Professional Documents
Culture Documents
Takeaways Ib
Takeaways Ib
Takeaways Ib
Currency Risk refers to the risk of fluctuations in exchange rates the value of
firms earnings can be reduced
Commercial Risk potential loss or failure from poorly developed or executed
business strategies, tactics, procedures
Who participates in IB
Multinational Enterprises (MNE) large company with substantial resources that
performs various business activities through a network of subsidiaries and affiliates
Born Global Firm a young entrepreneurial company that initiates international
business activity very early in its evolution
Non-governments Organizations (NGOs) Non-profit organizations conduct
cross border activities. These purse special causes and serve as advocates for the
arts, education, politics, religion, and research.
Why do firms internationalize?
Seek opportunities for growth through market diversification Foreign
markets can extend the life of products of services that have reached maturity at
home
Earn higher margins and profits foreign markets are underserved/unserved
Gain new ideas about products, services, business methods unique foreign
environments + new ideas
Better serve key customers that have relocated abroad example: Nissan
moves, supplier moves with them
Be closer to supply sources, benefit from global sourcing advantages, gain
flexibility in product sourcing countries move where raw materials are located
Gain access to lower-cost or better-value factors of production lower
labour costs, access to capital/tech
Develop economies of scale more production, lower distributed cost
Confront international competitors more effectively or thwart the growth
of competition in the home market
Chapter 3 Takeaways
Four types of Participants in International Business
Focal Firm initiator of an international business transaction; conceives, designs,
and produces offerings intended for consumption by customers worldwide. Primarily
MNEs, SMEs, privately owned companies, stock-held firms, state enterprises owned
by govts.
Distribution channel intermediary provides logistics and marketing services
for focal firms, both in the home country and abroad. Sales reps, independent
distributors.
Facilitator form or an individual with special expertise in banking, legal advice,
customs clearance, etc that help an international business conduct transactions.
A freight forwarder is a specialized logistics service provider that arranges
international shipping for exporting firms
Governments
International entry strategies
Licensor a firm that enters a contractual agreement with a foreign partner to
allow the partner the right to use intellectual property for a period of time in
exchange for royalties.
Franchisor a firm that grants another the right to use an entire business system
in exchange for fees, royalties, etc.
Turnkey contractors Focal firm that plan, finance, organize, manage, and
implement all phases of a project and then hand it over to a foreign customer after
training local employees
Joint Venture Partner focal firm that creates and jointly owns a new legal entity
through equity investment or pooling of assets. Shared costs and risks, fain access
to needed resources, economiesof scale.
Project based, nonequity venture Focal firms that collaborate to take a given
project, no new entity
Intermediaries Based in the Foreign Market
Foreign distributor foreign market based intermediary that works under
contract for an exporter and takes title to and distributes the exporters products in
a national market or territory.
Agent (broker) handlers orders to buy and sell commodities, products, services
in international business transactions for a commission.
Manufacturers Representative intermediary contracted by the exporter to
represent and sell its merchandise or services in a designated country or territory.
Facilitators in International Business
Chapter 8 Takeaways
Government Intervention
Protectionism national economic policies designed to restrict free trade and
protect domestic industries from foreign competition
Tariff a tax imposed on imported products, increasing the cost of acquisition
Nontariff Trade Barrier a govt policy, regulation, or procedure that impedes
trade through means other than tariffs.
Customs Checkpoints at the ports of entry where govt officials inspect imported
products and levy tariffs.
Quota a quantitative restriction placed on imports of a specific product over a
period of time
Local Content Requirements requirement that a manufacturer must include a
minimum percentage of added value through local sources
Regulations and technical standards - Safety, health, or technical regulations;
labeling requirements.
Administrative and bureaucratic procedures - Complex procedures or
requirements imposed on importers or foreign investors that hinder their trade or
investment activities.
FDI and ownership restrictions - Rules that limit the ability of foreign firms to
invest in certain industries or acquire local firms.
Subsidy - Financing or other resources that a government grants to a firm or group
of firms, intended to ensure their survival or success.
Countervailing duty - Increased duties imposed on products imported into a
country to offset subsidies given to producers or exporters in the exporting country.
Antidumping duty - Tax charged on an imported product whose price is below
usual prices in the local market or below the cost of making the product
Why?
Defensive
Protection of the National Economy
Protection of an infant industry
National Security
National Culture and Identity
Offensive
National Strategic Priorities
Increase Employment
Chapter 9 Takeaways