International Business second part - Details

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Entry is early when a firm enters a foreign market before other foreign firms and late when a firm enters after other international businesses have established themselves

Timing of entry

Advantages accruing to the first to enter a market ex. capture demand by establishing a strong brand name

First-mover advantages

Disadvantages associated with entering a foreign market before other international businesses

First-mover disadvantages

The price an early entrant bears that later entrants avoid, such as the time and effort in learning the rules, failure due to ignorance, and the liability of being a foreigner.

Pioneering costs

Sale of products produced in one country to residents of another country

Exporting

A venture 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

Turnkey project

Agreement in which a licensor grants the rights to intangible property to the licensee for a specified period and receives a royalty fee in return

Licensing agreement

A specialized form of licensing in which the franchiser sells intangible property to the franchisee and insists on rules to conduct the business

Franchising

A cooperative undertaking between two or more firms

Joint venture

A subsidiary in which the firm owns 100 percent of the stock

Wholly owned subsidiary

One company's purchase of the property and obligations of another company

Acquisition

A firm building a subsidiary from the ground up in another country

Greenfield strategy

The most risky type of direct investment, whereby a company builds a subsidiary from scratch in a foreign country

Greenfield venture

Arrangement in which a company lincenses valuable intagible property to a foreign partner and receives a licence for the partner's valuable knowlwdge; reduces risk of licensing

Cross-licensing agreement

A decision that has a long-term impact and is difficult to reverse, such as entering a foreign market on a large scale

Strategic commitment

1. Exporting 2. Turnkey projects 3. Licensing 4. Franchising 5. Joint ventures 6. Wholly owned subsidiary

What are the six different modes to enter a foreign market?

1. Which markets to enter? 2. When to enter those markets? 3. On what scale?

Three basic decisions a firm must contemplate before foreign expansion.

Firm skills that competitors cannot easily match or imitate

Core Competence

Cost advantages associated with large-scale production

Economies of Scale

Systematic production costs reductions that occur over the life of a product

Experience Curve

When different stages of value chain are dispersed to those locations around the globe where value added is maximum or where costs of value creation are minimized

Global Web

Cost savings from learning by doing

Learning Effects

Cost advantages from performing a value creation activity at the optimal location for that activity

Location economies

A ratio or rate of return concept

Profitability

Actions managers take to attain the firm's goals

Strategy

The percentage increase in net profits over time

Profit Growth

Performing activities that increase the value of goods or services to consumers

Value Creation

Plan to exploit experience-based cost and location economies, transfer core competencies with the firm, and pay attention to local responsivness

Transnational Strategy

Needs that are the same all over the world, such as steel, bulk chemicals, and industrial electronics

Universal Needs

Trying to create a value by transferring core competencies to foreign markets where indigenous competitors lack those comepetencies

International Strategy

Cost advantages associated with using specialized competencies across different product lines and businesses

Economies of scope

The flow of skills and product offerings from foreign subsidiary to home country and from foreign subsidiary to foreign subsidiary

Global learning

Difference between Total revenues and total costs

Profit

Cooperative agreements between two or more firms

Strategic alliances

Giving away a technological know-howand market access to its alliance partner in return for very little

Disadvantage of Strategic alliances

Partner selection, alliance structure, managing the alliance

Making Alliances work

Sites for fundamentals research located in regions where valuable scientifing knowledge is being created; where teams develop the basic technologies that become new products

Basic research centres

Number of intermediaries that a product has to go through before it reaches the final consumer

Channel length

A few retailers supply most of the market

Concentrated retail system

Extent to which the place of manufacture influences product evaluations

Country of origin effect

When a small change in price produces a large change in demand

Elastic demand

Distribution channel that outsiders find difficult to access

Exclusive distribution channel

Many retailers, with no single one having a major share of the market

Fragmented retail system

When a large change in price produces only a small change in demand

Inelastic demand

Identyfing groups of consumers whose purchasing behaviour differs from others in important ways

Market segmentation

Choices about product attributes, distribution strategy, communication strategy and pricing strategy that a firm offers its targeted markets

Marketing mix

Occurs when a pricing strategy in one market may have an impact on a rival's pricing strategy in another market

Multipoint pricing

Amount of other messages competing for a potential consumer's attention

Noise

Reducing prices below fair market as a competitive weapon to drive weaker competitors out of the market ("fair" being cost plus some reasonable profit margins)

Predatory pricing

Measure of how responsive demand for a product is to changes to price

Price elasticity of demand

Market strategy emphasizing mass media as opposed to personal selling

Pull strategy

Marketing strategy emphasizing personal selling rather than mass media advertising

Push strategy

When the receiver of the message evaluates the message based on the status or image of the sender

Source effect

Pricing aimed at giving a company a competitive advantage over its rivals

Strategic pricing

A political system in which political power is monopolized by a party, group, or individual that governs according to religious principles.

