BUS 187 Global Dimensions of Business

1. Responsibilities of World Bank, International Monetary Fund and World Trade Organization

The World Trade Organization polices the world trading system; makes sure that nation-states adhere to the rules laid down in trade treaties ;promotes lower barriers to trade and investment
The International Monetary Fund (1944) maintains order in the int

2. Explain a) theocratic law system, b) civil law system, c) contract law system and d) common law system

A) Theocratic - Law based on religious teachings
B) Civic law - based on detailed set of laws organized into codes
C) Common law - law based on tradition, precedent, and custom
D) An agreement creating obligations enforceable by law.

3. Globalization - Definition pros and criticisms

The shift for a more integrated and interdependent world economy.
Pros - cheaper goods, economic growth, more consumer income, more jobs
Cons - job losses, enviromental degregation, cultural imperialism of global media and MNE's

4. International Business

The exchange of goods and services among individuals and businesses in multiple countries.

5. Multinational Enterprise

any business that has productive activities in two or more countries

6. Importance of Antitrust laws in the United States

regulates the conduct and organization of business corporations to promote fair competition for the benefit of consumers.

7. Explain the implications of the global monetary system for currency management and business strategy.

Currency management
The monetary system is not perfect
Both speculative activity and government intervention affect the system
Companies must use risk management instruments
Business strategy
Minimize risk by placing assets in different parts of the world

8. Ricardo's theory of comparative advantage

countries should specialize in the production of those goods they produce most efficiently and buy goods that they produce less efficiently from other countries (absolute adv)

9. Understand how the political systems of countries differ

...

10. Ethnocentrism - what does it mean. How can it impact when doing business in a country.

A belief in the superiority of one's own culture. Companies that are ill informed about the practices of another culture are unlikely to succeed in that culture.
Ethnocentrism can benefit domestic companies because ethnocentric consumers will be more like

11. The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

obligates member states to make the bribery of foreign public officials a criminal offense

12. What is the Foreign Corrupt Practices Act

makes it illegal for US companies to bribe foreign government officials to obtain or maintain a business under their authority

13. Understand the ethical issues faced by international businesses

The most common ethical issues are:
1)human rights
2)environmental regulations
3) employment practices
4) Corruption
5) the moral obligation of MN companies

14. Explain the implications for management practice of national differences in political economy

- The cost of doing business in a country are a function of political system, economic level, legal system
- benefits of doing business in a country are a function of market size, purchasing power of consumers, their likely future wealth
- democratic regi

15. Recognize how the economic systems of countries differ

Market economies - all productive resources are privately owned; production determined by S&D, gov encourages free and fair competition between private producers
command economies - gov plans goods and services that a country produces, quantity and price

16. Explain Deregulation and Privatization

privatization - transfers the ownership of state property into the hands of private investors
Deregulation - removing legal restrictions to the free play of markets, est of private enterprises, manner in which pe operate

17. What is elastic and inelastic demand?

Demand is elastic when a small change in price produces a large change in demand
Demand is inelastic when a large change in price produces a small change in demand

18. Advantages and Disadvantages of Exporting?

Advantages:
- avoids est local manufacturing
- helps firm achieve location economies (Cost reduction in production because of location) and experience curve
Disadvantages:
- there may be lower-cost manufacturing locations
- high transport costs and tariff

19. Identify why and how advertising and promotional strategies might vary among countries?

standardized advertising
Makes sense: has significant economic advantages ; creative talent is scarce and one large effort to develop a campaign will be more successful than numerous smaller efforts; brand names are global
Does not make sense: cultural di

20. The choice of distribution strategy - long vs. short channel and its impact on pricing

Short Channel - when price is more important - each intermediary in a channel adds its own markup to product
Long channel - when retail sector is very fragmented: economizes on selling costs; can offer access to exclusive channels
Short Distribution chann

21. Identify the different strategies for competing globally and their pros and cons.

Global standardization - increase profitability and profit growth by reaping the cost reductions from economies of scale, learning effects, and location economies
Localization - increase profitability by customizing goods or services so that they match ta

