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UC / International Business / IB 3080 / What consumers consider business success?

What consumers consider business success?

What consumers consider business success?


School: University of Cincinnati
Department: International Business
Course: Global Environment of Business
Professor: Johns
Term: Fall 2020
Tags: FDI, geocentric, expatriate, polycentric, ethnocentric, demand, marketingmix, distribution, and SupplyChain
Cost: 50
Name: INTB Final Exam Study Guide
Description: This is a 9 page study guide that covers terms and concepts from chapters 10, 11, 12, 15, 16, and 17 for the final exam. The guide also includes a summary of the closing cases from each chapter. The guide is typed to be easily legible and there are no highlights on the pages so students can annotate on their own to study.
Uploaded: 12/02/2020
12 Pages 102 Views 6 Unlocks

INTB Final Study Guide

What consumers consider business success?

Chapter 10 

Foreign Exchange Market: converts currency from one country to another,  has 2 functions; convert currency and provide insurance against  exchange risk (hedging)

Currency Speculation: short term movement of money from one currency to  another in the hopes of profiting from shifts in exchange rates

Carry Trade: borrowing in one currency when interest rates are low then  using proceeds to invest where interest rates are high

Spot Exchange Rates: convert one currency into another on a specific day  (real-time)

Forward Exchange Rates: conversion of currency at a set future date Arbitrage: buying low and selling high

Law of One Price: in competing markets free of transportation costs and  barriers to trade, identical products must be sold for the same price when their price is expressed in the same currency

Why is organization important in architecture?

Fisher Effect: a country’s “nominal” interest rate is the sum of the required  rate of interest and the expected rate of inflation over the time period If you want to learn more check out What provides calories but has no nutritional value?

International Fisher Effect: the spot exchange rate should change in an equal  amount but in the opposite direction

Bandwagon Effect: traders move as a herd in the same direction at the same  time

Inefficient Market: when prices do not reflect all available information,  fundamental analysis uses economic theory, technical theory uses  technology

Freely Convertible: country allows both residents and non-residents to  purchase unlimited amounts of foreign currency  

Externally Convertible: country allows only non-residents to convert money  into foreign currency

Capital Flight: when people rush to convert their domestic currency into  foreign currency- usually during times of hyper-inflation or unstable  economies

What are the advantages and disadvantages of strategic alliance?

Countertrade: a range of barter-like agreements by which goods and services can be traded for others Don't forget about the age old question of How did the government come to spy on millions of americans?

Transaction Exposure: event to which the income from individual transactions is affected by fluctuations in foreign exchange values

Translation Exposure: impact of currency exchange rates changes on the  reported financial statements of a company

Economic Exposure: the extent to which a firm’s future international earning  power is affected by changes in exchange rates

Lead Strategy: attempting to collect foreign currency receivables early when  a foreign currency is expected to depreciate and paying foreign country  payables before they are due when a currency is expected to appreciate

Lag Strategy: delaying collection when expected to appreciate and delaying  payment for expected appreciation

Chapter 11 

Floating Exchange Rate: when the foreign exchange market determines  relative value of a currency  

Pegged Exchange Rate: the value of a currency is fixed relative to a  reference currency

Dirty Float System: countries try to hold the value of their currency within  some range against an important reference currency

Fixed Exchange Rate: values of a set of currencies are fixed against each  other at some mutually agreed on exchange rate We also discuss several other topics like How does accuracy of scheme affect n?

Dollarization: when a country abandons their own currency and uses the U.S. Dollar

Gold Standard: pegging currencies relative to gold

Gold Par Value: the amount of currency needed to purchase one ounce of  gold

Balance of Trade Equilibrium: when the income its residents earn from  exports is equal to the money its residents pay to other countries for  imports

The Jamaica Agreement: floating rates declared acceptable, gold was  abandoned as a reserve asset, total annual IMF quotes increased to $41  billion

Case for Floating Exchange Rates: would increase monetary control to  improve economy or lower unemployment, do not support IMF  intervention, they want the exchange rate depreciation to cure any trade  deficits, can help countries deal with economic crises


Case for Fixed Exchange Rates: controls inflation, want to reduce speculation, avoid risk and uncertainty

Currency Board: commits itself to converting its domestic currency on  demand into another currency at a fixed exchange rate If you want to learn more check out What places have a direct democracy?

