Untitled Flashcards Set

Chapter 8: Currency and Foreign Exchange

8.1 What Managers Need to Know About Currency and Foreign Exchange:

• Definition of Currency and Foreign Exchange: Currency is a medium of exchange used in transactions. Foreign exchange (FOREX) involves trading different currencies to facilitate international business.

• Role of the Foreign Exchange Market: Companies use FOREX for currency conversion, hedging to mitigate risks, arbitrage for profit from price differences, and speculation on currency fluctuations.

• Exchange Rate Mechanisms:

  • Spot Rates: Immediate exchange rates.

  • Forward Rates: Agreed future exchange rates.

  • Derivatives: Include currency swaps (buy/sell same currency at different dates), options (rights to exchange currency), and futures (obligatory currency exchange contracts).

8.2 Understanding International Capital Markets Fundamentals:

• Purpose of Capital Markets: To allocate funds from entities with surpluses to those with deficits efficiently.

• Components:

  • Equity Markets: Trade company ownership via stocks.

  • Debt Markets: Lend funds through bonds and loans.

  • Eurocurrency Markets: Include Eurodollars held outside the U.S. for financing.

• Role of Offshore Financial Centers: Provide tax-efficient environments for financial transactions (e.g., Cayman Islands).

• Financial Institutions: Include retail banks, private banks, and investment banks, each serving specific global finance roles.

Chapter 9: Accounting and Financial Decisions

Key Topics:

1. Accounting Standards in International Business:

   • Harmonization of standards like GAAP (U.S.) and IFRS (International) facilitates global business comparisons.

   • Accounting ensures transparent financial reporting for managers, investors, and governments.

2. Capital Budgeting: Evaluation of investment projects using NPV, IRR, and risk assessments to inform international decisions.

3. Financing Options:

   • Equity Financing: Selling shares to raise funds.

   • Debt Financing: Borrowing funds via bonds or loans with repayment obligations.

4. Government Influence: Free trade agreements and tax policies shape investment climates.

Chapter 10: Analytical Tools for Global Expansion

Key Topics:

• CAGE Framework: Assesses cultural, administrative, geographic, and economic "distances" affecting market potential.

• PESTLE Analysis: Evaluates external factors like political stability, economic trends, sociocultural shifts, technological advancements, environmental regulations, and legal systems for strategic decision-making.

Chapter 11: Entry Modes and Global Sourcing

Key Topics:

1. Traditional Entry Modes:

   • Exporting: Fast entry with low investment risk but limited control.

   • Licensing/Franchising: Allows local adaptation but risks creating competitors.

   • Strategic Alliances and Joint Ventures: Shared resources and risks.

   • Wholly Owned Subsidiaries: High control but costly and slow.

2. CAGE and PESTLE: Analytical tools for comparing countries’ business environments.

3. Importing and Exporting: Involves logistics, intermediaries, and risk management for global trade.

4. Global Sourcing: Optimizes costs by sourcing materials/services internationally, despite potential supply chain risks.

5. Financing Operations: Includes trade finance, credit terms, and government-backed guarantees for stability.

Chapter 13: Entrepreneurship and Global Startups

Key Topics:

1. Definition of Entrepreneurship: Entrepreneurs identify opportunities and create innovative solutions.

2. Shape of the Entrepreneurial Process: A triangular model with three components:

   • Opportunity Identification

   • Venture Planning

   • Resource Mobilization

3. Entrepreneurial Leadership: Motivating teams, securing funding, and navigating global markets.

4. Global Startups: Characteristics include speed, scalability, and addressing global needs.

5. Three Facets of Entrepreneurship:

   • Vision: Recognizing future opportunities.

   • Execution: Implementing ideas.

   • Adaptability: Responding to challenges.

Chapter 15: Global Marketing and Supply Chain Management

Key Topics:

1. Global Marketing Fundamentals: The Four Ps:

   • Product: Adapting to local needs.

   • Price: Balancing affordability and profitability.

   • Promotion: Localizing campaigns.

   • Place: Managing distribution channels.

2. Standardized vs. Customized Approaches: Weighing cost efficiencies against local appeal.

3. Distribution Fundamentals: Differences in logistics between domestic and international markets.

4. International Supply Chain Management: Managing risks, optimizing costs, and ensuring product quality globally.

5. Reverse Innovation: Adapting emerging market solutions for developed countries.

6. Global Sourcing Advantages: Leveraging global markets for cost efficiency and access to expertise.