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19 Cards in this Set
- Front
- Back
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What does free trade basically mean ?
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no barriers
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What do economists prefer rather than tarriffs ?
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Income taxes and sales tax
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When was free trade widely practiced ?
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19th century in Europe, prior to WWII
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Why was GATT created ?
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To prevent the mistakes of the 30's from repeating, reducing tarriffs...WTO continued the process.
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What are the modes of international business ?
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Importing and Exporting; Service Exports and Imports; and Direct and Portfolio Investment.
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Name two kinds of international investment.
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Direct investment (gives foriegner control) & Portfolio investment (purchase of securities on the open market).
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What is the most important aspect of FDI ?
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Control - control must follow investment
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Control usually means what percentage ?
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10-25%
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What are some concerns regarding control ?
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Governmental concerns & Investor Concerns
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What are some Governmental Concerns ?
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Risk of governement takeover
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What are some investor concerns ?
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Relinquishing control (tech info) & Quality issues
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What is the Appropriability Theory ?
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Denying rivals access to resources (especially technology)
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What are motivations for FDI?
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Expand sales, aquire resources, diversify sales and supplies, minimize competitive risk and political issues/motives.
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What are the motivations for sales expansion ?
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-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) |
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What is vertical integration ?
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Company control of value chain.
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What is rationalized production ?
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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.
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How do FDI's minimize competitive risk ?
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Follow customers; prevent competitors advantage - in oligoplistic industries, competitors usually make FDI in a given country at about the same time.
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What are the reasons for Buying ?
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-Avoid start-up problems
-More finance options available |
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What are the reason for Building ?
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-No desired company is available for acquisition
-Acquisition will carry over problems -Local financing may be easier to obtain |
