Unit 5

Question 1

timing of entry

Answer 1

Entry is early when a firm enters a foreign market before other foreign firms and late when a firm enters after other international businesses have established themselves.

Question 2

first-mover advantages

Answer 2

Advantages accruing to the first to enter a market.

Question 3

first-mover disadvantages

Answer 3

Disadvantages associated with entering a foreign market before other international businesses.

Question 4

pioneering costs

Answer 4

Costs an early entrant bears that later entrants avoid, such as the time and effort in learning the rules, failure due to ignorance, and the liability of being a foreigner.

Question 5

exporting

Answer 5

Sale of products produced in one country to residents of another country.

Question 6

turnkey project

Answer 6

A project in which a firm agrees to set up an operating plant for a foreign client and hand over the “key” when the plant is fully operational.

Question 7

licensing agreement

Answer 7

Arrangement in which a licensor grants the rights to intangible property to a licensee for a specified period and receives a royalty fee in return.

Question 8

franchising

Answer 8

A specialized form of licensing in which the franchiser sells intangible property to the franchisee and insists on rules to conduct the business.

Question 9

joint venture

Answer 9

A cooperative undertaking between two or more firms.

Question 10

wholly owned subsidiary

Answer 10

A subsidiary in which the firm owns 100 percent of the stock.

Question 11

strategic alliances

Answer 11

Cooperative agreements between potential or actual competitors.

Question 12

strategy

Answer 12

Actions managers take to attain the firm’s goals

Question 13

profitability

Answer 13

A ratio or rate of return concept.

Question 14

profit growth

Answer 14

The percentage increase in net profits over time.

Question 15

value creation

Answer 15

Performing activities that increase the value of goods or services to consumers.

Question 16

operations

Answer 16

The various value creation activities a firm undertakes.

Question 17

organization architecture

Answer 17

The totality of a firm’s organization, including formal organizational structure, control systems and incentives, organizational culture, processes, and people.

Question 18

organizational culture

Answer 18

The values and norms shared among an organization’s employees.

Question 19

organizational structure

Answer 19

The three-part structure of an organization, including its formal division into subunits such as product divisions, its location of decision-making responsibilities within that structure, and the establishment of integrating mechanisms to coordinate the activities of all subunits.

Question 20

controls

Answer 20

The metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits.

Question 21

incentives

Answer 21

The devices used to reward appropriate managerial behavior.

Question 22

processes

Answer 22

The manner in which decisions are made and work is performed within any organization.

Question 23

people

Answer 23

The employees of the organization, the strategy used to recruit, compensate, and retain those individuals, and the type of people that they are in terms of their skills, values, and orientation.

Question 24

core competence

Answer 24

Firm skills that competitors cannot easily match or imitate.

Question 25

location economies

Answer 25

Cost advantages from performing a value creation activity at the optimal location for that activity.

Question 26

localization strategy

Answer 26

Increasing profitability by customizing the firm’s goods and services so that they provide a good match to tastes and preferences in different national markets.

Question 27

global web

Answer 27

When different stages of value chain are dispersed to those locations around the globe where value added is maximized or where costs of value creation are minimized.

Question 28

experience curve

Answer 28

Systematic production cost reductions that occur over the life of a product.

Question 29

learning effects

Answer 29

Cost savings from learning by doing.

Question 30

economies of scale

Answer 30

Cost advantages associated with large-scale production.

Question 31

universal needs

Answer 31

Needs that are the same all over the world, such as steel, bulk chemicals, and industrial electronics.

Question 32

global standardization strategy

Answer 32

A firm focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies.

Question 33

transnational strategy

Answer 33

Attempt to simultaneously achieve low costs through location economies, economies of scale, and learning effects while also differentiating product offerings across geographic markets to account for local differences and fostering multidirectional flows of skills between different subsidiaries in the firm’s global network of operations.

Question 34

international strategy

Answer 34

Trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies.

Question 35

MITI

Answer 35

Japan’s Ministry of International Trade and Industry.

Question 36

sogo shosha

Answer 36

Japanese trading companies; a key part of thekeiretsu,the large Japanese industrial groups.

Question 37

export management company (EMC)

Answer 37

Export specialist that acts as an export marketing department for client firms

Question 38

letter of credit

Answer 38

Issued by a bank, indicating that the bank will make payments under specific circumstances.

Question 39

bill of exchange

Answer 39

An order written by an exporter instructing an importer, or an importer’s agent, to pay a specified amount of money at a specified time.

Question 40

bill of lading

Answer 40

A document issued to an exporter by a common carrier transporting merchandise. It serves as a receipt, a contract, and a document of title.

Question 41

draft

Answer 41

An order written by an exporter telling an importer what and when to pay.

Question 42

sight draft

Answer 42

A draft payable on presentation to the drawee.

Question 43

time draft

Answer 43

A promise to pay by the accepting party at some future date.

Question 44

Export-Import Bank (Ex-Im Bank)

Answer 44

Agency of the U.S. government whose mission is to provide aid in financing and facilitate exports and imports.

Question 45

countertrade

Answer 45

The trade of goods and services for other goods and services.

Question 46

barter

Answer 46

The direct exchange of goods or services between two parties without a cash transaction.

Question 47

counterpurchase

Answer 47

A reciprocal buying agreement.

Question 48

offset

Answer 48

Agreement to purchase goods and services with a specified percentage of proceeds from an original sale in that country from any firm in the country.

Question 49

switch trading

Answer 49

Use of a specialized third-party trading house in a countertrade arrangement.

Question 50

buyback

Answer 50

Agreement to accept a percentage of a plant’s output as payment for contract to build a plant.