22. What is an experience curve? Think of examples.

systematic reductions in production costs that occur over the life of the product
ex:moving down - firms reduce the cost of creating value
ex:to get down quickly - firms use a single plant to serve global markets

23. What is Diminishing returns to specialization

more units of resources are required to produce each additional unit

24. What are Fragmented retail systems and its impact on firms

there are many retailers, no one of which has a major share of the market: most common in developing countries. Makes firms hard to enter

25. What is a turnkey project. What are its pros and cons?

Full implementation of business system - handles detail such as training operating personnel
adv: ROI because of past knowledge of process; less risky than FDI
dis: firms have no long term interest in foreign country; firm creates competitors; selling own

26. Communist Philosophy

a theory or system of social organization based on the holding of all property in common, actual ownership being ascribed to the community as a whole or to the state.

27. Pull and Push Strategies

Push strategy emphasizes personnel selling
Pull strategy emphasizes mass media advertising

28. Relation of property rights and economic growth.

- democratic regimes, market based policies, and strong property rights are more likely to have higher sustained rate of economic growth

29. What is licensing. What are its pros and cons?

Licensing - grants rights to produce and sell firm's products in return for royalty fee
adv: avoids developmental costs & risks opening in foreign market; avoid barriers to invest; can capitalize on market opportunities w/o developing applications
dis: li

30. What is franchising. What are its pros and cons?

Franchisor sells intangible property to franchisee; franchise must abide to strict rules on how to operate
ADV: avoids risks of opening up a foreign market; firms can est global presence
DIS: distance makes it hard to detect poor performance; inhibits abi

31. What does the term strategy mean.

Strategy means:a plan of action or policy designed to achieve a major or overall aim. enterprise valuation - profitability - profit growth - reduced costs - add value and raise prices - sell more in existing markets - enter new markets

32. Explain why and how a firm's pricing strategy might vary among countries.

Standardization & customization

33. Evaluate the pros and cons of entering into strategic alliances.

Pros:
- Facilitate entry into foreign market
- share risks and costs of new products
- bring together skills and assets
- technological standards
Cons:
- not reveal more than it receives

34. What are Cross-Licensing Agreements

a contract between two or more parties where each party grants rights to their intellectual property to the other parties.

35. Explain the three basic decisions that firms contemplating foreign expansion must make: which markets to enter; when to enter those markets; and on what scale.

Choice of entry: factors to consider - transport costs, trade barriers, political risks, economic risks, costs, firm, strategy
When to enter: politically stable, have free market systems, low inflation rates, low private sector debt
What scale: small- sca

36. Describe how the globalization of the world economy is affecting new-product development within the international business firm.

Competition is about technological innovation; faster; PLC are short; open the door for new opportunities
- New product ideas come from the interactions of scientific research, demand conditions, and competitive conditions

37. What Are The Barriers to International Communication?

1. cultural barriers
2. Source and country of origin effects A) source effects - basis message by status of sender B) country of origin effects - the place of manufacturing influences product evaluations
3. Noise levels - other messages competing for pote

38. Different Pricing Strategies that International Business Managers can use.

1. Price discrimination - firms charging consumers in different countries different prices for same product
2. Strategic Pricing - A) Predatory pricing - profits gained in one market used to support aggressive pricing designed to drive competitors out in

39. How Do Regulations Influence Pricing?

1. Antidumping regulations - dumping occurs when a firm sells a product for a price that is less than the cost to make it; antidumping rules set a floor under export prices and limit a firm's ability to pursue strategic pricing
2. Competition policy - ind

1. How do levels of economic development affect consumer behavior? What are the implications for marketing strategy?

Consumers in the most advanced countries often shun globally standardized products that have been deveopled with the lowest comon denominator. They are willing to pay more for products that have additional featuresand attributes customized to their tastes

2. Explain briefly the regulatory influences on pricing.

a

3. Explain the relationship between first-mover disadvantages and pioneering costs.

When a firm enters a market prior to other international businesses, it can have first-mover disadvantages. These advantages may rise to pioneering costs, costs that an early entrant has to bear that a later entrant can avoid. Pioneering costs arise when

