International Business Chapter 2 Questions and Answers Graded A+

International Business Chapter 2 Questions and Answers Graded A+ What makes a company international? 1. owning a retail outlet in another country 2. Owning a manufacturing plant in another country 3. Importing/exporting internationally 4. Investing internationally International Business conducts transactions across national borders Globalization development of an increasingly integrated global economy (free trade, free flow of capital...) Pros of Expansion company growth, new markets and consuemrs, increased profits, inexpensive supplies, low labour cost, financing Drivers of International Business GATT (General Agreement on Tariffs and Trade), government changes allowing freer movement and trade, evolution of the Internet, the Euro Benefits of Globalization Developing Countries: increased employment, tax revenue, international relations, access to technology Developed Countries: lower costs of production, new markets for trade, corportate growth Corportate Globalization Companies have more power than nations, corporate wealth in measured by NET INCOME, as opposed to GDP Ethnocentric maintains tight control from head office over the company's foreign operations Polycentric Gives foreign operations greater autonomy, taking market difference into account Geocentric Seeks total integration of global operations, focuses on the company itself. Company deals with specific goods and services realting to country's trend Methods of Organizing an MNC Seperate employees, functional, product, geographic, matric (staff may be separated according to function, products, or sype of market but information flows across all departments) Centralized Organization produce and sell goods from one central location, use common marketing themes to create international marketing campaigns PROS: build global image, consistent messege, cost Decentralized Organizations Use local production facilities, ad agencies, sales rep , to target specific international markets. PROS: proximity to markets, flexibility, cultural sensitivity GES: Exporting Is the marketing and direct sale of domestically produced goods in another country. PROS: no investment in product facilities, quick entry to country, learn about foreign markets CONS: significant inventment reliance, trade barriers GES: Licensing Permits a company in the target country to use the property of a licensor for a free. PROS: little investment, quick entry, avoids trade barriers CONS: profits may be limited, lack of control and licensee may be a competitor GES: Franchising Company authorizes an individual to conduct busienss in prescribed manner. PROS: business plan is set, brand recognition CONS: expensive, lack of control GES: Joing Venture/Merger Agreement between 2 or more organizations to share assets to control a new business. PROS: share knowledge, more money to use CONS: lose some control, disagreements