Second-half of chapter 4, International Trade and Competitive Advantage: Key Concepts in Economics

Outsourcing

practice of paying suppliers and distributors to perform certain business processes or to provide needed materials or services

Offshoring

Practice of offsourcing to foreign countries

Levels of International Involvement

Exporters and Importers

International Firms

Multinational Firms

Exporters

firm that distributes and sells products to one or more foreign countries

Importers

firm that buys products in foreign markets and then imports them for resale in its home country

International Firm

firm that conducts a significant portion of its business in foreign countries

Multinational Firms

firms that designs, produces, and markets products in many nations

International Organization Structures

Independent Agent

Licensing Arrangement

Strategic Alliance

Branch Office

Foreign Direct Investment (FDI)

Independant Agent

foreign individual or organization that agrees to represent an exporter's interest

Licensing Agreement

arrangement in which firms choose foreign individuals or organizations to manufacture or market their products in another country

Strategic Alliances

arrangement (also called joint venture) in which a company finds a foreign partner to contribute approximately half of the resources needed to establish & operate a new business in the partner's country

Branch office

foreign office set up by an international or multinational firm

Foreign Direct Investment (FDI)

arrangement in which a firm buys or establishes tangible assets in another country

Barriers to International Trade CHECK THIS ONE

•Quotas

•Embargo

•Tariffs

•Subsidy

•Protectionism

•Local Content Laws

•Business Practice Laws

Economic Differences

levels of government involvement in a given industry in different economic systems

Legal and Political Differences

- Quotas, Tariffs, subsidies - protectionism - local content laws

Social and Cultural Differences

- Values, Symbols, Beliefs, and employee behavior across cultures

Quota

restriction on the number of products of a certain type that can be imported into a country

Embargo

government order banning exportation or importation of a particular product or all products from a particular country

Tariff

a tax levied on imported products

Subsidy

government payment to help a domestic business compete within foreign firms

Protectionism

the practice of protecting domestic business at the expense of free market competition

- critics charge that protectionism drives up prices by reducing competition

Local Content Law

law requiring that products sold in a particular country be at least partly made there

Business Practice Law

law or regulation governing business practices in given countries

Cartel

association of producers whose purpose is to control supply and prices

Dumping

practice of selling a product abroad for less than the cost of production

Social and Cultural Differences

-values

-symbols

-beliefs

-language behavior across cultures

Hofstede's Five Dimensions of National Culture

helps to understand the cultural environment

- Social Orientation

- Power Orientation

- Uncertainty Orientation

- Goal Orientation

- Time Orientation

Social Orientation

a person's beliefs about the relative importance of the individual versus groups to which that person belongs - individualism vs collectivism

Power Orientation

the beliefs that people in a culture hold about the appropriateness of power and authority differences in hierarchies such as business organizations - resect vs tolerant

Uncertainty Orientation

the feeling individuals have regarding uncertain and ambiguous situations - accepts vs avoids

Goal Orientation

the manner in which people are motivated to work toward different kinds of goals - aggressive vs passive

Time Orientation

the extent to which members of a culture adopt an outlook on work, life, and other elements of society - long-term vs short-term