When one nation is less efficient than another nation in the production of each of two goods. The nation that is least efficient has a comparative advantage in the production of that good which is absolute disadvantage is less(Look at slides for calculations)
Explain what an exchange rate is and why it’s important.
+It is the price of one currency in terms of another
+It is important to know as it helps determine if it is better to produce locally or to import
What are 7 newer explanations for the direction of trade?
(1)Resource endowment:+The land, labor and related production factors and nation possesses
(2)Overlapping demand:+Similar preference and demand among Nations with similar per capita income
(3)Product differentiation:+Unique product differences to influence demand
(4)International product life cycle:+A theory that explains why a product that begins as an export becomes and import eventually
(5)Economies of scale:+Lower in cost as production facility gets larger and output increases
(6) experience Curve:+Rate at which efficiency improves as experience increases
(7) national competitive advantage from regional clusters:+A regional cluster of firms will develop in a nation with favorable conditions and will give that nation a competitive advantage in a certain industry
