Review for Final

Business 187 – Global Dimensions of Business Prof. Wood

Format of the final will resemble the format of the midterms

Approximately 30 multiple choice questions

Two essays

The multiple choice will cover…

Key points from before the 2nd midterm (See handout with “Elements to

Remember from Before the 2nd Midterm” – available on web site)

More emphasis on questions from the last part of the course To be reviewed in these slides

Review of chapters since the 2nd midterm

Key points in Chap. 17: Export and Import Strategies (Micro view)

Before the midterm Ch. 16 covered the macro view of marketing strategy Market potential analysis Gap analysis (for where you already have sales)

International pricing Distribution systems Push vs. pull marketing

Ch. 17 deals with specific details of exporting

Characteristics of exporters Probability of being an exporter

increases with company size (revenues) Export intensity, the % of revenues

coming from exports, is not correlated with size

U.S. Government help: Export Assistance Centers of the International Trade Administration (ITA)

“Distribution” is “the course – physical path or legal title – that goods take between production and consumption.” Includes both shipping and the process by

which the product is sold

Intermediaries in distribution Sales representatives (“reps”) do not take title Distributors actually buy your goods from you Export management companies

handle everything, but rare in U.S.

Getting paid

Letter of credit – document that obligates buyer’s bank to pay when goods ship (usually very reliable) Buyer proves to his bank he has the

money to pay His bank authorizes another bank in

exporter’s country to pay as soon as exporter proves the goods have shipped

Open account – the seller just sends a bill (often very dangerous)

Key points from Chap. 21 – Human Resource Management

International HR Managerial Terms Locals – citizens of the countries in

which they are working Least expensive

Expatriates – non-citizens Home-country national Third-country national

Selecting the right expatriate

Focus on technical competence first Then

adaptiveness flexibility, tolerance

Cost of living adjustments Difficulties of returning to home country

Reverse culture shock Former expatriate suddenly has less status Home folks have different interests

Key points from Chap. 18 – Global sourcing

Important terms Supply chain (everything) Logistics (the movement and storage)

Tradeoffs among efficiency, dependability, quality, flexibility, innovation

Centralized (global) vs. regional vs. multi-domestic manufacturing

In the 18th century, economists started to advocate free trade

“Every individual seeks the most advantageous employment for his capital”

“Study of his own advantage necessarily leads him to prefer that employment most advantageous to society” - Adam Smith, 1776

Some basic free-market economics

Two fundamental principles1. The price for which sellers are willing to

sell a product indicates what the resources to produce (and sell) it are worth.

2. The price for which buyers will buy indicates what the product is worth to the buyer

So economists think anything that manipulates prices is dangerous

Quantitative analysis shows we can produce more through free trade

Comparative advantage theory shows trade improves productivity even when one nation is more efficient in everything

“Free trade” means no barriers

The principle: You should have the same incentives when you consider a product from abroad as from your home country.

Economists prefer income taxes or

sales taxes (on everything) rather than tariffs (on particular imports) For any given amount of revenue raised,

income and sales taxes disrupt the market less than tariffs

Most economists only make exception for tariffs to protect infant industries – industries that lack comparative advantage, but could develop it soon

In the 19th century, free trade was widely practiced

In Europe, tariffs were low or non-existent

But after WW I and especially in the early 30s, nations raised tariffs to protect their domestic economies

A disastrous depression followed

GATT was created to prevent the mistakes of the ‘30s from repeating

It provided a framework for negotiating reductions in tariffs and non-tariff barriers

The WTO continued the process and provided an enforcement mechanism to prevent new barriers

So – usually tariffs are not free trade

The WTO (and most economists) discourage use of tariffs to raise funds to protect an industry that already has

comparative advantage

Do you support complete free trade?