Review for Final

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Review for Final

• Business 187 Global Dimensions of Business
  Prof. Wood

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Format of the final will resemble the format of
the midterms

• Approximately 30 multiple choice questions
• Two essays

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The multiple choice will cover

• Selected points from the first two-thirds of the
  course
• (See handout with Elements to Remember from
  Before the 2nd Midterm available on web site)
• More questions from the last part of the course
• To be reviewed in these slides

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Review of chapters since the 2nd midterm

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Key points in Chap. 17 Export and Import
Strategies (Micro view)

• Before the midterm we had just studied the macro
  view of marketing strategy (Ch. 17)
• Evaluating countries
• International pricing
• Distribution systems
• Push vs. pull marketing

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Ch. 17 deals with specific details of exporting

• Characteristics of exporters
• Probability of being an exporter increases with
  company size (revenues)
• Export intensity, the of revenues coming from
  exports, is not correlated with size
• U.S. Government help Export Assistance Centers
  of the International Trade Administration (ITA)

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• Distribution is the course physical path or
  legal title that goods take between production
  and consumption.
• Includes both shipping and the process by which
  the product is sold
• Intermediaries in distribution
• Sales representatives (reps) do not take title
• Distributors actually buy your goods from you
• Export management companies
• handle everything, but rare in U.S.

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• Famous kinds of Asian intermediaries
• Sogo shosha - Japanese general trading company
• Chaebol - Big Korean group with trading company
• Other intermediaries in U.S.
• Freight forwarder (exporting)
• Customs broker (for importing)

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Export Documentation

• Key export documents
• Pro forma invoice like a letter of intent
• Commercial invoice an actual bill (describes
  goods and payment terms)
• Bill of lading receipt for goods from the
  carrier (airline, shipping line)
• Export license required for some tech goods
• Certificate of origin proof goods came from a
  particular place

17-11
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Getting paid

• Letter of credit document that obligates
  buyers bank to pay when goods shipped (usually
  very reliable)
• Open account the seller just sends a bill
  (often very dangerous)

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Key points from Chap. 21 Human Resource
Management

• International HR Managerial Terms
• Locals citizens of the countries in which they
  are working
• Least expensive
• Expatriates non-citizens
• Home-country national
• Third-country national

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• Selecting the right expatriate
• Focus on technical competence first
• Then
• adaptiveness
• flexibility, tolerance
• Cost of living adjustments
• Difficulties of returning to home country
• Reverse culture shock
• Former expatriate suddenly has less status
• Home folks have different interests

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Key points from Chap. 15 Control Strategies

• What is control?
• planning, evaluation, and correction to ensure
  the organization meets its objectives
• Why is control important?
• Control difficulties abroad
• Distance
• Diversity
• Uncontrollables
• Extra uncertainties (government instabilities,
  etc.)

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Location of decision-making

• Globally integrated strategy more centralized
• Multidomestic strategy - decentralized

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Control mechanisms

• dont memorize a list of mechanisms, but know
  that
• corporate culture is shared values that produce
  similar behavior in different countries

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Key points from Chap. 18 Global sourcing

• Important terms
• Supply chain (everything)
• Logistics (the movement and storage)
• Tradeoffs among efficiency, dependability,
  quality, flexibility, innovation
• Centralized (global) vs. regional vs.
  multi-domestic manufacturing

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• Think about advantages and disadvantages of
  sourcing globally vs. buying in one or a few
  countries.

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In the 18th century, economists started to
advocate free trade

• Every individual seeks the most advantageous
  employment for his capital
• Study of his own advantage necessarily leads him
  to prefer that employment most advantageous to
  society - Adam Smith, 1776

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Some basic free-market economics

• Two fundamental principles
• The price for which sellers are willing to sell a
  product indicates what the resources to produce
  it are worth.
• The price for which buyers will buy indicates
  what the product is worth to the buyer
• So economists think anything that manipulates
  prices is dangerous

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Quantitative analysis shows we can produce more
through free trade

• Comparative advantage theory shows trade improves
  productivity even when one nation is more
  efficient in everything

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Free trade means no barriers

• The principle You should have the same
  incentives when you consider a product from
  abroad as from your home country.

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• Economists prefer income taxes or sales taxes (on
  everything) rather than tariffs (on particular
  imports)
• For any given amount of revenue raised, income
  and sales taxes disrupt the market less than
  tariffs
• Most economists only make exception for tariffs
  to protect infant industries industries that
  lack comparative advantage, but could develop it
  soon

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In the 19th century, free trade was widely
practiced

• In Europe, tariffs were low or non-existent
• But after WW I and especially in the early 30s,
  nations raised tariffs to protect their domestic
  economies
• A disastrous depression followed

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GATT was created to prevent the mistakes of the
30s from repeating

• It provided a framework for negotiating
  reductions in tariffs and non-tariff barriers
• The WTO continued the process and provided an
  enforcement mechanism to prevent new barriers

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So usually tariffs are not free trade

• The WTO (and most economists) discourage use of
  tariffs
• to raise funds
• to protect an industry that already has
  comparative advantage

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Do you support complete free trade?

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Slide below this is not required
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Structures for International Businesses