International Business Exam

Front 1

Why are trade and foreign investment good for society as a whole?

Back 1

• A greater amount of choice in the availability of goods and services
• Competition results in lower prices for goods and services
• Increased quality of life and higher living standards

Front 2

Describe Merchantilism trade theory

Back 2

Mercantilists believed that for a nation to be wealthy it needed to export as much as possible and import as little as possible, creating a trade surplus. Failed to see that if all countries did this there would be an unpleasant export surplus.

Front 3

Describe Specialisation theory

Back 3

Based on the premise of absolute advantage and comparative advantage

Absolute advantage: The ability for a country to produce a good or service more efficiently =

Comparative Advantage: The ability of a country that has an absolute advantage in the production of two or more goods to produce one of them relatively more efficiently than the other

Front 4

Describe factor endowment theory (H-O Theory)

Back 4

Attributes the comparative advantage of a country to its factor endowments. This could be land, labour, capital, or technology. H-O theory assumes that there is perfect competition in the marketplace, and that production factors are immobile amongst countries.

Front 5

Expand on Factor Price Equalisation theory (an expansion to factor endowment theory)

Back 5

When factors are allowed to move freely among trading nations, efficiency increases. This leads to superior allocation of goods and services. This will happen until price equilibrium is reached.

Front 6

Explain Porters Diamond model of national competitive advantage

Back 6

Firm strategy, structure and rivalry, demand conditions, factor conditions, and related and supporting industries are all interlinked. Surrounded by government and then chance.

Front 7

What is a tariff

Back 7

A customs duty on imports (a tax)

Front 8

What is a specific tariff

Back 8

An import tax that assigns a fixed dollar amount per physical unit

Front 9

What is an Ad Valorem Tariff

Back 9

A tax on imports that is levied at a constant percentage of the monetary value of one unit of the imported good

Front 10

Explain preferential duties

Back 10

A tax on goods imported from certain countries is not applied to goods imported from other countries

Front 11

What is an export subsidy, and what is an export tax?

Back 11

• An export subsidy is a negative tariff on exports aimed at boosting exports
• Export tax is meant to raise the cost of exporting and divert production for home consumption

Front 12

List some non-tariff barriers

Back 12

Import quota - limit on the number of imports allowed

Voluntary export restraint - efficient exporting nation agrees to limit number of exports for a period of time

Domestic content provision - A specific percentage of the product must be sourced locally

Front 13

Explain Regional Integration

Back 13

Implementation of a magnitude of economic and/or political steps by member states to increase their global competitiveness

Front 14

Explain spatial transformations

Back 14

The process of allowing efficient distribution of business activities within and among countries

Front 15

List the stages of regional integration

Back 15

• Free trade area
• customs union
• common (or single) market
• economic and monetary union
• political union

Front 16

List some benefits of regional integration

Back 16

• Larger pool of customers with growing incomes, similar taste and culture
• encouraging economies of scale
• freeing the flow of capital, labour & technology
• increased cooperation, peace & security
• encourages increased social welfare

Front 17

Lists some drawbacks of regional integration

Back 17

• Undermines most favoured nation rule
• Uniform laws doesn't take into account national economic, social, & cultural differences
• eliminates jobs and increases unemployment in protected industries
• lose national independence
• easy of border crossing (drugs & terrorism)
• Reduced powers of national government

Front 18

Why is the EU seen as the most advanced regional integration bloc?

Back 18

• 1957 treaty of Rome established European economic community
• 1992 became full economic union with free movement of labour among member nations
• 1992 Euro was adopted as common currency
• Sovereign debt crisis of some nations challenges fiscal stability

Front 19

How has NAFTA affected US-Mexico bilateral trade?

Back 19

• Trade expansion through the phased elimination of all trade barriers
• Protection of IP rights
• Creation of regulatory bodies to address unfair trade practices, disputes, environmental protection, workers rights
• Implementation of NAFTA rules and regulations

Front 20

Why is ASEAN important, and why may Asia become the most important free trade region of this century?

Back 20

• ASEAN promotes economic growth, social development, and cultural progress
• Promotes peace and stability with rule of law among member nations
• RISE OF THE MIDDLE CLASS
• ABUNDANCE OF LABOUR

Front 21

What is a balance of payments?

Back 21

Shows all the transactions between one country and the rest of the world for a period of time

Front 22

Differentiate between the current account and the financial account

Back 22

Current account shows the activities of consumers in relation to trade balance, service balance, income balance and net transfers

Financial account consists of domestically owned assets abroad, foreign-owned assets in the domestic country, and net financial derivatives

Front 23

Briefly, explain the various international monetary systems

Back 23

• Gold standard: pegs currency values to the market value of gold
• Bretton woods agreement: USD pegged to the exchange rate of gold, 43 currencies pegged to the USD
• International Monetary Fund (IMF): Authority established to ensure the stability of international monetary system

Front 24

How did the flexible exchange rate system develop?

