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19 Cards in this Set

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  • Back
What does free trade basically mean ?
no barriers
What do economists prefer rather than tarriffs ?
Income taxes and sales tax
When was free trade widely practiced ?
19th century in Europe, prior to WWII
Why was GATT created ?
To prevent the mistakes of the 30's from repeating, reducing tarriffs...WTO continued the process.
What are the modes of international business ?
Importing and Exporting; Service Exports and Imports; and Direct and Portfolio Investment.
Name two kinds of international investment.
Direct investment (gives foriegner control) & Portfolio investment (purchase of securities on the open market).
What is the most important aspect of FDI ?
Control - control must follow investment
Control usually means what percentage ?
10-25%
What are some concerns regarding control ?
Governmental concerns & Investor Concerns
What are some Governmental Concerns ?
Risk of governement takeover
What are some investor concerns ?
Relinquishing control (tech info) & Quality issues
What is the Appropriability Theory ?
Denying rivals access to resources (especially technology)
What are motivations for FDI?
Expand sales, aquire resources, diversify sales and supplies, minimize competitive risk and political issues/motives.
What are the motivations for sales expansion ?
-Transportation(decrease shipping costs)
-Lack of Domestic capacity
-Scale Economics (highly differentiated favor FDI)
-Trade Restrictions (when imports highly restrictive)
-Country of Origin Effects (timely delivery)
-Changes in Country Cost Advantages (export back to home country)
What is vertical integration ?
Company control of value chain.
What is rationalized production ?
Different compenents or portions of a product line are made in different parts of the world. Locate production in another country when there is a need for tight relations to ensure smooth production flow.
How do FDI's minimize competitive risk ?
Follow customers; prevent competitors advantage - in oligoplistic industries, competitors usually make FDI in a given country at about the same time.
What are the reasons for Buying ?
-Avoid start-up problems
-More finance options available
What are the reason for Building ?
-No desired company is available for acquisition
-Acquisition will carry over problems
-Local financing may be easier to obtain