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UM - BUS 206 - Study Guide

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UM - BUS 206 - Study Guide

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background image BUS 206 
Part 2 (Written)
I. Week 1  Globalization: is the ongoing process that deepens and broadens the relationships and  interdependence among countries. This term sometimes refers to the integration of 
world economies through the reduction of barriers to the movement of trade, capital, 
technology, and people.
International Business: is a mechanism to bring about globalization. It includes all 
business transactions, private and governmental, including sales, investments, and 
transportation that involve two or mote countries.
­ More opportunity to be more competitive and profitable
­ IB operates differently then domestic business
­ Expand sales
­ Acquire resources
­ Diversify or reduce risk Factors contributing to rapid growth of IB 1. Increase in and expansion of technology ­ Reducing costs and speeding up transactions ­ Advances in communication and transportation 2. Liberalization of cross­boarder trade and resource movements Reduced restriction
­ Greater variety of goods for citizens
­ Competition spurs domestic producers to become more efficient
­ They hope to induce other countries to lower their barriers
3. Development of services that support international business
4. Growing consumer pressures
­ Consumers are more informed about foreign products and services an are  better able to afford more luxury items. More able to comparison shop and  find better deals 5. Increased Global competition ­ Companies continually look abroad to increase market share and reduce costs.
­ Clustering: which helps them to become quickly aware of foreign opportunity 
and to gain easier access to the resources needed to move internationally 6. Changing Political Situations ­ Governments are spending more resources on the improvement of  infrastructure which increases the ease of transporting goods and resources 7. Expanded Cross­national corporations  ­ Reciprocal advantages ­ To attack problems jointly that one country acting alone cannot solve
­ To deal with area of concern that lie outside the territory of any nation
Arguments against Globalization
background image ­ Creates winners and losers: creating a greater supply of low­skilled, Low­cost  labor ­ Threatens national sovereignty: many countries fear multilateral agreements  will diminish its sovereignty and freedom ­ It can dilute local culture
­ Makes corporate monitoring and holding companies accountable more 
difficult ­ It can create environmental stress II. Week 2 Political Risks: The risk that political decisions or events in a country negatively 
affect the profitability or sustainability n an investment
o Political risk that MNC’s may be exposed to: 1) Systematic: Risks that affect all firms in that particular country 2) Procedural: Reflects the costs of getting things done because of such  problems as government corruption, labor disputes, and/or a partisan judicial
system 
(Each day, people, products, and funds move from point to point in the global  market. Each move creates a procedural transaction between the units involved, whether 
units of a company or units of a country. Political actions sometimes create frictions that 
interfere with these transactions. Procedural risk reflects the costs of getting things done 
because of such problems as government corruption, labor disputes, and/or a partisan 
judicial system)
3) Distribution: Reflects revisions in such items as tax codes, regulatory  structure, and monetary policy imposed by governments in order to capture 
greater benefits from the activities of foreign firms 
(— As foreign investors  generate more profits in the local economy, the host country may begin to question the 
distributive justice of the rewards of operating in its market. In other words, as the business 
grows more successful, officials may question whether they are receiving their “fair” share 
of the growing profits. Distributive risk  reflects revisions in such items as tax codes, 
regulatory structure, and monetary policy imposed by governments in order to capture 
greater benefits from the activities of foreign firms. ) 4) Catastrophic: include those random political developments that adversely 
affect the operations of all firms in a country 
(includes random political  developments that adversely affect the operations of every company in a country. Typically, it arises from specific flash points, such as ethnic discord, illegal regime change, civil 
disorder, or insurrection. It disrupts the business environment in a way that affects every 
firm in the country. If such disruptions spiral out of control, they devastate companies and 
nations.)
o Four ways to manage political risk 1) Avoidance: avoid investment or with drawl investment from a risky location ( 2) Adaptation: accommodate the risk (equity sharing, participative  management localization, and development assistance ( Adaptation is  accommodating the risk. Use adaptation when the risk in a given country is relatively low  or when a high­risk environment is worth the potential returns. There are four primary 
forms of adaptation. Equity sharing is sharing equity with a local partner, such as through a 
joint venture. Participative management means actively involving nationals. Localization is 
background image transforming the subsidiary into a national firm. Development assistance refers to  involvement in host country infrastructure development) 3) Dependency: Keep the subsidy and host nation dependent on the parent film (input control, market control, Position control, and staged contribution)  (Dependency is keeping the subsidiary and host nation dependent on the parent firm. There  are four approaches to dependency. Input control involves keeping control of raw materials,
technology, and know how. Market control is keeping control of the means of distribution. 
Position control is keeping control of key management positions. Staged contribution 
involves successively increasing contributions to the host nation.)
4) Hedging: Minimizing losses (use political risk insurance and/or local debt  financing) ( Hedging is minimizing losses, such as through the use of political risk  insurance and/or local debt financing. Local debt financing is borrowing money from the 
host nation.)
III. Week 3 o Four important tasks that negotiations need to do when preparing for  negotiation 1) Identify interests and priorities ­ Opens up a range of options ­ Increases the probability of finding common ground between parties  (facilitates agreement) ­ Leads to greater satisfaction with negotiation process and outcome  2)   Identify resources and capabilities ­Allows you to know exactly what you have to offer to your counterpart ­ Reduces the chance that you may miss out on offering something that your counterpart desires and would be wiling to give you attractive concessions
in return
Benefits of identifying your counterparts resources and capabilities ­ Allows you to know if what your counterpart has is what you want 3)   Identify Objects ­ Motivate you to perform better (results) ­ Provide instant measure during active negotiating
­ Protect you from making too many concessions (and limit counterparts 
flexibility) but easily lead to competitive , positional bargaining and to 
atomizing rather than bonding the issues
5) Identify your “BATNA” (Best Alternative To a Negotiation Agreement) ­ A good batna strengthens your negotiation power
­ Batnas tell you when to accept and when to reject an agreement
o  Quality of communication Experience (QCE) in negotiation 1) Strive for CLARITY in communication  ­ check for shared definition and understanding of the situation ­ clarify terms and meaning
­ use active listening
­ express your own ideas clearly
When there is more clarity

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School: University of Miami
Department: Business
Course: Principles of International Business
Professor: Chei Chua
Term: Winter 2015
Tags: business
Name: BUS 206 Midterm Study Guide
Description: This is a study guide based on everything the professor said would be on the exam! All the bullet points on her review sheet are answered and explained on this guide. Enjoy!
Uploaded: 02/29/2016
7 Pages 69 Views 55 Unlocks
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