50 terms

OM Ch 8

direct foreign investment
A method of investment in which a company builds a new business or buys an existing business in a foreign country
multinational corporation
A corporation that owns businesses in two or more countries
quotas, voluntary export restraints, government import standards, government subsidies, and customs valuation/classification
What are the 5 types of non-tariff barriers?
use of trade barriers to protect local companies and their workers from foreign competition
direct tax on imported goods
specific limits on the number or volume of imported products
voluntary export restrains
like a quota but the exporting country imposes the limit; offer to limit imports usually occurs because of the implicit threat of forced trade quotas by the importing country
non-tariff barrier that develops and protects companies in special industries
customs classification
assigned to imported products by government officials that affects the size of a tariff and the imposition of import goods
Administering trade agreements, Forum for trade negotiations, Handling trade disputes, Monitoring national trade policies, Technical assistance and training for developing countries, & Cooperation with other international organizations
What are the functions of the World Trade Organization?
The U.S. marketplace is easiest for foreign companies to enter
Competitive market between domestic and foreign companies keeps prices low
What are the 2 reasons American consumers get more for their money?
choices, competition, & purchasing power
What do free trade agreements increase?
food, clothing, necessities, & luxuries
What do free trade agreements decrease?
global consistency
When a multinational company has offices/plants indifferent countries and uses the same rules, guidelines, policies, and procedures
local adaptation
When a multinational company modifies its rules, guidelines, policies, and procedures to adapt to differences in foreign customers, governments, and regulatory agencies
When companies produce products in their home countries and sell those products to customers in foreign countries
exporting, cooperative contracts, strategic alliance, & wholly owned affiliates
What are the 4 forms for global business?
licensing and franchising
What are the 2 kinds of cooperative contracts?
domestic company receives royalty payments for allowing another company to produce its product, sell its service, or use its brand name in a particular foreign market
collection of networked firms in which the manufacturer or marketer of a product or service licenses the entire business to another person or organization
key resources, costs, risks, technology, and people
What do companies forming strategic alliances combine?
joint venture
What is the most common strategic alliance?
joint venture
two existing companies collaborate to form a third company
Less dependence on home market sales ; Greater degree of control over research, design, and production decisions
What are the 2 advantages of exporting?
Many exports are subject to tariff and nontariff barriers; Transportation costs can increase price ; & Companies may depend on foreign importers for product distribution
What are the 3 disadvantages of exporting?
Allows companies to earn profits without investing more money ; The licensor invests in production equipment and facilities ; & Helps companies avoid tariff and nontariff barriers
What are the advantages of licensing?
Licensor gives up control over quality of the product or service sold by the foreign licensee; Licensees can eventually become competitors
What are the 2 disadvantages of licensing?
Fast way to enter foreign markets ; Good strategy when a company's domestic sales have slowed
What are the 2 advantages of franchising?
Franchisors face a loss of control; Franchising success may be culture-bound
What are the 2 disadvantages of franchising?
strategic alliance
An agreement in which companies combine key resources, costs, risk, technology, and people
Help companies avoid tariff and nontariff barriers to entry ; Participating companies bear only part of the costs and risks ; & Advantageous to smaller local partners
What are the 3 advantages of joint ventures?
Companies must share profits; Joint venture represent a merging of four cultures ; & With equal ownership, power struggles and a lack of leadership may occur
What are the 3 disadvantages to joint ventures?
Parent company receives all of the profits and has complete control
What is the 1 advantage of wholly owned affiliates?
Expense of building new operations or buying existing business; Losses can be immense if the venture fails
What are the 2 disadvantages of wholly owned affiliates?
First, the company founders successfully develop and communicate the company's global vision. Second, rather than going global one country at a time, new global ventures bring a product or service to market in several foreign markets at the same time.
What are the 2 common factors of global new ventures?
access to growing markets, location to build, and minimal political risk
What are the 3 best business climates for an attractive global business?
purchasing power
measured by comparing the relative cost of a standard set of goods and services in different countries
purchasing power and foreign competitors
What two factors help companies determine the growth potential of foreign markets?
degree of global competition
the number and quality of companies already in the market
avoidance, control, & cooperation
What are the 3 strategies for minimizing political risk?
political uncertainty
associated with the risk of major changes in political regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events
policy uncertainty
risk associated with changes in laws and government policies that directly affect the way foreign companies conduct business
strategy used when the political risks associated with a foreign country or region are viewed as too great
active strategy to prevent or reduce political risks by lobbying foreign governments or international trade agencies to change laws, regulations, or trade barriers that hurt their business in that country.
national culture
The set of shared values and beliefs that affects the perceptions, decisions, and behavior of the people from a particular country
power distance, individualism, masculinity & femininity, uncertainty avoidance, & short-term/long-term orientation
What are the 5 consistent cultural dimensions?
consumer driven
countries with short-term orientations are _________________
savings driven
countries with long-term orientations are _________________
Someone who lives and works outside his or her native country
language and cross-cultural training and consideration of spouse, family, and dual-career issues.
What are the 2 ways in which chances for success in an international assignment be increased?