Term
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Definition
| a market for converting the currency of one country into that of another country |
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Definition
| The rate at which one currency is converted into another |
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Definition
| the risk that changes in exchange rates will hurt the profitability of a business deal |
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Definition
| Involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates |
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Definition
| involves borrowing in one currency where interest rates are low, and then using the proceeds to invest in another currency where interest rates are high |
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Definition
| the process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps |
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Definition
| the exchange rate at which a foreign exchange dealer will convert one currency into another currency on a particular day |
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Term
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Definition
| when two parties agree to exchange currency and execute the deal at some specific date in the future |
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Definition
| the exchange rate governing forward exhange transactions |
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Term
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Definition
| simultaneous purchase and sale of a given amount of foreign exchange for two different value dates |
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Definition
| the purchase of securities in one market for immmediate resale in aother to profit from a price discrepancy |
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Term
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Definition
| in competitive markets free of transportation costs and carriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency |
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Definition
| a market which has no impediments to the free flow of goods and services, such as trade barriers, and prices reflect all available public information |
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Definition
nominal interest rates in each country equal the required "real" rate of interest and the expected rate of inflation over the period for which the funds are to be lent
i=r+l |
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Term
| International Fisher Effect |
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Definition
| for any two countries, the spot exchange rate should change in an equal amount but the opposite direction to the difference in nominal interest rates between the two countries. |
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Term
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Definition
| when traders move like a herd, all in the same direction and at the same time, in response to each others' perceived actions |
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Term
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Definition
| one in which prices do not reflect all available information |
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Term
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Definition
| drams on economic theory to construct sophisticated economic models for predicting exchange rate movements. |
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Term
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Definition
| uses price and volume data to determine past trends, which are expected to contineue into the future |
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Term
| freely convertible currency |
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Definition
| a country's currency is freely convertible when the government of that country allows both residents and nonresidents to purchase unlimited amounts of foreign currency with it |
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Term
| externally convertible currency |
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Definition
| nonresidents can convert their holdings of domestic currency into foreign currency, but the ability of residents to convert the currency is limited in some way |
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Term
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Definition
| a currency is not convertible when both residents and nonresidents are prohibited from converting thier holding of that currency into another country |
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Definition
| residents convert domestic currency into a foreign currency |
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Definition
| the trade of goods and service for other goods and services |
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Definition
independent businesses that handle export (or import) shipments for compensations
-act as agents
-prepare documents
-offer advice |
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Term
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Definition
| the extent to which the reported consolidated results and balance sheets of a corportaion are affected by fluctuations in foreign exchange values |
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Term
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Definition
| the extent to which a firm's future international earning power is affected by changes in exchange rates |
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Term
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Definition
| attempting to collect foreign currency receivables early when a foreign currency is expected to depreciate and paying foreign currency payables before they are due when a currency is expected to appreciate |
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Term
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Definition
| delaying collection of foreign currency receivables if that currency is expected to appreciate and delyaing payables if the currency is expected to depreciate |
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Term
Export Management Companies
(EMCs) |
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Definition
export specialists who act as the export management department or international department for client firms
Two-types of assignment:
-start operations for a firm with understanding the firm will take over after they are well established
-start-up services iwth continuing responsibilty for selling the firms products internationally |
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Term
| international monetary system |
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Definition
| institutional arrangements countries adopt to govern exchange rates |
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Term
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Definition
a system under which the exchange rate for converting one currency into another is continually adjusted depending on the laws of supply and demand.
