INTB Edward Imm test 4

International monetary system

The institutional arrangement that governs the exchange rates

Examples of Floating exchange rates

Dollar, euro, yen, and pound

Pegged rate

Currency is tied to a reference currency (typically the us dollar or Euro)

What common currency was tied to the US dollar until 2005

Yuan

Managed (dirty) float

Currency moves freely but the country's central bank will manipulate it to maintain its value

What are the two main functions of the IMF

1. Maintain fixed exchange rate + Discourage currency devaluation 2. To impose monetary discipline curtailing(ward off)inflation

Two main functions of the world bank

1. Sell bonds in capital markets and make low-interest loans to undeveloped nations 2. Sell subscriptions to wealthy nations

Currency crisis

A speculative attack on the exchange value of a currency causes a sharp decline

Banking Crisis

Loss of confidence in the banking system

Foreign debt crisis

Country cannot service foreign debt obligations, private or public

Purpose of the Hersey story

Had to diversify products because cocoa was so hard to ship, leading to the Reeses

Ed's friend the CEO of the airline story

Needed to drop expenses, had two security dogs and worked their way down to just using a speaker to play dog barks

What are the two most valuable things in Ed's opinion

1. In window AC machine 2. Stovetop stuffing

Price-Cost

Profit

Value-Price

Consumer Surplus

Value-Cost

Value created

What was the test bait as it pertains to value creation

We try to reduce cost, add value, raise prices

Three major types of location economies

- Government (can be a huge source of the economy) - Labor (some people don't work for much money) - Culture (some cultures work hard or spend more)

Support activities

- Information systems - Logistics - Human Resources

Global standardization

Concentrate on few favorable locations, Little to no customization, Reap Economies of scale

Localization strategy

Customize for local differences, Create value with high price

Trans-national strategy

Best of both, Hard to achieve

Stay home/Sell abroad

Very little customization

Two easiest that you can you do

Wake up at 50 filthy rich, or dirt poor

Mutual fund

Collection of stocks

DOW

Collection of 30 biggest stocks

Rule of 72

Calculates the time an interest rate will take to double their investment

Floating exchange rate

A system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.

EMS (European Monetary System)

EU system designed to create a zone of monetary stability in Europe, control inflation, and coordinate exchange rate policies of EU countries.

Dollarization

The process of aligning a country's currency with the US dollar

Gold Standard

Everything currency was measured based off the value of gold at the time

Gold Par value

the amount of currency needed to purchase one ounce of gold

Balance of trade equilibrium

Reached when the income a nation's residents earn from exports equals money paid for imports.

Currency board

Means of controlling a country's currency

Moral Hazard

When people act recklessly in the belief that they will be saved if things go wrong

What are some primary activities

Production, marketing and sales, customer service, research and development

organization architecture

The totality of a firm's organization, including formal organizational structure, control systems and incentives, organizational culture, processes, and people.

organizational structure

The three-part structure of an organization, including its formal division into subunits such as product divisions, its location of decision-making responsibilities within that structure, and the establishment of integrating mechanisms to coordinate the activities of all subunits.

Controls

The metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits.

Global Web

When different stages of value chain are dispersed to those locations around the globe where value added is maximized or where costs of value creation are minimized.

Strategic alliances

cooperative agreements between potential or actual competitors