Term
| Regional Economic Integration |
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Definition
Agreements among countries in a
geographic region to reduce, and
ultimately remove, tariff and nontariff
barriers to the free flow of goods,
services and factors of production
among each other. |
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Term
| Levels of Economic Integration |
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Definition
1. Free Trade Area
2. Customs Union
3. Common Market
4. Economic Union
5. Political Union |
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Term
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Definition
| No barriers to trade among member states |
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Term
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Definition
| A common external trade policy |
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Term
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Definition
| Labor and capital can move freely among members |
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Term
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Definition
| Common currency, tax rates, and monetary and fiscal policy |
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Term
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Definition
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Term
| Where has economic integration worked? |
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Definition
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Term
| Where has economic integration not worked? |
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Definition
1. Western Hemisphere
2. Asia
3. Africa |
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Term
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Definition
| Strategy is the actions taken at the level of the firm |
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Term
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Definition
1. The process of establishing and sustaining competitive advantage
2. The actions managers take to attain the goals of the firm
3. The process of identifying and taking action to lower the cost of
value creation and/or differentiate the firm’s product through perceived superior design, quality, service, or functionality |
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Term
| Porter's generic strategies |
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Definition
1. cost
2. differentiation |
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Term
| Two conflicting pressures: |
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Definition
1. cost reduction
2. responsiveness |
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Term
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Definition
1. Desire to reduce costs by:
-Mass production
-Product standardization
-optimal location production
2. Hard to do with commodity-type products
-products serving universal needs
-substitution easy
3. Hard where competition is in low cost producing location
4. International competition creates price pressures |
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Term
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Definition
1. Different consumer tastes and preferences
2. Different infrastructure and practice
3. Differences in distribution channels
4. Government demands
5. Level of economic development |
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Term
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Definition
1.Earn a greater return from
distinctive skills or core competencies
2.Worldwide learning
3.Realize location efficiencies by dispersing operations to locations where they can be performed most efficiently
4.Realize economies of scale
5.Realize economies of scope |
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Term
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Definition
1. multidomestic strategy
2. home replication strategy
3. transnational strategy
4. global strategy |
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Term
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Definition
1.Go where locals don’t have your skills
2.Little adaptation. Products developed at home (centralization)
3.Possibly a commodity item
4.Manufacturing and marketing in each location
5.Makes sense where low skills, competition,
and costs exist |
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Term
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Definition
1.Maximize local responsiveness
-Customize the product and marketing
strategy to national demands
2.Extremely decentralized
3.Often the strategy of choice for consumer products
4.Good for high local responsiveness and low cost reduction pressures
5.Nestle:
-No indication of any pet food in Peru
-3 brands in Chile
-5 pet food brands in U.S. |
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Term
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Definition
1.Best use of economies of scale and
scope
2.This is a low cost strategy
3.Utilize product standardization to create a global product
4.Not good where local responsiveness
demand is high |
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Term
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Definition
1.Core competencies can develop in any of the firm’s worldwide operations
2.Flow of skills and product offerings occurs throughout the firm - not only from home firm to foreign subsidiary (global learning)
3.Makes sense where there is pressure for both cost reduction and local responsiveness
4.But….costs involved in communication and coordination |
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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
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Definition
1.Favorable benefit-cost-risk-trade-off:
-Politically stable developed and developing nations.
-Free market systems
-No dramatic upsurge in inflation or private-sector debt.
