Term
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Definition
Consists of different demand analysis:
Including: Cross national, time series, income elasticity analysis, regional lead and lag analysis. |
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Term
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Definition
| Collecting cross national data (such as info about a countrys GDP and the demand for a particular product) and then you just plot it on a graph. |
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Term
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Definition
| A type of analysis in which you are collecting historical data about a country and plotting it against the demand and then your finding the line of best fit with a regression and then determinining whether or not demand will increase or decrease. |
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Term
| Income elasticity Analysis |
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Definition
Assumption that income is the most important factor in demand. Income elasticity is determined by the %change in demand divided by the % change in income.
(Elasticity is the sensitivity of one variable to another varialbe) |
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Term
| Regional lead and lag analsys |
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Definition
| Type of analysis in which demand for a certain product exibits identical patterns in many countries. For instance look at TV ownership in countries over the last thirty years. In all of the tv ownership has increased in all countries at roughly the same rate. Leading countries will have the products first, and lagging countires will experience the same curve but at later dates. |
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Term
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Definition
| Consists of four variables: a) Product Policy b)Pricing c)Distribution (Placement) d)Promotion |
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Term
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Definition
First of the P's in the Marketing Mix. Consists of Standardized Product policy (here you just sell the same product everywhere i.e. corn,rice etc)
Localized approach, here you make what sells in the local market, and is generally used for brands with weak market recognition.
Adaptation (Hybrid) Product Policy: Here you have a standardized product, but you also include the regional preferences (such as coke in the U.S. and Italy) |
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Term
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Definition
Consists of Uniform, Differentied, and Objective, and Marginal Cost pricing.
Uniform Pricing: when you have a strong brand name and you have the same price everwhere (there is no difference in the purchasing power)
Differentied pricing: you have a weak brand name and you have different prices in different markets
Objective pricing (on a different notecard)
Marginal cost pricing: here you only cover the variable cost of the product. The fixed cost for this product is treated as a sunk cost. You sell so long as you cover the variable cost of the product. |
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Term
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Definition
Consists of three phases: Market Holding, Market Skimming, and Market Penetration.
Market Holding: This is used for a stable market, for pricing you just use the "cost plus" system. You want to maintain your market share.
Market Skimming: Your in a monopolistic position. Here you can charge the maximum price for your product.
Market Penetration: You want to enter the market and you charge only your variable cost (marginal cost pricing) |
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Term
| What are the other factors in International Pricing? |
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Definition
Government Intervention: this includes such things as price ceilings and price floors.
Market Diversity: Includes competition by other companies, price elasticity, and product perception and use.
Exchange Rate Fluxuation
Pricing Practice (Philosophy)
Extra Cost factors (such as transportation etc) |
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Term
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Definition
a) FAS (Free Alongside Ship): This is the price to ship things to your port of departure (such as the trucks and whatnot)
b) FOB (Free on Board): This is the cost to ship from port to port.
c) C & F (Cost and Freight): This is both A and B from above.
d) CIF (Cost and Freight and Insurance) |
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Term
| What are the components of the Distribution channel? |
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Definition
| This includes two channels: Internal and External. |
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Term
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Definition
A type of distribution channel, its from your home country (you deal with employees and companies with those within your country) and it is viewed as passive (as in your not putting in alot of effort).
There are different servies available for internal distribution, these are: Export agent, Export house, resident foreign buyer, export association, and export trading company.
Export house: Think of this as ebay, but only within your home country.
Export association: Association of companies in a similar industry.
Export trading company: large scale trading company designed to emulate japanese "sogo shosha", which is a financial institution which is allowed to export and import. |
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Term
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Definition
| Distribution channel that consists of: Import agents (exlusive or general), foreign distributors (foreign trade company/foreign export house), branch (unincorporated business unit), subsidiary (incorporated business unit under foreign law). |
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Term
| Factors for Channel Distribution |
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Definition
a) Market size and potential
b) amount of experience
c) amount of resources
d) nature of the product
e) possiblity of FDI in the future
f) tax implication |
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Term
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Definition
One of the 4 p's in the Marketing Mix. It has two approaches: pushing and pulling (aggressive and passive).
Additional factors for the type of promotion you will use include: population density, availablity for promotional instruments, literacy rate, perception about information source (do you trust tv, newspapers etc).
