MGMT 425 EXAM ONE ALFRED TOMA

companies of all types and sizes and in all sorts of industries but they vary in their extent of involvement

who are the key players in international business?

International Business

any commercial transaction that crosses the borders of two or more nations

exports and imports of goods/services; direct/portfolio investments

what are the activities of international business?

multinational corporation

business that has direct investments abroad in multiple countries; generate significant jobs, investment, and tax revenue for the regions and nations they enter but can also leave lots of people without jobs when they close

technological advances in transportation and information technologies, trend toward regional economic integration, and trade toward reduction of trade barriers

what are the factors affecting globalization?

lowers the costs and difficulties of global communication

how does technology play a role in helping small firms?

Globalization

trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies

globalizations of markets and production

what two areas is globalization having profound effects?

globalization of markets

refers to the convergence in buyer preferences in markets around the world

global products

products marketed in all countries essentially without any changes

reduces marketing costs

creates new market opportunities

levels uneven income streams

local buyers' needs

global sustainability

how does globalization of markets benefit a company?

standardizing certain marketing activities

ex) keeping same commercial basics and translating into various languages

how are costs reduced in global marketing?

company that sells global products can explore opportunities abroad if its home market is small or becomes saturated

how are new market opportunities created in global marketing?

supplementing domestic sales with international sales: the company reduces or eliminates wide variation in sales between seasons and steadies its cashflow

how are unleveled income streams leveled in global marketing?

managers must constantly monitor the match between the firm's products and markets to reflect the needs of the buyer

ex) Disney fast food in US vs Japan

how does global marketing affect local buyers' needs?

Sustainability

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs

most companies today operate in an environment of increased transparency and scrutiny regarding their business activities

how does global marketing affect sustainability?

globalization of products

refers to the dispersal of production activities to locations that help a company achieve its cost-minimization or quality-maximization objectives for a good or service

access lower cost workers

access technical expertise

access production inputs

what are the benefits that companies obtain from globalization of production?

low cost labor

global production activities allow companies to reduce overall production costs through access to _______________________

technical know-how

companies also produce goods/services abroad to benefit from ___________________________

unavailable; costlier

globalization of production allows companies to access resources that are ______________________ or ___________________ at home

falling barriers to trade and investment

technological innovation

what are the two main forces driving globalization?

Gross Domestic Product (GDP)

the value of all goods and services produced by a domestic economy during a one year period

Gross National Product (GNP)

exports, imports, and international operations

the value of all goods and services produced by a country's domestic and international activities during a one year period

email and videoconferencing, internet, company intranets and extranets, advancements in transportation technologies

how does technological innovation drive globalization?

eliminates jobs in developed nations

lower wages in developed nations

exploits workers in developing nations

what are the arguments against globalization?

increases wealth and efficiency in all nations

generates labor market flexibility in developed nations

advances the economies of developing nations

what are the arguments for globalization?

inequality within nations

inequality between nations

global inequality

what are the three points about income inequality?

inequality within nations

Studies suggest that developing nations boost incomes of their poor by integrating them into the global economy

inequality between nations

nations open to world trade and investment appear to grow faster than rich nations and those sheltered off are worse off

global inequality

experts agree inequality has declined but disagree on the extent

forces of globalization

international business environment

national business environment

international firm management

what are the elements of the global business environment?

C + I + G + (X-M)

what is the formula for GDP?

Regional Economic Integration

the process whereby countries in a geographic region cooperate to reduce or eliminate barriers to the International flow of products, people, or capital

free trade area

economic integration whereby countries seek to remove all barriers to trade among themselves but where each country determines its own barriers against nonmembers

abolish internal trade restrictions

customs union

economic integration whereby countries remove all barriers to trade among themselves and set a common trade policy against nonmembers

common market

economic integration whereby countries remove all barriers to trade and to the movement of labor and capital among themselves and set a common trade policy against nonmembers

economic union

economic integration whereby countries remove barriers to trade and the movement of labor and capital among members, set a common trade policy against nonmembers, and coordinate their economic policies

political union

economic and political integration whereby countries coordinate aspects of their economic and political systems

trade creation

greater consensus

political cooperation

employment opportunities

corporate savings

what are the arguments for regional integration?

trade diversion

shifts in employment

loss of national sovereignty

what are the arguments against regional integration?

Geo-Politics

main source of power: military

how power is maintained: economy

Geo-Economics

main source of power: economy

how power is maintained: military

after WWII, Europe needed to rebuild itself and avoid further armed conflict and increase its industrial strength to stay competitive with an increasingly powerful US

Cooperation was the only way to face these challenges

treaty of Paris created European coal and steel community

treaty of Rome formed common market for union and created European economic community

additional industries included and became EU

history of the EU

Single European Act and Maastricht Treaty

what two things have contributed to success of EU?