Currency Crisis: occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or  forces authorities to expend large volumes of international currency  reserves and sharply increase interest rates to defend the prevailing  exchange rate

Banking Crisis: refers to a loss of confidence in the banking system that leads to a run on banks, as individuals and companies withdraw their deposits

Foreign Debt Crisis: when a country cannot service its foreign debt  obligations, whether private-sector or government debt

Moral Hazard: arises when people behave recklessly because they know they will be saved if things go wrong

Chapter 12 

Strategic Alliance: cooperative agreements between potential or actual  competitors

Profitability: the rate of return that the firm makes on its invested capital Profit Growth: measured by the percentage increase in need profits over time

Value Creation: measured by the difference between the value of product to  an average customer and the cost of production per unit

Operations: a value chain composed of a series of distinct value creation  activities, including production, marketing and sales and the firm  infrastructure We also discuss several other topics like What is going on by describing context of before, middle, and end of what happens?

Organization Architecture: the totality of a firm’s organization including  formal organizational structure, control systems and incentives,  organizational culture, processes, and people

Organizational Structure: formal division of the organization into subunits  such as product divisions, national operations, and functions, the location of decision-making responsibilities within that structure, and the  establishment of integrating mechanisms to coordinate the activities of  subunits including cross-functional teams and or pan-regional committees

Controls: metrics used to measure the performance of subunits and make  judgements about how well managers are running them  

Incentives: devices used to reward appropriate managerial behavior Processes: the manner in which decisions are made and work is performed


Organizational Culture: the norms and value systems that are shared among  employees in a company

Global Expansion: firms that operate internationally are able to expand the  market for their domestic product offerings, realize location economies to where they can best be completed across the globe, realize greater cost  economies from experience effects, and earn a greater return by  leveraging any valuable skills developed in foreign operations

Core competence: skills within the firm that competitors cannot easily match  or imitate Don't forget about the age old question of How has colonialism affected african countries?

Location Economies: economies that arise from performing a value creation  activity in the optimal location for that activity

Experience Curve: refers to systematic reductions in production costs that  have been observed to occur over the life of a product

Learning Effects: refer to cost savings that come from learning by doing

Economies of Sale: refer to the reductions in unit cost achieved by producing  a large volume of a product

Universal Needs: when the tastes and preferences of consumers in different  nations or regions are similar

Global Standardization Strategy: focuses on increasing profitability and profit  growth by reaping the cost reductions that come from economies of  scale, learning effects, and location economies

Localization Strategy: focuses on increasing profitability by customizing the  firms goods or services so that they provide a good match to tastes and  preferences in different national or regional markets

Transnational Strategy: trying to simultaneously achieve low costs through  location economies, economies of scale, and learning effects,  differentiate the product, and foster a multidirectional flow of skills  between different subsidiaries in the firms global network of operations

International Strategy: taking products first produced for their domestic  market and selling them international with only minimal local  customization

Advantages of Strategic Alliance: facilitate entry into foreign markets, allows  firms to share the fixed costs and associated risks to developing new  products, brings together complementary skills and assets of 2  companies. And it can make sense to form an alliance that will help the  firm establish technological standards for the industry that will benefit  the firm


Disadvantages of Strategic Alliance: give competitors a low-cost route to new technology and markets, alliances have risks, can give more than you  receive

Chapter 15 

Upstream Supply Chain: includes all of the organizations and resources that  are involved in the portion of the supply chain from raw materials to the  production facility  

Downstream Supply Chain: includes all of the organizations that are involved  in the portion of the supply chain from the production facility to the end  user

Six Sigma: modern successor to TQM that is a statistically based philosophy  aiming to reduce defects, boost productivity, eliminate waste, and cut  costs throughout a company

Minimum Efficient Scale: the scale of output a plant must operate to realize  all major plant-level scale economies

Lean Production: a range of manufacturing technologies designed to reduce  setup times for complex equipment and increase the utilization of  individual machines through better scheduling, and improve quality  control at all stages

Mass Customization: the ability of companies to use flexible manufacturing  technology to reconcile two goals that were once thought to be  incompatible

Flexible Machine Cells: grouping of various types of machinery, a common  materials handler, and a centralized cell controller

When to Use Concentration: differences among countries in factor costs,  political economy, and culture have a substantial impact on the costs of  manufacturing, trade barriers are low, externalities arising from the  concentration of like enterprises favor certain locations, important  exchange rates are expected to remain relatively stable, production  technology has high fixed costs, products value to weight ratio is high,  and if the product serves universal needs

When to Use Decentralization: differences in costs, political economy, and  culture do not have a substantial impact on the costs of manufacturing,  trade barriers are high, location externalities are not important, volatility  in important exchange rates is expected, production technology has low  fixed costs and low minimum efficient scale, products value to weight  ratio is low, and if the product does not serve universal needs


Offshore Factory: one that is developed and set up mainly for producing  component parts or finished goods at a lower cost than producing them  at home