Advertisment standardization (one ad for every location): Some advantages is that you save time and money, but there are problems due to legal factors, language barriers, cultural differences,translation differences.
Country of origin effect: products made in a certain country impact quality perception (positive or negative). |
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Term
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Definition
Theory X: People are born to be lazy and you have to be authoratative (crack the whip)
Theory Y: People are self motivated and you can have democratic leadership.
Theory Z: Long term employment is better, collective decision making is better, individual decision making is better, evaluation over long periods of time is better, implicit control is better, and task specilizaiton is better. |
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Term
| Differences between US and Japanese business styles |
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Definition
Japanese: Longer term of employment, more loyalty to a company, use collective decision making, personal lives are concerns to managers, do not want specilization (want general knowledge).
American: opposite of everything the japanese do. |
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Term
| Managment of Foreign subidiaries |
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Definition
| HCM (host country manager), PCNM (parent national manager, TCNM (Third country national manager) |
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Term
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Definition
Host country manager, you save money by having a host country manager, thye have insider knowledge, they can help and relate with local employees.
disadvantages include them having a conflict of interest because they work for a foreign company. Language is an issue, ignorance of their host countries system, and it is difficult to move the manager somewhere else (to another country for instance). |
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Term
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Definition
Parent country national manager: Moving a manager from the home country to the foreign subisidary. Advantages include tighter control, consistency between the subsidiary and the parent company, and ease of rotation.
disadvantages include high cost, unfamiliarity with the local environment, as well as ethnocentric attitudes. |
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Term
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Definition
| Third country national managment: A person not from the home or subsidary country. Advantages include: less expensive, the personal acts as a mediator, and they are the best person on a global scale. However they are hard to find qualified. |
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Term
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Definition
This manager needs to have cultural adaptability, knowledge of the local environment, communication skills, abiility to acheive with limited resources, mental and physical strength, as well as family support.
*PCNM is most needed when strong control is desired and when operations have just begun. They are also important to have if there are racial disputes in the area, and when you want to train foreign peoples in managment. |
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Term
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Definition
| Stragies include compensatory trade (country trade) which invovles reciprical commitment other than a normal cash payment. There are five types of these: bartar, clearing agreement, counter purchase, buyback, and offset. |
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Term
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Definition
| Type of collaborative stratagy, this is when two companies open an acocunt with one another and trade, and it is very much like bartaring, but when there is a leftover balance, the balance is cleared (paid off in cash). |
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Term
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Definition
| Type of collaborative stratagy, it is when you sell technology or capital equipment in return for unrelated products (i.e oil for food). |
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Term
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Definition
| Type of collaborative stratagy, in which you agree to sell technology with an agreement to take back a portion of the output. |
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Term
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Definition
| A type of collaborative stratagy. This is when you build or develop a facitlity in return for business rights (such as tax breaks, or exclusive selling rights). |
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Term
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Definition
Agreement to grant a right to an intangible property in exchange for a licensing fee. Includes patent, trademark, copyright, and tech knowhow.
Advantages include "quick and easy", less risky than FDI, and gives access where markets are prohibited.
Problems include quality control, diffusion of technology, and the possiblity when you compete with the licensee (license granter) later. |
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Term
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Definition
The product is made by a foreign firm based on contracts. The design and specifications must be provided by the firm.
Advantages include include utilization of cheap resources without FDI, less risky than FDI, and more flexible than FDI.
Disadvatages include diffusion of technology, quality control, and contractual uncertainty. |
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Term
| Working Capital Managment |
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Definition
| Consists of intra-corporate funds and external funds. |
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Term
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Definition
Involves either a loan, equity, or transfer price.
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Term
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Definition
The intra-corporate price transfered from one corporate division to another.
The primary reason for transfer price is to avoid control from the local government. This is due to: working capital, reduces income tax, reduces tariffs, bolsters credit rating, increasing profit sharing, increaseing profit under price control.
Transfer price: the intra-corporate price transfered from one corporate division to another.
Disadvantages include: conflict with the local government, subsidaries performance is distorted, you must keep dual accounting books, and objectives of the two divisions can confict with one another. |
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Term
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Definition
Two types of this: a)borrowing in the international market by a subsidiary and b) subsidiary borrowing from the local economy (such as a local bank).