Single European Act (SEA)

proposals to remove remaining barriers, increase harmonization, and enhance competitiveness of European countries

Maastricht Treaty

called for:

1. banking in a single common currency

2. set up monetary and fiscal target for participants

3. political union of member nations

Copenhagen Criteria

requirements to enter the EU:

stable institutions (guarantee democracy, rule of law, human rights, respect/protection of minorities)

functioning marketing economy (capable of coping with competitive pressures and market forces in EU)

assume obligations of membership (adherence to the aims of economic, monetary, and political union)

ability to adopt the rules and regulations of the community, rulings of the European court of justice, and treaties

European Commission

Court of Auditor

European Parliament

Court of Justice

Council of the EU

What is the structure of the EU

European Commission

drafts/proposes new policy that will be implemented if passed

comprised of one member from each member country

Court of Auditors of the European Union

assists European Commission and audits EU accounts and implements budget

European Parliament

debates and amends legislation proposed by the European Commission

each member nation votes into office its representatives

Court of Justice

court of appeals of the EU and assists European Parliament

composed of one judge from each member nation and a smaller number of advocates general who hold renewable 6 year terms

Council of the EU

accepts or rejects laws

configuration of the council changes depending on which topic is up for discussion

Court of Auditors

made up of one individual per each member nation appointed for renewable 6 year terms

NAFTA

encourages free trade among Canada. Mexico, and the US but manufacturers/distributors must abide by local contents requirements and rules of origin

determining whether a product has sufficient North American content to qualify for tariff free status

provide NAFTA a certificate of origin to an importer to claim an exemption from tariffs

what are producers/manufacturers responsible for in regards to NAFTA?

Goods Wholly Produced or Obtained in North America

goods containing non-originating inputs but meet Annex 401

goods produced in the NAFTA region wholly from originating materials

unassembled goods and goods classified in the same harmonized system category as their Annex 401 rules but have sufficient north American regional value content

what are the criteria to determine whether a good meets NAFTA rules of origin?

political, economic, cultural motives

Why do governments intervene in trade?

a politician's career can depend on pleasing voters and getting reelected and:

protect jobs

preserve national security

respond to unfair trade

gain influence

why do governments make trade-related decisions based on political motives?

protection of young industries from competitions and the promotion of a strategic trade policy

why do governments make trade-related decisions based on economic motives?

protection of national identity

culture and trade are intertwined and greatly affect one another; slowly altered by exposure to the people and products of other cultures

why do governments make trade-related decisions based on cultural motives?

subsidies

export financing

foreign trade zones

special government agencies

what are the instruments of trade promotion?

subsidy

financial assistance to domestic producers in the form of cash payments, low interest loans, tax breaks, product price supports, or other forms

intended to assist domestic companies in fending off international competitors

becoming more competitive at home or increasing competitiveness in international markets through exports

export financing

Governments often promote exports by helping companies finance their export activities; they can offer loans that a company could otherwise not obtain or can charge them an interest rate that is lower than the market rate

Foreign Trade Zones

designated geographic region through which merchandise is allowed to pass with lower customs duties (taxes) and/or fewer customs procedures

purpose is to increase employment and increased trade is a by product; final product assembly and going around customs duties price increases

City and state program

working capital guarantee program

credit information services

credit insurance

guarantee program

loan program

who are experts in export financing?

special government agencies

special agency responsible for promoting exports; knowing if product is subject to quote or tariff; open trade agencies in other countries; organize trips for trade officials and business people to promote products; encourage imports that the nation doesn't or can't produce

tariffs

embargoes

quotas

embargoes

local content requirements

administrative delays

currency controls

what are the instruments of trade restrictions?

tariff

government tax levied on a product as it enters or leaves a country

Ad Valorem Tariff

levied as a percentage of the stated price of an imported product

Specific Tariff

levied as a specific fee for each unit of an imported product

compound tariff

levied on an imported product and calculated partly as a percentage of its stated price and partly as a specific fee for each unit

Quota

restriction on the amount (measured in units or weight) of a good that can enter or leave a country during a certain period of time

Embargo

complete ban on trade (imports and exports) in one or more products with a particular country

administrative delays

regulatory controls or bureaucratic rules designed to impair the flow of imports into a country

currency controls

restrictions on the convertibility of a currency into other currencies

GATT (General Agreement on Tariffs and Trade)

treaty designed to promote free trade by reducing both tariffs and non tariff barriers to international trade

cross border supply

consumption abroad

commercial presence

presence of natural persons

What are the form forms international trade can take related to services according to GATT?

cross-border supply

services supplied from one country to another

consumption abroad

consumers or companies using a service while in another country

commercial presence

a company establishing a subsidiary in another country in order to provide a service

presence of natural persons

individuals traveling from their own country to supply services in another

World Trade Organization (WTO)

the international organization that regulates trade among nations

help the free flow of trade, help negotiate further opening of markets, and settle trade disputes among its members

What are the goals of the WTO?

dumping

exporting a product at a price either lower than the price that the product normally commands in its domestic market or lower than the cost of production

antidumping duty

additional tariff placed on an imported product that a nation believes is being dumped on its market

WTO

involved in issues concerning dumping

no it leaves the task to national governments and many intergovernmental organizations

does the WTO have a separate agreement that deals with environmental issues?

both control/manage trade but tariff barriers raise revenues

what is the difference between tariff and non tariff barriers?

quantitative and non quantitative NTBs

what are the types of non tariff barriers?

USITC- US International Trade Commission

an independent federal agency that sets tariffs; US harmonized tariffs schedule

US Department of Commerce

sets quotas and issues quota licenses; collects/publishes trade data

CBP- US Customs and Border Protection

administers and controls the importation of imported products; monitors quotas; ICE

Office of US Trade Representative

cabinet level office; negotiates US trade deals with the world; advises US governments on trade policies; sits with all other departments

Official Prices

US equivalent fair market price

Variable Levies

typically levied on commodities to level off the difference between the higher domestic price and the lower foreign price of a commodity (to offset price advantage)

normal trade relations (most favored nation status)

requirement that WTO members extend the same favorable terms of trade to all members that they extend to any single member