Int Bis Final

group of indiduals who use standard products all over the world

move profits to the country with the lowest tax rate

o selling products through unofficial intermediaries (distributers)

when to pick a short marketing channel

when to pick a long marketing channel

the adverse consequences of unpredictable changes in exchange rates

the rate at which a foreign exchange dealer converts one currency into another currency on a particular day

Two parties agree to exchange currency and execute the deal at some specific date in the future for a certain exchange rate

what determines exchange rate

Selling items for different prices in different countries, if converted to currency would not be the same

The short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates

Borrow in a currency with low-interest rates and invest in another currency where interest rates are high
 If 5% in US and 40% in Turkey
 Borrow in US and put it in a Turkish bank

 A basket of good should cost roughly the same amount in every country
use prices to predict exchange rate

use interest to predict exchange rates

implication of foreign exchange market
 of financial statements- accounting: record sales in Chinese currency but end of year convert to USD, fluctuations in exchange rate throughout the year make this difficult

implication of foreign exchange market
make agreement for purchase and payment date is different
 mitigate it with forward contracts

implication of foreign exchange market
about long term effects: if USD is consistently strong exporters will have a harder time selling products
• Disperse production so that it is in cheaper places and minimize influence of exchange rate fluctuations

resources for exporting
---help find countries and companies customers
---- Business counseling, information, technical assistan
---- loans and insurance

--- is about who does the activity and ---- is about the location of the activity

motive for FDI
• Gain access to
new markets
or opportunities
• Follow key
customers
• Compete with
key rivals in their
own markets

motive for FDI
• Access raw
materials
• Gain access to
knowledge or
other assets
• Access
technological and
managerial knowhow available in a
key market

motive for FDI
• Reduce sourcing
and production
costs
• Locate production
near customers• Take advantage of
government
incentives
• Avoid trade
barriers

FDI: The firm owns, or seeks to own, multiple stages of a value chain for producing, selling, and delivering a product.

FDI: Arrangement whereby the firm owns, or seeks to own, the activities involved in a single stage of its value chain.