Source Factory: managers have more say in decisions and have a strategic  input, located where production costs are low, where infrastructure is well developed and where it is easy to find a skilled workforce

Server Factory: linked into the global supply chain for a global firm to supply  specific country or regional markets around the globe, set up to  overcome intangible and tangible trade barriers

Contributor Factory: serves a specific country or world region, has  responsibilities for product and process engineering and development

Outpost Factory: intelligence gathering unit, meaning it is often placed near a competitor’s headquarters or main operations, can also factor as a server or offshore factory

Lead Factory: creates new processes, products, and technologies that can be  used throughout the global firm, cutting edge production takes place here

Make-or-Buy Decisions: decision for whether to produce an item in house or  purchase it from an outside supplier

Global Distribution Center: facility that positions and allows customization of  products for delivery to worldwide wholesalers or retailers or directly to  consumers anywhere in the world

Global Inventory Management: decision making process regarding the raw  materials, WIP component parts, and finished goods inventory for a  multinational corporation

Reverse Logistics: the process of planning, implementing, and controlling the efficient, cost-effective flow of raw materials, WIP inventory, finished  goods, and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal

Just in Time Inventory: economize on inventory holding costs by having  materials arrive at a manufacturing plant just in time to enter the  production process and not before

Global Supply Chain Coordination: shared decision-making opportunities and  operational collaboration of key global supply chain activities

Chapter 16 

Marketing Mix: the set of choices the firm offers to its targeted markets  (place, price, product, promotion)


Market Segmentation: identifying distinct groups of consumers whose needs, wants, and purchasing behavior differ from others in important ways  (demographics, geographics, sociographic, or psychological)  

Intermarket Segment: a segment that spans multiple countries, transcending national boarders

Business Analytics: the knowledge, skills, and technology that allow for the  exploration as well as deeper investigation of a company’s international  business strategies and activities to gain insight and drive future strategy developments and implementation

International Market Research: the systematic collection, recording, analysis,  and interpretation of data to provide knowledge that is use for decision  making in a global company

Concentrated Retail System: a few retailers supply most of the market

Fragmented Retail System: one where there are many retailers, none of  which have a major share of the market

Channel Length: the number of intermediaries between the producer and the consumer

Exclusive Distribution Channel: one of the difficult channels for outsiders to  access, example shelf space in a supermarket

Channel Quality: the expertise, competencies. And skills of established  retailers in a nation and their ability to sell and support the products of  international businesses

Barriers to International Communication: cultural differences, source effects,  country of origin effects, noise levels

Source Effects: when the receiver of the message evaluates the message on  the basis of status or image of the sender

Country of Origin Effects: the extent to which the place of manufacturing  influences product evaluations

Noise: the number of other messages competing for a potential customer’s  attention

Push Strategy: emphasizes personal selling rather than mass media  advertising (used for complex products, short distribution channels, and  when few social media options are available)

Pull Strategy depends more on mass media advertising to communicate the  marketing message to potential consumers (used for consumer goods,  when distribution channels are long, and when there is sufficient social  media)


Price Discrimination: whenever customers in different countries are charged  different procs for the same product or for slightly different variations of  the product, this can be profitable if the firm can keep national markets  separate and different price elasticities of demand in different countries

Price Elasticity of Demand: measure of the responsiveness of demand for a  product to change in price, it is elastic when a small change in price  produces a large change in demand, and inelastic if a large change in  price only produces a small change in demand

Predatory Pricing: the use of price as a competitive weapon to drive weaker  competitors out of a national market, once competitors leave then the  firm can raise prices to gain high profits

Multipoint Pricing: a firm’s pricing strategy in one market may have an  impact on its rivals pricing strategy in another market

Experience Curve Pricing: price low worldwide in attempting to build global  sales volume as rapidly as possible even if this means taking large losses  initially  

Research and Development: greater in countries where more money is spent  on basic and applied research and development, underlying demand is  strong, consumers are affluent, and competition is intense

Chapter 17 

Expatriate Manager: a citizen of one country who is working abroad in one of  the firm’s subsidiaries, involved in cultural, language, and practical  training

Staffing Policy: the selection of employees for particular jobs Corporate Culture: the organization’s norms and values systems

Ethnocentric Staffing: all key management positions are filled by parent country nationals (pursued if the host country lacks qualified people,  want unified company culture, or if the firm wants to create value by  transferring core competencies to a foreign operation

Negatives of Ethnocentric: limits advancement opportunities for host-country nationals, can lead to cultural myopia or the firm’s failure to understand  cultural differences

Polycentric Staffing Policy: requires host-country nationals to be recruited to  manage subsidiaries while parent-country nationals occupy key positions  at corporate headquarters, used to prevent cultural myopia and is less  expensive