Back 24

Smithsonian Agreement - Allowed the US to devalue the dollar against other countries' currencies

Jamaica Agreement - Allowed countries to adopt different exchange rate systems including floating their currencies on world markets

Front 25

Explain the theory behind valuing or devaluing currencies

Back 25

Special drawing right (SDR) - A basket of currencies (USD, Euro, Yen, GBP), created by IMF to benchmark values of currencies

Clean float - monetary system with minimal government intervention

Dirty float - monetary system with varying degrees of government intervention aimed at keeping currencies between certain acceptable values

Front 26

What is dollarisation

Back 26

The process of using the dollar or some other foreign currency in accordance with or instead of the local currency

Front 27

Differentiate between hard currency and soft currency

Back 27

Hard currency - currency of countries that are industrialised (USD, Yen, Euro, GBP)

Soft currency - emerging nations' currencies that are less stable, often pegged to a hard currency

Front 28

Explain the international transaction process

Back 28

1. Importer obtains bank promise

2. Bank promises exporter

3. Exporter ships to the bank

4. Bank pays exporter

5. Bank delivers to importer

6. Importer pays bank

(may be more than one bank involved)

Front 29

What is a letter of credit

Back 29

Issued by a bank on request of importer that a certain sum will be paid to the exporter on the presentation of certain documents

Front 30

Explain the purposes of a bill of lading

Back 30

Issued to the exporter by the common carrier transporting the merchandise

Serves as a receipt, contract, and a document of title

Front 31

Explain FOB (Free on board shipping)

Back 31

Seller has fulfilled their duties when goods have passed over the ship's rail at the named port of shipment. Buyer bears all costs of damaged or lost goods from this point.

Front 32

Explain CFR (Cost and Freight)

Back 32

Seller must pay all costs in order to deliver the goods to the port of destination, but as soon as the goods are on the ship all costs of risk and loss transfer to the buyer

Front 33

Explain CIF (Cost, Insurance, and Freight)

Back 33

Same obligations as CFR, but the seller also has to procure marine insurance against the buyer's risk of loss or damage

Front 34

List 4 characteristics of culture companies doing business abroad need to recognise

Back 34

• Culture is not inherited but learned
• Culture is shared, cumulative, and transgenerational
• Culture is adaptive and capable of change
• Culture is patterned, change in one area impacts other aspects

Front 35

Name the key elements of culture

Back 35

• Religion
• Social Structure
• Language
• Education
• Poltical Philosophy
• Economic Philosophy

Front 36

Nameand distinguish among the cultural dimensions proposed by Hofstede

Back 36

• Power distance
• Individualism vs Collectivism
• Masculinity vs Femininity
• Uncertainty Avoidance
• Time orientation (Long term vs short term)

Front 37

Explain the Importance of Culture for Managingand Marketing in Overseas Markets

Back 37

• Different cultures affect attitudes towards work
• Need for different management styles
• Advertising campaigns must be carefully tailored to local markets
• Culture has an impact on communication styles

Front 38

How can culture become a source of competitive advantage?

Back 38

Companies can exploit unique cultural traits to develop targeted products and services

Japanese toilet example

Front 39

Explain totalitarianism

Back 39

• Leaders govern without people's endorsement
• Government controls much of people's life
• Leaders do not tolerate opposing viewpoints

Front 40

Differentiate between theocratic and secular totalitarianism

Back 40

theocratic is religiously driven, secular is military and bureaucratically driven

Front 41

Describe democracy

Back 41

Government leaders are elected directly by the wide participation of the people or their representatives

Front 42

Differentiate between common law, civil law, and theocratic law

Back 42

Common law is based on tradition, uses past cases

Civil law's rules and statutes constitute a legal code

Theocratic law is legal tradition based on religious teachings

Front 43

What are some types of political risks?

Back 43

• Conflict and violence
• Terrorism and kidnapping
• Property seizure
• Policy changes
• Local content requirements

Front 44

Name the layers of the environment

Back 44

• The organisation
• Markets / Competitors
• Industry
• Macro-environment

Front 45

Outline the PESTEL Framework for market entry

Back 45

• Political
• Economic
• Social
• Technological
• Environmental
• Legal

Front 46

What are porters five forces relating to market entry

Back 46

• Threat of new entrants
• Bargaining power of buyers
• Threat of substitutes
• Bargaining power of suppliers
• 
  
• ALL link to Rivalry among existing firms

Front 47

What are the advantages of early entry?

Back 47

• Preempt rivals and capture demand
• Build sales volume
• Create switching costs, tie in customers through technical support etc.

Front 48

What are the advantages of late entry?

Back 48

• Able to observe what others have done
• Higher degree of certainty
• Less pioneering costs

Front 49

What are the entry mode approaches?

Back 49

• Naive approach: use same mode everywhere
• Pragmatic approach: using mode most appropriate for the market
• Analytical choice: based on fit between choice of mode, market requirements and resources of firm

Front 50

What are the Uppsala model's four main market entry modes?

Back 50

• Indirect and direct exporting
• Contractual modes (franchising)
• FDI
• Cooperative ventures

Front 51

What are the pros and cons of exporting?