Ex: US dollar, Yen, UK pound, Euro
*thus their exchange rates determined by the market forces and fluctuate aga eah other day to day. |
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Term
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Definition
| currency value is fixed relative to a reference currency |
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Term
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Definition
| a system under which country's currency is nominally allowed to float freely against other currencies, but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value. |
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Term
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Definition
| a system under which the exchange rate for converting one currency into another is fixed. |
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Term
European Monetary System
(EMS) |
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Definition
| a system to regulate fixed exchange rates before the introduction of the euro. |
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Term
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Definition
| the practice of pegging currencies to gold and guarenteeing convertibility. |
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Term
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Definition
| the amount of currency needed to purchase one ounce of gold |
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Term
| balance of trade equilibrium |
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Definition
| reached when the income a country's residents earn from exports equals the money residents pay for imports. 98i |
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Term
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Definition
| system under which some currencies are allowed to float freely, butt the majority are either managed by governement intervention or pegged to another currency |
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Term
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Definition
| means of controlling a country's currency; holds reserves of foreign currency equal at the fixed exchange rate at at least 100 percent of the domestic currency issued. |
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Term
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Definition
| occurs when a speculative attack on the echange value of a currency results in a sharp depreciation in the value of the currency of forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rates |
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Term
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Definition
| a loss of confidence in the banking system that leads to a run on banks, as individuals and companies withdraw their deposits |
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Term
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Definition
| arises when people behave recklessly because they know they will be saved if things go wrong |
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Term
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Definition
| actions managers take to attain the firm's goals; maximize the value of the firm for its owners, shareholders |
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Term
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Definition
| a ratio or rate of return concept, calculated by dividing the net profits of the firm by total invested capital (ROIC) |
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Term
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Definition
| the percentage increase in net profits over time |
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Term
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Definition
ferforming activities that increase the value goods or services to consumers.
(V-C)...higher gap=better!
-By: lowering productions costs C
-increase V through design, styling, functionality, features, reliability, after sale service |
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Term
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Definition
| the various value creation activities a firm undertakes |
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Term
| Organization Architecture |
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Definition
| the totality of a firm's organization, including formal organizational structure, control systems and incentives, organizational culture, processes, and people |
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Term
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Definition
| The 3 part structure of an organization including its formal division into subunits such as product dividsions, its location of decision-making responsibilities within that structure, and the establishment of integrating mechanisms to coordinate the activities of subunits |
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Term
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Definition
| the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits |
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Term
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Definition
| are the devices used to reward appropriate managerial behavior. |
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Term
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Definition
| the manner in which decisions are made and work is performed within the organization |
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Term
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Definition
| the norms and value systems shared among an organization's employees |
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Term
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Definition
| the employees of an organization, its recruiting, compensations, and retention strategies, and the type of people who work a the organization. |
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Term
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Definition
| a firm's skills that competitors cannot easily match or imitate; bedrock of a firm's competitive advantage |
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Term
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Definition
| cost advantages from performing a value creation activity in th eoptimal location for that activity...can lower the cost of value creation and help the firm to achieve a low-cot position, and-or it can enable a firm to differentiate its product offering from those of competitors |
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Term
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Definition
| when different stages of the value chain are dispersed to those locations around the globe where value added is maximized or where costs of value creation are minimized. |
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Term
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Definition
systematic production cost reductions that occur over the life of a product; each time cumulative output doubles
-->due to: learning effects and economies of scale |
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Term
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Definition
| cost savings from learning by doing |
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Term
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Definition
| cost advantages associated iwth large-scale production; spread fixed costs over a large volume |
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Term
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Definition
| needs that are the same all over the world, such as steel, bulk chemicals, and industrial electronics |
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Term
| global standardization strategy |
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Definition
| a firm focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies; no customization |
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Term
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Definition
| increasing profitability by customizing the firm's goods or services so that they provie a good match to tastes and preferences in different national markets. |
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Term
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Definition
| attempt to simultaneously achieve low costs throught location economies, economies of scale, and learning effects while also differentiating product offering across geographic markets to acount for local differences and fostering a multidirectional flow of skills bt differerent subsidaaries in the firm's global network of operations |
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Term
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Definition
trying to create value by taking products first produced for the domestic market and selling them internationally with only minimal local customization.
Grace kennedy, microsoft |
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Term
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Definition
| cooperative agreements between two or more firms |
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Term
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Definition
| entry is early when a firm enters a forein market before other foreign firms and late when firms enters after other international business have established themselves. |
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Term
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Definition
| disadvantages associated with entering a foreign market before other international businesses. give rise to pioneering costs |
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Term
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Definition
| costs that an early entrant has to bear that later entrant can avoid; such as the time and effort in learning the rules, failure due to ignorance and the liability of being a foreigner; when firms home market different from foreign market; promoting and establishing a product offering, educating customers. |
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Term
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Definition
Advantages: avoids substanial costs of establishing manufaturing operations in a host country; exportin gmay help a firm achieve exerience curve and location economies.