4. Discuss strategic alliances. How successful are they? Why do firms form strategic alliances?

Strategic alliances is an agreement between two or more parties to puruse a set of agreed upon objectives needed while remaining independent organizations. Partners may provide the sa with resources such as products, distribution channels, manufacturing c

5. Compare and contrast licensing agreements and franchising agreements.

A licensing agreement is an arrangement whereby a licensor grants the rights to intangible property to another entity for a specified period in exchange for royalties. In contrast, francising is basically a specialized form of licensing in which the franc

6. What are the three dimensions of organizational structure?

organizational structure can be thought of in terms of three dimensions: first, vertical differentiation or the location of decision- making responsibilities within the firm. Second, horizontal differentiation or the formal division of the organization in

7. Explain the five reasons why a firm should decentralize its decision-making.

Control, flexibility, motivation, better decisions, Management unburden
Firms should decentralize their decision-making for five main reasons. First, top management can become overburdened when decision-making authority is centralized and this can result

8. Consider the firm in terms of a value chain. What is the difference between primary activities and support activities? Provide examples of each.

The operations of a firm can be thought of as a value chain composed of a series of distinct creation activities. Primary activities have to do with the design, creation, and delivery of the product; its marketing; and its after-sale service. normally, pr

9. Describe the benefits of global expansion for firms.

Global expansion allows firms to capture many oppourtunities not open to firms that remain focuesed purely on the domestic markets. Frims that operate globally have the oppourtunity to sell their product in a much larger marketplace. Location economies ca

10. Explain the concept of location economies.

In economics, economics of location is a strategy used by firms in a monopolistic competition environment. Unlike a product differentiation strategy, where firms make their products different in order to attract customers, the economics of location strate

11. What are the two types of competitive pressures that firms competing in the global marketplace face? How do firms respond to these pressures? Cost reductions and to be locally responsive Respond by lowering prices and catering to local places

Firms that compete in the global marketplace typically face two types of competitive pressure that affect their ability to realize location economies and experience effects, to leverage products and transfer competencies and skills within the enterprise.

12. What are the four basic strategies that firms use to compete in international markets? Global standardization high pressure cr pressure for lr, Localization high pressure for local responsiveness pressure for cost reduction is low, International low p

The four basic strategies that firms use to compete in international markets are the international strategy, the global standarization strategy, the localization strategy, and the transnational strategy. The international strategy is most appropriate when

17. What type of firms favor the worldwide area structure and why? What are the disadvantages of this
type of structure? Low degree of diversifiation & domestic structures based on functions - choose it because it facilitates local responsiveness - to cus

The worldwide area structure tends to be favored by firms with a low degree of diversification and a domestic structure based on functions. This structure divides the world into geographic areas, each area being a self-contained, largely autonomous unit.

13. What is the connection between religion and ethical systems? Do they have any implications for business?

Religion may be defined as a system of shared beliefs and rituals that are concerned with the realm of the sacred.16 Ethical systems refer to a set of moral principles, or values, that are used to guide and shape behavior. Most of the world's ethical syst

14. Why is the role of education in a culture important to international companies?

Many companies that expand their market to other countries have to familiarize themselves with the target culture, as the more they know about their new customers the better. These companies need to know the new culture's educational policies and the cont

15. Consider the importance of unspoken language. Why is it important to be familiar with the unspoken
language of another culture?

Unspoken language refers to nonverbal communication. We all communicate with each other by a host of nonverbal cues. The raising of eyebrows, for example, is a sign of recognition in most cultures, while a smile is a sign of joy. Many nonverbal cues, howe

16. Discuss the benefits and costs of FDI from the perspective of a host country and from the perspective
of the home country.

The main benefits of inward FDI for a host country arise from resource-transfer effects, employment effects, balance-of-payments effects and effects on competition and economic growth. Three costs of FDI concern host countries. They arise from possible ad