2.Unfavorable
-Politically unstable developing nations with a mixed or command economy or where speculative financial bubbles have led to excess borrowing. |
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Term
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Definition
1.Advantages in early market entry:
-First-mover advantage
-Build sales volume
-Move down experience curve and achieve cost advantage
-Create switching costs
2.Disadvantages:
-First mover disadvantage - pioneering costs
-Learn from others’ experience
-Later entrants can identify unserved or underserved niches
-Ability to innovate – not confined by past successes
3.Paradox – Firms need to build on experience, but not be trapped by it |
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Term
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Definition
1.Large scale entry
-Strategic commitments - a decision that has a long-term impact and is difficult to reverse
-May cause rivals (domestic and foreign) to rethink
-Logistics and supply issues may prevent smallscale entry
2.Small scale entry:
-Time to learn about market
-Reduces exposure risk |
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Term
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Definition
1. Exporting
2. Turnkey projects
3. Licensing
4. Franchising
5. Joint ventures
6. Wholly owned subsidairies |
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Term
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Definition
1.Avoids cost of establishing manufacturing operations
2.May help achieve location economies |
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Term
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Definition
1.May compete with low-cost location manufacturers
2.Possible high transportation costs
3.Tariff barriers
4.Possible lack of control over marketing reps |
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Term
| Turnkey Projects Advantages |
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Definition
1.Can earn a return on knowledge asset
2.Less risky than conventional FDI |
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Term
| Turnkey Projects Disadvantages |
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Definition
1.No long-term interest in the foreign country
2.May create a competitor
3.Selling process technology may be selling
competitive advantage as well |
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Term
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Definition
1.Reduces costs and risks of establishing enterprise
2.Overcomes restrictive investment barriers
3.Others can develop business applications of
intangible property |
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Term
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Definition
1.Lack of control
2.Cross-border licensing may be difficult
3.Creating a competitor |
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Term
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Definition
Reduces costs and risk of establishing
enterprise |
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Term
| Franchising Disadvantages |
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Definition
1.May prohibit movement of profits from one country to support operations in another country
2.Quality control |
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Term
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Definition
1.Benefit from local partner’s knowledge
2.Shared costs/risks with partner
3.Reduced political risk |
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Term
| Joint venture disadvantages |
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Definition
1.Risk giving control of technology to partner
2.May not realize experience curve or location economies
3.Shared ownership can lead to conflict |
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Term
| Wholly Owned Subsidiary advantages |
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Definition
1.No risk of losing technical competence to a competitor
2.Tight control of operations
3.Realize learning curve and location economies |
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Term
| Wholly Owned Subsidiary disadvantages |
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Definition
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Term
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Definition
is “the process of
planning and executing the
conception, pricing, promotion, and
distribution of ideas, goods, and
services to create exchanges that
satisfy individual and organizational
objectives.” |
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Term
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Definition
1. How to develop the firm’s product(s)
2. How to price those products
3. How to sell those products
4. How to distribute those products to the firm’s customers |
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Term
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Definition
1. Product
2. Place
3. Price
4. Promotion |
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Term
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Definition
1. Differentiation
2. Cost Leadership
3. Focus |
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Term
| Product Development Strategies |
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Definition
1. Ethnocentric
2. Polycentric
3. Geocentric |
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Term
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Definition
| No strategy changes when you globalize, many think because it was successful at home, it will be successful in another country. |
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Term
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Definition
| Firm spends the money to customize products to what consumers need in that specific market. It is only successful if the consumers make it. |
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Term
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Definition
| Standardization of marketing mix. Nothing changes. Ex. McDonalds |
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Term
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Definition
Marketing to the poor:
1. Serving the world's poor, profitably
2. Poor consumers have huge purchasing power in aggregate
3. To profit in these markets, companies must:
-remember the poor are not stupid or willing to settle for junk
-rethink conventional wisdom - package size, credit policies, packaging, product design |
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Term
| If a firm standardizes it's brand for an international market |
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Definition
Reduces:
1. packaging
2. design
3. advertising production costs |
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Term
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Definition
1. The importance of brand "equity"
-Losing equity through firms own actions
-Imitation
-Equity theft
2. Brand counterfeiting
-Luxury goods
-Can also happen to shampoo, toothpaste, etc |
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Term
| Combating the counterfeit problem |
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Definition
1.Some firms can ignore the issue:
-For luxury goods, two non-overlapping markets
-Also may not be cost-effective to police issue
2.But, if counterfeited products pose a health /safety risk or if there is significant loss of sales:
-Private investigation
-Inform customers how to detect a counterfeit
-High-tech labeling (difficult to duplicate)
-Constant design change
-Pressure governments for legislation
-Coalition with other manufacturers |
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Term
| Factors affecting pricing decisions |
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Definition
1. Business strategy
2. Competitive environment
3. Cost of doing business
4. Exchange rate fluctuations |
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Term
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Definition
1. Standard price policy (geocentric)
2. Two-tiered pricing (ethnocentric - domestic and international)
3. Market pricing (polycentric - what each market will bear, for maximum profit) |
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Term
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Definition
A gray market is a market that
results when products are imported
into a country legally but outside the
normal channels of distribution
authorized by the manufacturer. (This
phenomenon is also know as parallel
importing.) |
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Term
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Definition
1. automobiles
2. consumer products
3. watches |
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Term
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Definition
1. internet shopping
2. "gadget envy" |
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Term
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Definition
1. manufacturer
2. wholesaler
3. retailer
4. customer |
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