Disadvantages: exporting from home base may not be appropriate if lower-cost locations for manuf the product can be found abroad; high transportation costs are uneconomical for bulk products; tariff barriers; firm delegates its marketing, sales, and service in each country where it does business to another company; ignorance/intimidation; poor market analysis |
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Term
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Definition
a project in which a firm agrees to set up an operating plant for a foreign client and hand over the "key" when the plant is fully operational. Most common in pharmaceutical, petroleum refining, and metal refining industries. A way of earning great economic returns from that asset
ADVANTAGES: useful where FDI is limited by host-governing regulations; can also be less risky than conventional FDI
DISADVANTAGES: the firm that enters into a turnkey deal will have no long-term interest in the foreign country; the firm that enters into a turnkey project with a foreign enterprise may inadvertently create a competitor; if the firm's process technology is a source of competitive advantage, then selling this technology through a turnkey project is also selling competitive advantage to potential and/or actual competitors. |
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Term
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Definition
occurs when a firm licenses the rights to produce its product, its production processes, or its brand name or trademark to another firm, in return the licensor collects a royalty fee from the licensee.
ADVANTAGES: licensee puts up most of the capital necessary to get the overseas operation going...firm bears no development costs or risks; frequently used when a firm possesses some intangible property that might have business applications, but it does not want to develop those applications itself.
DISADVANTAGES: does not give firm tight control over manufacturing, marketing, or strategy that is required for realizing experience curve and location economies; competing in global market may require a firm to coordinate strategic moves across countries by using profits earned in one country to support competitive attacks by another; risk with liccensing technological know-hows. |
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Term
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Definition
a subsidiairy in which the firms owns 100 percent of the stock. Greenfield venture, or merger/aquistion
ADVANTAGES: preferred with technological competence; gives firm tight control over operationsin different countries; may be required if a firm is trying to realize location and experience curve economies.
DISADVANTAGE: most costly mode. |
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Term
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Definition
| Japan's great trading houses |
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Term
Export Management COmpany
(EMC)
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Definition
| export specialists who act as the export marketing department for client firms |
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Term
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Definition
| issued by a bank, indicating that the bank will make payments under specific circumstances |
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Term
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Definition
| an order written by an exporter instructing an importer, or an importer's aganet, to pay a specified amount of money at a specified time; also called a draft |
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Term
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Definition
| an order written y an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time |
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Term
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Definition
| a draft payable on presentation to the drawee |
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Term
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Definition
| a promise to pay by the accepting party at some future date |
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Term
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Definition
a document issued to the exporter by the common carrier transporting the merchandise; it serves as a receipt, a contract, and a document of title
-receipt
-contrade
-document of title |
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Term
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Definition
| agency of the us goverment whose mission is to provide in financing and facilitate exports and imports; also referred to as the Ex-Im bank |
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Term
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Definition
| the direct exchange of goods an/or services bt two parties wo a cash transaction |
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Term
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Definition
| a reciprocal buying agreement |
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Term
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Definition
| a buying agreement similar to a counterpurchase, but the exporting country can then fulfill the agreement with any firm in the country to which the sale is being made. |
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Term
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Definition
| the use of specialized third party trading house in a countertrade agreement |
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Term
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Definition
| when a firm builds a plant in a country and agrees to take a certain percentage of the plant's outtput as partial payment for the contract. |
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Term
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Definition
| activities involved in making a product |
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Term
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Definition
| the procurement and physical transmission of materil through the supply chain, from suppliers to customers. |
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Term
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Definition
| Management philosophy that takes as it central focus the need to improve the quality of a company's products and services. |
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Term
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Definition
| statistically based methodologuy for improving product quality |
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Term
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Definition
| certification process that requires certain quality standards must be met. |
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Term
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Definition
| the level of output at which most plant-level scale economies are exhausted. |
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Term
flexible manufacturing technology
(Lean technology) |
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Definition
| manufacturing technology designed to improve job scheduling, reduce set time, and improve quality control. |
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Term
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Definition
the production of a variety of end products at a unit cost that could once be achieved only through mass production of a standardized output.
