Terms in this set (42)
Country of Origin Effect
The extent to which the olace of manufacturing or production influences product evaluatons.
Summary Construct Model
Consumers use country image to inf the wuality of a soecific oroduct since they cannot detect a product's quality before purchase
Ex: Made in Switzerland infers precision
Summary Construct Model
If we are unfamiliar with a product, then we make judgements based in other produvts from that country.
Product jusgement by one attribute:quality. in past 20 years, more attributes added: reliability, drability, workmanship
Country of Origin Effect is ____
economic development had an affect on the products quality of image
Consumer Segmentation by Attitude
Buy domestically made products even though their image may not be good as that of imported goods.
Do not have bias against either imports or domestic goods.
Clear preference for imports
Will not buy imported goods from certain countries which they consider behave badly in the international arena. Different from patriots. They don't have bias in favor of locally made goods.
General Strategies for Minimizing Consumers negative attitudes
1. Use local and well established distributors
2. shift production location in local market
3. do something positive like sponsor a local environmental cause.
Any firm that engages in international trade or investment
Break Even Point
Q = TFC/(P-VC)
TFC: Total Variable Costs
VC: Variable Costs
Consumption (Most Important)
Export - Import
Highways and public buildings
Keynesian Economics (Believe that the private sector leads to inefficient macroeconomic outcomes and that the public sector must step in with monetary policies & fiscal policies)
Investment in factories and housing
People purchasing houses
Companies building factories
Interest rate stimulates this
Interest rate is close to zero so government loses ability to stimulate the economy because they cannot drop it much lower.
Larges portion (%) of GDP for US and JPN
Current Policy, Obama wants to increase exports, therefore, the US $ must be weak.
Risks of Quantitative Easing
Central bank can lose money
danger of inflation
potential to destroy confidence in an economy
may not work if not implemented aggressively enough
difficult to gauge how much QE is needed
US supply of money increases
interest rates decrease
Investors want to invest in foreign countries with higher interest rates
(would want to sell dollars and buy foreign currency)
The trend toward a more integrated global economic system
Globalization of markets
the merging of historically distinct and separate national markets into one huge global marketplace
Globalization of Produciton
the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (labor energy, land, and capital)
Manage, regulate, and police the global market place
Promote the establishment of multinational treaties and govern the global business environment (World Trade Organization, International Monetary Fund, World Bank, United Nations)
What is driving the move toward greater globalization
Declining trade and investment barriers, technoloy
Occurs when a firm exports goods or services to consumers to another country
Foreign Direct Investment
Occurs when a firm invests resources in business activities outside its home country
How has world output and world trade changed over the last 50 years?
In the 1960s:
the U.S. dominated the world economy and the world trade picture
the U.S. dominated world FDI
U.S. multinationals dominated the international business scene
about half the world-- the centrally planned economies of the communist world-- was off limits to Western international business
Today, much of this has changed
How has the foreign direct investment picture changed over the last 50 years?
The share of world output generated by developing countries has been steadily increasing since the 1960s
The stock of foreign direct investment (total cumulative value of foreign investments) generated by rich industrial countries is declining
Cross-border flows of foreign direct investment are rising
The largest recipient of FDI is China
What is a multinational enterprise?
A multinational enterprise is any business that has productive activities in two or more countries
Since the 1960s:
there has been a rise in non-U.S. multinationals
there has been a rise in mini-multinationals
Why is the changing world order important for firms?
The collapse of communism in Eastern Europe (new export and investment opportunities)
Economic development in China (huge opportunities despite continued Communist control)
Free market reforms and democracy in Latin America (new markets and new sources of materials and production)
What will the global economy look like in the 21st century
A more integrated global economy
new opportunities for firms
but, political and economic disruptions can throw plans into disarray
Is the shift toward a more integrated and interdependent global economy a good thing?
Many experts believe that globalization is promoting greater prosperity in the global economy, more jobs, and lower prices for goods and services
Others feel that globalization is not beneficial
What does the shift toward a global economy mean for managers within an international business?
Managing an international business (any firm that engages in international trade or investment) differs from managing a domestic business in four key ways
The power of microprocessor technology doubles and its costs of production fall in half every 18 months
The law is named after Intel co-founder Gordon E. Moore, who described the trend in his 1965 paper
2011 World DRAM share by Samsung, Hynix, and Elpida were 43%, 22%, and 14%, respectively.
Elpida filed bankruptcy on Feb 27, 2012 mainly due to followings :
Yen appreciation in recent years
speed of technological change
Annual $2 billion investment
Rise of competition, mainly by Korean and Taiwanese companies
Friedman's basic position is that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law. He explicitly rejects the idea that business should undertake social expenditures beyond those mandated by the law and required for the efficient running of a business. (Textbook p.144 The Friedman Doctrine)
Problems with PPP
Price strategy influence price of a country
not considering transportation costs
not considering government interventions (tariffs, etc)
International Fisher Effect (Estimate Spot Rate)
100*(S1-S2/S2) = I(base) - I(Other)
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