Back 51

• Lower risk and lower cost, benefits the local economy, creates foreign exchange reserves, provides employment, export intensity positively correlated to GDP growth
• BUT there are mandatory requirements (packaging & labelling), environmental requirements (i.e. local customisation), and cultural/market adaptation

Front 52

What are the motives for ICV's?

Back 52

• Minimising transaction costs
• Opportunities for organisational learning
• Knowledge assets and key resources to be exchanged
• Deter market entry from competitors
• Increased resources

Front 53

Outline the VRIN Framework

Back 53

Value - is it valued by consumers and can it create a competitive advantage?

Rarity - Do capabilities exist that no or few competitors possess?

Imitability - Is it easy to imitate?

Non-substitutability - Is the risk of capability substitution low?

Front 54

Demonstrate the international strategy framework

Back 54

• Internationalisation drivers
• Geographic advantages
• Market selection
• Mode of entry

Front 55

Summarise the internationalisation drivers

Back 55

• Market drivers - similar customer needs, global customers, transferable marketing
  
• Cost drivers - scale economies, country-specific differences, favourable logistics
  
• Competitive drivers - interdependence between countries, competitors global strategies
  
• Government drivers - trade policies, technical standards, host country policies
  

Front 56

Outline the CAGE framework

Back 56

• Cultural Distance
• Admin and political distance
• Geographical characteristics
• Economic disparity

Front 57

What are some regulatory issues for HRM?

Back 57

• Some countries pertain the formation of labour unions and collective bargaining
• Employee working hours
• Some countries open their doors for foreign workers, others have restricted it

Front 58

What are the three main staffing policies?

Back 58

• Ethnocentric approach - fill key management positions with parent country nationals
• Polycentric approach - Recruits host country nationals to manage subsidiaries in their own country
• Geocentric approach - seek best people for the job regardless of nationality

Front 59

Outline some cultural differences in appraisal systems

Back 59

• Good and bad feedback
• Individual or group appraisal
• Power distance considerations

Front 60

What are some issues regarding expatriate compensation?

Back 60

• Host country or home country pay level?
• What currency?

• Equalise pay on global basis, or pay relative to each country?
  

Front 61

Differentiate between marketing research and marketing intelligence systems

Back 61

Marketing research is information collected at one particular time, MIS is information collected regularly over time

Front 62

What is the international promotion mix?

Back 62

• Publicity
• Advertising
• Sales promotion
• personal selling

Front 63

What are some benefits of publicity?

Back 63

• Helps firms prospect for new customers
  

Paves way for sales call when favourable press is released

• Third party endorsement
  
• Helps sell minor products and stretches the promotional budget
  

Front 64

What are some benefits of a sales promotion?

Back 64

• Tangible benefits for a short period of time
• Sponsorships are increasingly important
• Trade shows can be very popular

Front 65

What are some benefits of advertising and personal selling? What is a drawback?

Back 65

• Can reach large audiences
• Can target specific industries
• Direct mail is most focused
• Low cost per contact for TV
• Personal selling has high cost per contact (con)

Front 66

Outline the objectives when setting a price internationally

Back 66

• Performance objective (bottom line goals)
• Prevention objective (keep competitors out)
• Maintenance objective (keep status quo)
• Survival objective

Front 67

What is gray marketing and dumping?

Back 67

Gray marketing is unauthorised importers selling the home countries product for less

Dumping is setting a price in a foreign market that undercuts the prices of competing local firms

Front 68

Outline the operations management activities

Back 68

• Procurement (acquisition of goods)
• Production (transformation of goods)
• Logistics (movement of goods)
• R&D (design of new products)

Front 69

What are some advantages of global procurement?

Back 69

• - No investing money needed for making
• Focus on production
• Flexible allocation of orders among suppliers
• Economies of scale
• No need for new skills
• Avoid business risks

Front 70

What are some advantages of global production?

Back 70

• Knowledge may provide cost and efficiency advantages
• Control of component and process quality
• Control over component and product deliveries
• Highly specialised production may require it
• Secure source of supply for critical components
• Protection of IP

Front 71

What are some considerations for the location of production facilities?

Back 71

• Does the product serve everyone worldwide or does it need to be adapted?
• How close is it to the market?
• Proximity may affect how the quality of the product is viewed.

Front 72

Name the three types of property seizure

Back 72

• Confiscation (forced transfer to government with no compensation)
• Expropriation (forced transfer to government with compensation)
• Nationalisation (forced transfer to the government of an entire industry)

Front 73

Name the three ways to manage political risk

Back 73

• Adaptation (partnerships, insurance, localisation, development assistance)
• Information Gathering (current employees or agencies)
• Influence Local Politics (lobbying, corruption)

Front 74

What are the 4 forms of political risks?

Back 74

• Political upheaval
• Forced divestment
• unwelcome regulation
• Interference with operations

Front 75

What two frameworks are usually used in conjunction when selecting a market?

Back 75

PEST(EL) & SWOT Analysis