**low cost and product customizaton through use of flexible manufacturing technology |
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Term
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Definition
| flexible manufacturing technology in which a grouping of various machine types, a common materials handler, and a centralized cell controller produce a family of products. |
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Term
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Definition
| an asset designed to perform a specific task, whose value is significantly reduced in its next-best use. |
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Term
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Definition
| the flow of skills and product offerings from foreign subsidiary to home country and from foreign susidiary and foreign subsidiary. |
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Term
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Definition
which markets to enter
when to enter the markets
what scale of entry |
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Term
| concentrated retail system |
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Definition
| a few retailers supply most of the market. |
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Term
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Definition
| many retailers supply the market with no one obtaining the most shares. |
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Term
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Definition
| the number of intermediaries that a product has to go through before it reaches the final customer. |
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Term
| exclusive distribution channel |
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Definition
| a channel that outsiders finds difficult to access |
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Term
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Definition
| choices abut product attributes, distribution strategy, communication strategy, and pricing strategy that a firm offers its target markets |
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Term
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Definition
| identifying groups of consumers whose purchasing behavior differs from others in important ways |
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Term
| concentrated retail system |
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Definition
| a few retailers supply most of the market |
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Term
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Definition
| the number of intermediaries that a product has to go through before it reaches the final customer. |
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Term
| exclusive distribution channel |
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Definition
| a channel that outsiders find it difficult to access..ex shelf space at supermarket. |
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Term
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Definition
| the expertise, competencies, and skills of established retailers in a nation, and their ability to sell and support the products of international businesses. |
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Term
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Definition
| when the receiver of a message evaluates the message based on the status or image of the sender. |
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Term
| Country of Origin Effects |
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Definition
| the extent to which the place of manufacturing influences product evaluations. |
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Term
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Definition
| the amount of other messages competing for a potential consumer's attention. |
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Term
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Definition
| a marketing strategy emphasizing personal selling rather than mass media advertising |
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Term
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Definition
| a marketing strategy emphasizing mass media advertising as opposed to personal selling |
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Term
| price elasticity of demand |
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Definition
| a measure of how responsive demand for a product is to changes in price |
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Term
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Definition
| when a small change in price produces a large change in demand |
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Term
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Definition
| when a large change in price produces only small change in demand. |
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Term
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Definition
| pricing aimed at giving a company a competitive advantage over its rivals; predatory pricing, multipoint pricing, experience curve pricing |
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Term
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Definition
| reducing prices below fair market value as competitive weapon to drive weaker competitors out of the market. |
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Term
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Definition
| occurs when a pricing strategy in one market may have an impact on rival's pricing strategy in another market. |
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Term
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Definition
| agressive pricing designed to increase volume and help the firm realize experience curve economies. |
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Term
| human resource management |
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Definition
| activities an organization conducts to use its human resource effectively |
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Term
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Definition
| a national of one country appointed to a management position in another country |
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Term
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Definition
| strategy concerned with selecting employees for particular jobs |
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Term
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Definition
| an organization's norms and value systems |
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Term
| ethnocentric staffing policy |
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Definition
a staffing approach within the NME in which all key management positions are filled by parent-country nationals; international strategic appropriateness
ADVANTAGES: overcomes lack of qualified managers in host nation, unified culture, helps transfer core competencies
DISADVANTAGES:produces resentment in host country, can lead to cultural myopia |
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Term
| polycentric staffing policy |
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Definition
an NME staffing policy in which host-country nationals are recruited to manage subsidiaries in their own country, while parent-country nationals occupy key positions at corporate headquarters; localization
ADVANTAGES: alleviates cultural myopia, inexpensive to implement
DISADVANTAGES: limits career mobility, isolates headquarters from foreign subsidiaries |
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Term
| geocentric staffing policy |
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Definition
a staffing policy under whenich the firm seeks the best people for key jobs throughout the company, regardless of nationality; global standardization & transnational
ADVANTAGES: uses human resources efficiently, helps build strong culture and informal management networks
DISADVANTAGES: national immigration policies may limit implementation, expensive |
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Term
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Definition
| the premature of an expatriate manager to the home country |
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Term
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Definition
establishing a firm that is jointly owned by two or more otherwise independent firms
ADVANTAGES: local partner's knowledge of the host country's competitive conditions, culture, launguage, political system, and business systems. High development costs/risks, a firms gains by sharing these costs with local partner; for many countries, joint ventures only means of entry into foreign market.
DISADVANTAGE: risks giving control of its technology to its partner; does not give a firm the tight control over subsidiaries that it might need to realize experience curve or location economies; shared ownership arrangement can lead to conflicts and battles for control between the investing firms if their goals and objectives change or if they take different views as to what the strategy should be. |
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