MIE 201, Chapter 3 In Class Notes
MIE 201, Chapter 3 In Class Notes MIE 201
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This 4 page Class Notes was uploaded by Jenna Loehrer on Wednesday September 21, 2016. The Class Notes belongs to MIE 201 at North Carolina State University taught by M.K. Ward in Fall 2016. Since its upload, it has received 4 views. For similar materials see Intro to Management in Management at North Carolina State University.
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Date Created: 09/21/16
Chapter 3 InClass Notes (8.29 8.31) Global Marketplace Fundamentals of International Trade ● Economic globalization: increasing integration and interdependence of national economies around the world ○ Macroeconomics view ● Most competitive countries: 1) Switzerland 2) Singapore 3) United States 4) Germany 5) Netherlands ● Why Do Nations Trade?: ○ Focus on relative strengths ■ Based on idea of comparative advantages ● Means that a country will focus on the production of a product if they can produce a product more efficiently than another country ● Focus on strengths and then trade with other countries ○ Expand markets ○ Pursue economies of scale ■ As productions increase in quantity (scale up), it will cost less to produce each unit ○ Acquire goods, services, and materials ○ Keep up with customers ■ Can be beneficial to expand internationally, if clients have international presences → to better serve customers ○ Keep up with competitors ■ If competitors have expanded internationally and are having success, may benefit you to move into same country to create competition (and differentiate your business model from them) ● How International Trade is Measured ○ Measurements of a nation’s level of international trade 1) Balance of Trade: total value of a country’s exports minus the total value of its imports, over a specified period of time a) Trade Surplus: exports exceed imports b) Trade Deficit: imports exceed exports 2) Balance of Payments: sum of all payments that a country receives from other countries minus the sum of all payments it makes to other countries, over a specified period of time a) Total flow of money into a country total flow of money out of a country Chapter 3 InClass Notes (8.29 8.31) Global Marketplace ● Foreign Exchange Rates and Currency Valuations: ○ Foreign Exchange: conversion of one currency into an equivalent amount of another currency ■ Uses interest rates, competitiveness of country... ○ Exchange Rate: rate at which the money of one country is traded for the money of another ● Strong VS Weak Currency: ○ Currency is strong when: ■ Its exchange rate is higher than what is considered normal ■ Impact of a strong currency: Goods/ services are more relatively expensive when compared to other countries ○ Currency is weak when: ■ Its exchange rate is lower than what is considered normal ■ Impact of a weak currency: Goods/ services are more relatively cheaper when compared to other countries ■ Encourages tourism and other countries to import from this country ● Conflicts in International Trade: ○ Free Trade: international trade that is unencumbered (having no burden) by restrictive measures ■ Advantages: no government intervention (no taxes) ○ Fair Trade: buyers voluntarily agree to pay more than the prevailing market price in order to help producers earn a living wage ■ Quality is added to a product because they know the workers were paid a living wage ■ Living wage: how much it costs to maintain a certain lifestyle ■ Not an equal playing field because larger corporations are at an advantage ● Government Intervention in International Trade ○ Protectionism**: government policies aimed at shielding a country’s industries from foreign competition ■ Make it more difficult for foreign competitors to receive same amounts of resources in their country ○ Tariffs: tax levied on imports ■ Taxes = tariffs ○ Quotas: Limits placed on the quantity of imports or exports that a nation will allow for a specific product ○ Embargoes: partial or complete prohibition of commerce and trade with a country or group of countries ○ Sanctions: politically motivated embargoes Chapter 3 InClass Notes (8.29 8.31) Global Marketplace ○ Subsidies: money that the government provides to certain industries to lower the cost of that good or service ■ The good or service will then be offered at a lower price ○ Dumping: unethical/ illegal business practice of selling a large quantity (in a foreign market) at a lower price than the fair market price ■ Can build a customer base because of lower prices ● International Trade Organization: ○ World Trade Organization (WTO): Permanent forum for negotiating, implementing, and monitoring international trade procedures and for mediating trade disputes ■ 150+ countries involved ○ International Monetary Fund (IMF): Formed to monitor global financial developments, provide technical advice and training, provide shortterm loans to countries that are unable to meet their financial obligations, and work to alleviate poverty in developing economies ○ World Bank: a United Nations agency involved in 100s of products aimed at addressing poverty, health, education, and other concerns in the majority world ● Trading Blocs ○ Trading blocs: Organizations of nations that removes trade barriers among their member countries and establish uniform barriers to trade with nonmember nations ○ Examples: ■ North American Free Trade Agreement (NAFTA) ● Canada, US, Mexico ■ European Union (EU) ● Cultural and Legal Aspects of the Global Business Environment ○ Culture: a shared system of symbols, beliefs, attitudes, values, expectations, and norms of behavior ○ Related Terms: ■ Stereotyping: assigning a wide range of generalized attributes to an individual on the basis of their membership in a particular group ■ Ethnocentrism: tendency to judge other groups based on one group’s standards and customs ● Judging other cultures/ other people based on our own cultural beliefs ○ Successful global business leaders recognize and respect differences in appearance, communication/language, religion, (social) values, etiquette/manners, political perspectives, attitude towards time, use of space, decisionmaking habits, ideas of status ○ ○ Define global mindset using science: ■ Global Mindset Inventory, developed via the Global Mindset Project ● Measures Global Intellectual Capital, Global Physiological Capital, Global Social Capital Chapter 3 InClass Notes (8.29 8.31) Global Marketplace ○ Legal Differences: ■ Types of law ● Common (tradition, customs), Civil (detailed legal codes), Theocratic (religious belief systems) ■ Range of legally acceptable business practices ● Strategic Alliances and Joint Ventures: Long term partnership between two companies to jointly develop or produce products in the global marketplace ○ Joint venture → two or more companies create a separate country ■ Legally separate from two companies that came together to create it ● Strategic Approaches to International Markets: ○ MultiDomestic: freedom to run operate company and adjust to each country ○ Global: view world as a single, integrated market ○ TransNational: attempts to reap benefits of national scale, but also responds to national changes ■ Hybrid of multidomestic and global ● Functional Strategies for International Expansion ○ Products ○ Customer Support ○ Promotion ○ Pricing ○ Staffing
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