Negatives of Polycentric: limited opportunities for experiences and cannot  progress, the gap formed between host-country and parent-country  managers, force for inertia


Geocentric Staffing: seeks the best people for key jobs, regardless of  nationality, enables the firm to make the best use of HR, enables the firm to build a cadre of international executives who feel at home working in a number of cultures, reduces cultural myopia, overall, this approach is the  most attractive

Negatives of Geocentric: immigration laws, extra costs for paperwork and  training, higher pay levels can create resentment within the firm

Expatriate Failure: the premature return of an expatriate manager to his or  her home country  

Reasons for Expatriate Failure: inability of spouse to adjust, manager inability to adjust, other family problems, personal or emotional maturity, or inability  to cope with larger overseas responsibilities

Success in Foreign Posting: self-orientation or good self-esteem, others orientation or good communication, perceptual ability or empathy, and  cultural toughness as some countries are tougher than others

Reasons for Diverse Workforce: divers talents bring insights into the needs of diverse consumer bases, utilizes women and minority talent, customers  appreciate interacting with employees that look like them, improves the  brand image, and there is evidence that proves diversity improves employee  satisfaction


Closing Cases 

The Mexican Peso, the Japanese Yen, and Pokémon Go

Nintendo’s profits from Mexico were suffering, because Mexican pesos had  been falling in value against the Japanese yen. Most transactions from peso  to yen are done through the dollar, not directly as the dollar is the most  liquid currency in the world. It is easier to trade dollars for yen and then  dollars for pesos than it is to trade yen for pesos. The strength of the yen  increases, and the peso is decreasing, and was at an all-time low after  Trump’s election. The issues with currency trade have impacted most  relations between Mexico and Japan, however Japan has been able to profit  off of using Mexican laborers for some import processes.

Egypt and the IMF

Egypt was in an economic crisis in 2013, they had low economic growth, a  large trade deficit, and a budget deficit. The tourism trade, which usually  brought in profits has collapsed as people feared terrorism from Islamic  areas. A major issue was the lack of foreign currency, making it hard to pay  for imports and resulting in shortages of key commodities, other issues had  cause surrounding countries to have similar troubles, and Egypt could no  longer take loans from these countries. In 2016, Egypt got an IMF loan of $12 billion in return that the government undertake economic reform. The  reforms included liberalizing the exchange rate and implementing an  austerity program that included an immediate end to energy subsidies. By  2017, the exchange rate of foreign currency was back to normal and the loan is slowly being released to Egypt. The remainder of the loan depends on  whether or not inflation can be controlled and whether or not the Egyptian  government does not cave to political pressure from protestors.

Sony Corporation: An International Innovator?

Sony’s global strategy has been innovation in its 12 technology industries.  The company strives to create new technologies and wants to give  customers an experience or feeling. The company is accelerating research  and development efforts. One new venture is Life Space UX which strives to  deliver unique experiences to transform one’s living space. Their Future Lab  Program embraces an approach to technological research and development  that emphasizes an open creative environment and direct lines of  communication with society.  

Alibaba and Global Supply Chains

Alibaba is an e-commerce company that facilitates sales among companies  that provide products sold over the internet. Alibaba does double the sales  from Black Friday and Cyber Monday combines on the Chine holiday “Singles  Day”. The company wants to bring in more global customers outside of China


and will needs top-notch and innovative supply chains. They do this by  focusing on a differentiation strategy, partner connections, buyer protection,  mobile technology, and large-scale product selections. Alibaba has done very well because they have good mobile platforms and really take into account  the needs of their customers.

ACSI and Satisfying Global Customers

The ACSI is an economic-based index that measures the satisfaction of  consumers across the U.S. economy. The scores are updated monthly to  measure the country’s economic health. The score reflects an aggregate of  customer satisfaction from the company’s that comprise the largest market  share in any given industry. Amazon has been consistently #1 on this scale  and is an example of what consumers consider business success. Literacy  rate, trade freedom, and business freedom all impact customer satisfaction.  Companies that do better for their customers also tend to do better in the  stock market. This explains why research and development is so important to understand customer satisfaction.  

Sodexo: Building a Diverse Global Workforce

Sodexo is the worldwide leader in providing quality of life services such as  workplace design, onsite food provision, facilities management, cleaning,  healthcare, prisoner rehab, employee benefits, and more. They are well  known for their commitment to a diverse workforce and derives from the  idea that diversity leads to satisfaction. Sodexo allows each country to  establish its own local diversity initiatives and some corporate initiatives,  following a decentralized approach. Additionally, 25% of the annual bonus of  executive team members is connected to how they perform on the diversity  scorecard metrics.



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