Problems with a) is that the parent company must make a payment guarentee.
Advantages with b) is that the subidiary can borrow without the parents payment guarentee, and hedge against political risk. |
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Term
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Definition
| this involves translation exposure, transaction exposure, and economic exposure. |
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Term
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Definition
| Degree to which a firms financial statement is influenced by exchange rate fluctuation. There are paper gains and losses due to FX changes. |
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Term
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Definition
| The degree to which a firms actual cash flow is influenced by FX fluctuation. |
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Term
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Definition
The degree to which a firms value is influenced by long term and fundamental (semi perminant or perminant FX change).
For example, if the dollar appreciates (goes up) foreign firms will not purchase as much U.S. product, so the U.S. exporting firm will be hurt. |
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Term
| International Capital Budgeting |
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Definition
Due to the time value of money, future cash flow must be discounted to present value by interest. For example, a million dollars tomorow is worth less than a million dollars, because of interest.
Net Present Value= Cash Inflow - Cash Outflow. (if NPV is + you invest, if it is - you dont invest).
Factors include: FX, local inflation rate forcasts, knowledge of the local and U.S. tax system, rate to discount future cash inflow, and political risk. |
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Term
| Payment methods for International Trade |
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Definition
Include: a) Cash in advance
b)open account
c) Trade draft/bill of exchange (unconditional order of payment made by the exporter to the importer, but the payment is still subject to the importers willingness and ability to pay)
d) Letter of credit: This is an instrument by which an importers bank guareentees to pay an exporter when paper documents are presented. The Letter of credit must be recevied by the exporter before shipment takes place. |
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Term
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Definition
| (Addendum to a Trade Draft) This is a payment that should be paid immediatly to take the shipment or delivery. |
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Term
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Definition
| You only need to write a signiture in order to take the shipment or delivery. Payment is not required immediatly. |
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Term
| What is the delivery style of the Site Draft and the Time Draft? |
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Definition
| The actual paper drafts go from the Exporter --> Bank --> Importer |
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Term
| Can an importer accept goods without a shipping document? |
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Definition
| No, The shipping document must be accepted by the importer before the goods can be accepted. This shipping document is also called a Bill of Lading. |
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Term
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Definition
This consists of two types:
a) Irrevocable: this is the most common.
b) Confirmed: this is less common, but safer. |
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Term
| Original Equipment Manufacturer (OEM) |
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Definition
| This is when a company buys foreign products and sells them under their brand name. They do it because they have production problems but an excellent marketing brand. There is typically a strategic alliance with good marketers with weak production abilities, and efficient producers with weak marketing abilities. |
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Term
| Turnkey Operation (Plant/Project Export) |
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Definition
A contract for construction of a large facility in a foreign country. The facility will be transferred to the owner when the construction is finished. This is appropriate when foreign countries have money but no technology to build the plant, or they dont like foreign ownership of the plant.
BOT (Build operate and Transfer): Same thing as Turnkey, but used more for foreign firms that have little money or technology. |
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Term
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Definition
| Contract to provide managerial services to existing facilities. It is appropriate when the facility is acquired under a turnkey operation, local managment sucks, or the facility is confiscated from another company. |
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Term
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Definition
A shared ownership with a local partner. 60% of them fail. Advantages to the partner include, capital, technology, and control.
Advantages to the foreign investor include: access to the market, shared risk, improved foreign image, utilizing the local parterns knowledge, better PR, government incentives.
Prolems include: sharing control, different goals, covert intentions, ID problems, communication problems, different time horizons, lack of cohesivness. |
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Term
| International Tax Managment |
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Definition
Consists of tax credits, and tax deferrals.
Tax credit: avoids double taxation. A US firms tax liablitiy is reduced by the amount they pay to a foreign government in income taxes.
Tax Deferral: Incourages foreign business activity (i.e US business to do business in foreign countries) because the collection of tax on foreign income is delayed until is sent back to the US.
Tax Deferral can only be used for income from a subsidiary not a branch of a company.
A tax deferral is only applied to a non controlled foreign subsidiary (meaning the U.S compnay is a minority shareholder) and it is also applied when a foreign subsidiary has active income (normal business income) and is a majority controlled subidiary.
A tax deferral is not applied when their is a controlled foreign subsidiary has passive income (abnormal income resulting from tax evasion). |
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