Theocratic Totalitarianism

A political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power.

Tribal Totalitarianism

Bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource.

Property Rights

The theft, piracy, blackmail, and the like by private individuals or groups.

Private Action

The extortion of income or resources of property holders by public officials, such as politicians and government bureaucrats.

Public Action

Grants the inventor of a new product or process exclusive rights to the manufacture, use, or sale of that invention

Patent

Exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit.

Copyrights

Designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products.

Trademarks

International agreement to protect intellectual property, signed by 187 countries

Paris Convention for the Protection of Industrial Property

Set certain safety standards to which a product must adhere.

Product Safety Laws

Involves holding a firm and its officers responsible when a product causes injury, death, or damage.

Product Liablity

Products of the mind, ideas (e.g., books, music, computer software, designs, technological know-how); intellectual property can be protected by patents, copyrights, and trademarks.

Intellectual Property

U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions.

Foreign Corrupt Practices Act

Set of rules governing certain aspects of the making and performance of commercial contracts between sellers and buyers who have their places of businesses in different nations.

United Nations Convention on Contracts for the International Sale of Goods (CIGS)

Body of law that governs contract enforcement.

Contract Law

A document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved.

Contract

A system of law based on religious teachings.

Theocratic Law

A system of law based on a very detailed set of written laws and codes.

Civil Law

A system of law based on tradition, precedent, and custom; when law courts interpret common law, they do so with these characteristics.

Common Law

System of rules that regulate behavior and the processes by which the laws of a country are enforced and through which redress the grievances is obtained.

Legal System

Economic system where the allocation of resources, including determination of what goods and services should be produced, and in what quantity, is planned by the government.

Command Economy

An economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced.

Market Economy

A political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to the rise of communism.

Right-Wing Totalitarianism

A version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship.

Communist Totalitarianism

A political system in which citizens periodically elect individuals to represent them in government.

Representative Democracy

Form of government in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited.

Totalitarianism

Political system in which government is by the people, exercised either directly or through elected representatives.

Democracy

An emphasis on the importance of guaranteeing individual freedom and self-expression.

Individualism

The sale of state-owned enterprises to private investors.

Privatization

Those committed to achieving socialism by democratic means.

Social Democrats

Those who believe socialism can be achieved only through revolution and totalitarian dictatorship.

Communists

A political system that emphasizes collective goals as opposed to individual goals.

Collectivism

Someone who believes in public ownership of the means of production for the common good of society.

Socialist

System of government in a nation.

Political System

Political, economic, and legal systems of a country.

Political Economy

Otherwise knowns as the Corruption of Foreign Officials Act that received Royal Assent on December 10, 1998. It is Canadian legislation that makes the bribery, or other business coruption "tool" of a foreign official by a Canadian business person, a criminal offence

Bill S-21

Removal of government restrictions concerning the conduct of business

Deregulation

Likelyhood that events, including economic mismanagement,will cause drastic changes in a country's business environement that adversely affect the profit and other goals of a particular business enterprise

Economic risk

Advantages accruing to the first to enter a market

First-mover advantages

Total income of all citizens of a country, including the income from factors of production used abroad. Since 2001, the World bank has used this measure of economimc activity instead of the previously used GNP

Gross national income (GNI)

Attempt by the United Nations to assess the impact of a number of factors on the quality of human life in a country

Human Development Index (HDI)

Development of new products, processes, organizations, management practises, and strategies

Innovation

Handicap experienced by being a late entrant in a market

Late mover disadvantages

Likelihood that a trading partner will opportunistically break a contract or expropriate intellectual property rights

Legal risk

Economic system wherein certain sectors are left to private ownership and free market organism, while others have significant goventment ownership and government planning

Mixed economy

Likelihood that political forces will cause drastic changes in a country's business environment that adversly affect the profit and other goals of a particular business enterprise

Political risk

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