Exam 2

political system: power is controlled by one central person or group

political system:wellbeing of society is more important than business

politial system: established institutions, have more freedom

which political system is the most business friendly and why?

economic system: total business freedom, no government involvement
o All productive activities are privately owned
The best type of system for businesses

economic system: all economic players are owned by the government, socliast countries

economic system: some privatly and some gov owned

gov selling business to private companies

The world is pushing for a liberalization of markets. What are the two drivers?

Legal system: flexible and very specific, room for interpretation

legal system: less flexible, more specific
the most common
contracts are simpler and need notarized

legal system: religion is used to develop legal system

most common religous law

take over an industry

type of nationalization with pay

type of nationalization with OUT pay

restrict on doing business with industry or product

total ban from doing business in a country

multinational companies bring overseas earnings back to the home country

intelectual propery rights: technology

intelectual propery rights: authors, producers

intelectual propery rights: marketing items

steps of analyzing organization readiness to internationalize

steps of analyzing int readiness:
Things considered: is everyone on board? do we have the resources?

steps of analyzing int readiness:
Things considered: doing good in home country? is product needed there?

steps of analyzing int readiness:
Things considered: country analysis, global sourcing, forign investment

type of country anaylis : o Lower number of countries for further analysis
o Ie. No countries with income below 30k or risk number above 6

country analysis that
o Identify a couple countries and then pick criteria (indicators) to rank by (make a table)
 Indicators can be general (any company) (population, economic size) or firm specific (ie. Sell farming equipment look at agriculture industry or land available)
 Use income per capita adjusted for purchasing power

steps of analyzing int readiness:
Things considered:  Look at the industry in that market: who are the major players, who is the competition, if it is a saturated market then don’t want to go there

steps of analyzing int readiness:
Things considered: What kind of local partner do you need and how will you pick them
• If licensing a product need a licenser, if going to export need distributers
• Do they know local knowledge and have local networks, reputation

steps of analyzing int readiness:
Things considered: How much will you make
 Use past company that has done it,
 Do a small market before opening to the entire country

tools to estimate sales in another country
------- use info from one country to make predictions in another
• Sell in Germany and want to sell in France, use that data
------ use info from one product to predict the second one

• National economic policies that restrict free trade.
• Usually intended to raise revenue or protect domestic industries from
foreign competition.

A tax on imports

are government grants (monetary or other resources) to firm(s),
intended to ensure their survival or success by facilitating production at
reduced prices, or encouraging exports.

Restrict the quantity of some good that
may be imported into a country  E.g. By issuing import licenses to a group of
firms

a hybrid of a quota
and a tariff where a lower tariff is applied
to imports within the quota than to those
over the quota

the extra profit that
producers make when supply is artificially
limited by an import quota

Demand that some specific fraction of a
good be produced domestically

bureaucratic rules designed to make
it difficult for imports to enter a country

aka countervailing duties- designed to punish foreign firms that engage in dumping and protect domestic producers from “unfair” foreign competition

selling goods in a foreign market below their costs of production, or selling goods in a foreign market below their “fair” market value

-----organization that wanted to eliminate trade barriors and turned into ---

Agreements between countries in a geographic region to reduce
tariff and non-tariff barriers to the free flow of goods, services, and
factors of production between each other

A geographic area consisting of two or more countries that agree to pursue
economic integration by reducing tariffs and other barriers to the crossborder flow of products, services, capital, and, in more advanced cases,
labor

Levels of regional integration:
Simplest, most common arrangement. • Member countries agree to gradually eliminate formal trade barriers
within the bloc, while each member maintains an independent
international trade policy with countries outside the bloc.

Levels of regional integration:
Similar to a free trade area except the members harmonize their
trade policies toward nonmember countries, by enacting commontariff and nontariff barriers on imports from nonmember countries. • adopts a common external trade policy

countries in fta have policies for non member countries

levels of regional integration
Like a customs union, except products, services, and factors of
production such as capital, labor, and technology can move freely among
the member countries.
free movement of production (labor/ capital mobility)

lvls of reg int
Like a common market, but members also aim for common fiscal and
monetary policies, and standardized commercial regulations.

common monetary and fiscal policies
• European union- bank determines the policies

Contains all characteristics of economic union  In addition, independent states are combined into a single political union  Requires that a central political apparatus coordinate economic, social, and
foreign policy for member states

- common political and social policies
• Highest level of integration
• European union- European parliament

reasons countries pursue economic integration

cost advantages reaped by companies when production becomes efficient.

occurs when low cost producers within the free trade
area replace high cost domestic producers

occurs when higher cost suppliers within the free
trade area replace lower cost external suppliers

Meeting the specific needs of buyers in individual countries

product entry: product can be used across countires the same way, cheaper, easier

product entry: changing a product to fit local responsivness (gov, culture)

product entry strategy:
wear local responsivness, weak global integration
more likely in multidemestic industries