IBT FINALS

export

The process of selling goods or services produced in one country to another country.

import

The process of purchasing goods or services from another country for domestic use.

Distributors

are export intermediaries who represent the company in foreign market.  It acts as the face of the companies

Outsourcing

is the act of a company relying on an external provider for a business process that otherwise would be internal. 

contractual mode, licensing, franchising, investment, joint venture

specialized entry modes are:

Contractual mode

involves the use of a contract rather than investment mode. 

Licensing

is defined as the granting of permission by the licenser to the licensee to use intellectual property rights, such as trademarks, patents, brand names or technology under the defined conditions.

Franchising

is a joint venture between a franchisor and a franchisee. The franchisor is the original business. It sells the right to use its name and idea. The franchisee buys the right to sell the franchisor's goods or services under an existing business model and trademark.

Investment

is an asset or item accrued with the goal of generating income or recognition. In an economic outlook, an investment is the purchase of goods that are not consumed today but are used in the future to generate wealth.

Joint Venture

is a combination of two or more parties that seek the development of a single enterprise or project for profit, sharing the risks associated with its development.

1.      Finding the right partners

2.  Local partners may gain the know-how to produce its own competitive products to rival the multinational firm.

Risk of Joint Ventures

Wholly Owned Subsidiaries

operate as a separate and distinct corporation from its parent company. This benefits the company for the purposes of taxation, regulation, and liability. The subsidiaries can sue and be sued separately from their parent.

risk of establishing a wholly owned subsidiary

Establishing or purchasing a _______ subsidiary requires the highest commitment on the part of the international firm, because the firm must assume all the risk – financial, currency, economic and political.

Supply Chain

is an interconnected system that turns raw materials into finished products ready for consumers consumption

1. Level of fixed cost (VARIABLE COST IF APPLICABLE)

2. Minimum efficient scale

3. Flexibility of the technology

   1. Fixed costs are substantial

   2. Production in multiple locations

Three Characteristics of a manufacturing technology

1. Concentrating them in the optimal location that can serve the world market.

2. Price

Locating Production Facilities

1.      Pressure to lower costs or respond to the local market

2.     Strategic Role of Foreign Factories

3.     The essence of Make-or-Buy Decisions

Strategic Role of Foreign Factories

-        It lower cost

-        Make protect technology

-        Cost structure

-        Strategic Alliances

-        Just in Time Inventory

Strategic Role of Foreign Factories

1.      Optimal Use of natural resources

2.     Availability of all types of goods

3.     Specialization

4.     Advantages of large-scale production

5.     Stability in prices

6.     Exchange of technical know-how and establishment of new industries

7.     Increase in efficiency

8.     Development of the means of transport and communication

9.     International co-operation and understanding

10. Ability to face natural calamities

Advantages of IBT

1.      Impediment of Home Industries

2.     Economic Dependence

3.     Political Dependence

4.     Mis-utilization of Natural Resource

5.     Import of Harmful Goods

6.     Storage of Goods

7.     Danger

8.     World Wars

Disadvantages of IBT

Trade

is the concept of exchanging goods and services between two people or entities.  International Trade is the concept of exchanging between people or entries in two different countries.

Competitive advantage

refers to factors that allow a company to produce goods or services better or more cheaper than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals.

Comparative advantage

in an economic model is the advantage over others in producing a particular good. A good can be produced at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade.

1.     Local Market Resources and capabilities

2.     Local market demand conditions

3.     Local suppliers and complementary industries

4.     Local firm characteristics

 Porter’s National Competitive Advantage Theory Determinants

Michael Porter

is an American academic known for his theories on economics, business strategy, and social causes.

Porter’s Five Forces

Competitive Rivalry, Supplier Power, Buyer Power, Threat of Substitution, and Threat of New Entry.

purpose of Porter's Five Forces analysis

to help businesses understand the competitive dynamics of their industry and make more informed strategic decisions. The model provides a framework for analyzing the five key factors that determine the competitive intensity and profitability of an industry.

Porter's Five Forces Framework 

is a method of analysing the competitive environment of a business. It is rooted in industrial organization economics and identifies five forces that determine the competitive intensity and, consequently, the attractiveness or unattractiveness of an industry with respect to its profitability

Competitive Rivalry.