Global Supply Chain Exam Review

Flashcards for review based on lecture notes.

Factor Endowments

Emphasis on advanced know-how, a nation's production and use of capabilities for economic activity.

Related and Supporting Industries:

Investments in factors of production by related industries that help achieve a strong competitive position.

Local Demand Conditions

Firms most sensitive to needs are closest customers.

Intensity of Rivalry:

Pressure to innovate, improve quality, reduce costs, and upgrade advanced factors.

New Trade Theory

Scale economies lead to this conclusion, disregarding location importance.

Factor Proportions Theory

Factor abundance guides activity location decisions; location is abundant in factors used intensively, leading to competitive advantage.

Factor Advantage:

Location advantage where factors (land, labor, capital) are abundant and cheaper, leading to competitive edge.

Ratios Test:

Ratio of factors between nations; if Nation A's F1/F2 ratio > Nation B's F1/F2 ratio.

Shares Test:

Nation abundant in factor F if share of its world supply (NF/WF) > its share of world income (NGDP/WGDP).

Diamond Theory

Shapes the rise of national clusters of excellence for specific activities.

Learning by Doing

Increased efficiency through experience.

First Mover Advantage

Access to lower costs and claiming scale economy before competitors.

World Trade Organization (WTO)

International institution supervising trade, keeping tariffs low, establishing rules, and resolving disputes.

Most-Favored Nation (MFN) principle

Treat imports from all WTO members equally; can't raise tariffs above MFN tariff %.

National Treatment:

Treat imported goods no worse than domestic goods.

Reciprocity in tariff reductions

Tariff reductions are mutual; emerging nations can have slightly higher tariffs.

Flexibility & Safety Valves - codes approach:

Opting out of rules and special treatment.

Antidumping Duties (ADD)

Pricing exports unfairly lower than domestic prices.

Countervailing Duties:

Import tariffs offsetting unfair subsidies to exporters.

Safeguards

Temporary relief via import restrictions to protect domestic economy, compensating affected parties.

National Security Provisions

Tariff to protect from harmful product/country, can target countries, no compensation required.

Time Costs

Damage/spoilage, time-sensitive goods, lead to stockouts, bottlenecks.

Preservation Technology

Reduces spoilage but cost is a tradeoff.

Inventories

Used to reduce exposure to stockout risk, but has associated holding costs and inflexibility

Subsidies

Government payments to domestic producers lowering costs.

Cournot Competition

Quantity+profit ↑, rival firm → less market share available and q+p ↓, but increasing total market supply

regional / free trade agreements

formal trade arrangements that lead to export volume increases

Own Account Transportation

Transport services handled internally.

Bill of Lading

Document with consignment info provided by transportation firm.

Outsourcing

Logistics functions outsourced.

Freight Carriers (2PLs)

Haulers, trucking companies, RRs, airlines, shipping lines.

Freight Forwarders (Freight Agents/Brokers)

Arrange transports & deal w/ customs, groupage (two halfloads → fill freight).

Integrators

Seamless end-to-end service (UPS, FedEx).

Shipper Associations:

Combine buying power of shippers.

3PLs

Offer multiple integrated logistics services.

4PLs

Offer total outsourced supply chain solutions, manage 3PLs.

5PLs

Use tech across supply chains for real-time visibility & control.

Incoterms

Terms establishing responsibilities in global trade, creating clear contracts.

E - Ex-works

Package goods, bring to factory door, buyer collects.

F:

Seller pays for pre-carriage to the port.

C:

Seller pays for ocean freight, buyer takes risk after import.

D:

Seller delivers to buyer's premises

Offshoring

Production activities transferred to other countries.

Nearshoring:

Production activities transferred to nearby countries.

Backshoring/Reshoring/Reverse-shoring:

Moving activities back to home country.

Service Level Agreement (SLA):

Contracts between customer and supplier to prevent info asym.

International Organization for Standardization (ISO):

Develop and implement international standards for fair trade.

ISO 9000

Internationally recognized, generic standard ensuring a quality system but not necessarily high quality or improvement.

Procurement

Sourcing and purchasing of supply chain products/services.

Focal Firm:

Initiator of an international business transaction.

Buy Example

Sourcing inputs from the market rather than making them.

Make Example

Producing most inputs internally.

Vertical Integration:

Firm controls entire product process from raw materials to distribution.

Adverse Selection

Problem exists prior to the transaction, hidden information problem.

Moral Hazard

Ex-post problem, exists after the transaction

Why do contracts fail?

Difficult to punish firms, problems in verifying fault, unforeseen events.

Make Option Benefits:

Enforceability, verifiability, handling unforeseen events, resolving asymmetry problems.

Buy/Make Hybrid:

Middle ground, contract with multiple firms like unified firm.

When is make a good idea?

Specific GSC activity critical, retaining control essential, activity within core competence.

Global Supplier Associations

Represents a Make/Buy Hybrid

ISO

JOB: international standards that promote international trade

Why ISO the fairest?

The agency who represent a consensus amongst multiple nations and fair.

ISO 9000 Certification

NOT high-quality, quality system, premise, and facility based.

Quality Assurance Properties:

Signals quality attributes, helps b2b relations, demonstrate capability.

Information Effects Properties:

Knowledge of standards needed to sell to customers.

Common Language Properties:

Leads to better relationships and harmonization.

ISO 9000 is best for who?

best for Global External Sourcing or global buy, offshore outsource

Exporting Firms

Sell goods or service to customers in foreign markets

Who Adopts ISO 9000

Best for suppliers, exporting firms, government agencies, larger firms, $$$ firms

Transaction Cost

Cost to doing business, (EX: searching, negotiation, enforcing)

Currency Exchange Rate

Ratio of a unit of currency of the Country A to a unit of currency of country B

Deal with Fx risks

A tactic to deal with risks buy a 30 days to 90 days forward exchange contract

The foreign exchange market

Worlds largest over the counter financial market

Major Fx User = firms

Major players are firms involved in int. business

Hub and spoke

System is a route pattern which allows customers to board in smaller volume cities, travel to hub

Floating Exchange Rate (FL)

Represents prices completely determined by market forces

De-globalization

Process of diminishing interdependence

World Openness Report:

Measuring ideas and benchmarking peers

Neo-liberal

A strategy for economic development that calls for free markets

producing and exporting outputs that are further re-exported

Forward GVC Participation:

using imported outputs to produce goods that are exported

Backward GVC Participation:

China trade war actions

Action by the Chinese Government to dominated domestic firms with investment

US side actions of trade conflict

The US Partial and Protective Trade Actions (trump 1 admin and Biden Subsides)

antidumping and countervailing duties:

an antidumping or tariffs for below fair market value to protect domestic industries from unfair competition.

Decoupling (Business)

In international business, reducing economic interdependence.

Just in time production

Process that redefines by reducing inventory levels/material when needed

Porter Theory

Believes in CLUSTERS: valuable knowledge flows between firms within a geographic cluster.

3PLs and 4PLS

3PL: Logistics, 4PL: Manages and coordinates the entire chain

Price Elasticity

% Decrease in Quantity Demanded / % increase in price per unit