Global Business Strategies Exam 3

Regional economic integration

Efforts to reduce trade and investment barriers within one region.

Global economic integration

Efforts to reduce trade and investment barriers around the globe

GATT

General Agreement on Tariffs and Trade. Multilateral agreement governing the international trade of goods (merchandise). Original Gatt agreement only covered stuff, not intellectual company.

WTO

World Trade Organization. Official title of the multilateral trading system and the organization underpinning this system since 2005.

NAFTA

North American Free Trade Agreement (NAFTA)

Free trade agreement among Canada, Mexico, and the United States

Customs Union

A group of countries committed to (1) removing of intragroup tariffs (2) as well as common external tariffs

Political Union

Includes:

1. Integration of political and economic affairs

2. Common economic policies

3. Free movement of goods, people, and capital

4. Common external tariffs

5. Removal of intragroup tariffs

Common Market

1. Free movement of goods, people, and capital

2. Common external tariffs

3. Removal of intragroup tariffs

Economic Union

1. Common economic policies

2. Free movement of goods, people, and capital

3. Common external tariffs

4. Removal of intragroup tariffs

Free Trade Area

Group of countries that remove trade barriers among themselves. Includes removal of intro group tariffs

SMEs

Small-and medium-sized enterprises

Firms with fewer than 500 employees

VRIO

resourced-based view

Value

Rarity

Imitability

Organization

Country of origin effect

Positive or negative perception of rims and products from a certain country

Liability of foreignness

The inherent disadvantage that foreign firms experience in host countries because of their non-native status.

Resource-based view argues that foreign firms need to deploy overwhelming resources and capabilities to offset the liability of foreignness.

Agglomeration

Location-specific advantages that arise from the culturing of economic activities in certain locations. (Think -

2W1H decisions

Questions to ask in foreign market entries: where, when, and how

Cultural distance

Difference between two culture along identifiable dimensions such as individualism.

Institutional Distance

Extent of similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries.

Geographic distance

First-mover advantages

Benefits that accrue to firms that enter the market first and that later entrants do not enjoy

Late mover advantages

Benefits that accrue to firms that enter the market later and that early entrants do not enjoy

Non-equity modes of entry

Mode of entering foreign markets through exports and contractual agreements that tends to reflect relatively smaller commitments to overseas markets.

Equity mode

Mode of entering foreign markets though JV's and wholly owned subsidiaries that indicates and relatively larger, harder-to-reverse commitment.

Three legs of micro-finance

1. Microcredit

2. Micro savings

3. Micro insurance

Types of MED social collateral

1. Individual lending

2. Solidarity group lending

3. Village banking

Tension in CMED goals

Holding to aspect of spiritual transformation and adaptation to biblical principles while helping to teach and educate. With this comes the tension of profitability and sustainability, specifically financially.

Sustainability in MED

Operational sustainability - can MED cover its current costs through its revenues?

Financial sustainability - is MED program profitable if all combined costs were considered?

Goal of MED - to become financially self-sustainability.

Types of risk in global expansion

Ex propriation

Profit

Currency

Political

Foreign currency exchange

The conversion of one currency into another currency.

Foreign exchange market

Market where individuals, firms, governments, and banks buy and sell currencies of other countries.

The Big Mac index

Tool for calculating purchasing power parity that compares prices of a Big Mac throughout the world.

Pure float

Not possible. Also known as clean (or free) float — pure market solution to determine exchange rates.

Pegged exchange rate policy

Stabilizing policy of linking a developing country's currency to a key currency.

Capital flight

Phenomenon in which a large number of individuals and companies exchange domestic currencies for a foreign currency.

Bandwagon effect

Effect of investors moving in the same direction at the same time.

Foreign exchange market

Market where individuals, firms, governments, and banks buy and sell currencies of other countries.

Strategic hedging

A strategy for non financial companies — it is the spreading out of activities in a number of countries in different currency zones to offset any currency losses in one region through gains in other regions.