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Anyone studying legal forces affecting international business soon realizes that:
The variety of these forces complicates the task of understanding the laws.
The existence of the rule of law in a foreign market suggests that:
This encourages foreign investment because foreign businesses know that their interests will be protected. Following the rule of law also makes ensuring protection of human rights of local people easier.
The main source(s) of international law is(are):
Bilateral and multilateral treaties, along with customary law.
-A nation's attempt to enforce its law beyond its borders.
Where litigation in international disputes should occur is:
-Often complex, so contracts should include choice-of-law and choice-of-forum clauses.
Arbitration is a private solution that is:
Often preferred by foreign litigants because it is perceived as fairer, faster, cheaper, and more confidential than are the courts.
Incoterms are universal trade terminology developed by the international chamber of commerce and include FAS, CIF, AND CFR.
FAS (free alongside ship- port of call): The seller pays all the transportation and delivery expense up to the ship's side and clears the goods for export.
-CIF(cost, insurance, freight-foreign port): The price includes the cost of the goods insurance, and all transportation and miscellaneous charges to the named port of final destination.
-CFR(cost and freight-foreign port)- is similar to CIF except that the buyer purchases the insurance, either because it can be obtained at a lower cost or because the buyer's government to save foreign exchange insists on use of a local insurance company.
Legal uncertainties have affected international business, and:
Despite legal uncertainties of doing business in other countries, international business activities will increase in the future. For this reason, international businesspeople must be aware of the legal environment in which they find themselves. Legal systems vary significantly from country to country, and it is important to understand the differences. The assumptions one makes on the basis of the U.S. legal system may not apply in other countries.
Usually, it is reasonable to assume that foreign law:
Will differ from US law and must be understood
Patents, trademarks, trade names, copyrights, and trade secrets, all of which result from the exercise of someone’s intellect
Historically, gold has been used as a way for people to store value because of its:
Based on its scarcity and easily assessed level of purity, gold has been trusted as a way for people to store value, exchange value, and measure value since ancient times.
Bretton Woods led to an exchange rate agreement known as the Bretton Woods System or:
the Bretton Woods system, also called the gold exchange standard and the fixed rate system, which served as the basis of the international monetary system from 1945 to 1971.
Financial forces such as inflation and taxation are considered uncontrollable because:
They are external forces beyond the influence of the firm, around which a manager can manage.
The present floating exchange rate system is not a totally free float because:
The forward currency market:
allows managers to lock in purchases of currencies at known rates.
Arbitrage functions to:
The process of buying and selling instantaneously to make profit with no risk
Purchasing power parity is a way to compare:
the number of units of a currency required to buy the same basket of goods and services in the foreign market that one dollar would buy in the United States or other home market
Exchange rate forecasting is:
to evaluate the foreign denominated cash flows involved in international transactions. Thus,
exchange rate forecasting is very important to evaluate the benefits and risks attached to the
international business environment.A forecast represents an expectation about a future value or values of a variable
Currency exchange controls are found most frequently in:
Foreign reserves are used to:
Foreign reserves are a source of currency for foreign debt service, import purchases, and other demands for foreign currency that domestic banks might encounter. The Chinese renminbi is convertible in current accounts (accounts for day-to-day banking) but not capital accounts (longer-term accounts), although recent hints in the international financial press suggest that China may be loosening controls so that the renminbi could become a hard currency, used for trade and as a part of foreign reserves.
To fully understand why, how, and where they intend to do business, now and over time, managers must have:
managers must fully understand why, how, and where they intend to do business, now and over time. This requires that managers have a clear understanding of the company’s mission, a vision for how they intend to achieve that mission, and an understanding of how they plan to compete with other companies. To meet these challenges, managers must understand the company’s strengths and weaknesses and be able to compare them accurately to those of their worldwide competitors. Strategic planning provides valuable tools that help managers address these global challenges.
To create a competitive advantage that is sustainable over time, the international company should try to develop competencies that:
that are valuable, rare, and difficult to imitate and that the organization is able to exploit fully. (pg. 249)
(1) create value for customers and for which customers are willing to pay; (2) are rare, because competencies shared among many competitors cannot be a basis for competitive advantage; (3) are difficult to imitate or substitute for; and (4) are organized in a way that allows the company to fully exploit and capture the value from the competitive potential of these valuable, rare, and difficult-to-imitate competencies.
According to a survey by Bain & Company, the management tool with the highest level of satisfaction among global executives is:
Strategic Planning (pg. 232)- also the most used management tool. It is a primary function of a company's managers and the ultimate manager of strategic planning and strategy making is the firm's chief executive officer.
An assessment conducted on the chain of interlinked activities of an organization or set of interconnected organizations and intended to determine where and to what extent value is added to the final product or service is known as:
A broad statement that defines the organization's purpose and scope is known as a:
A description of the company's desired future position if it can acquire the necessary competencies and successfully implement its strategy is known as a:
Action plans to enable organizations to reach their objectives are known as:
When a company faces relatively weak pressures for local responsiveness and cost reductions, it should tend to use a:
When there is strong pressure for a company to adapt its products or services for local markets, it should tend to use a
. In designing the organizational structure, management knows two concerns, __________ and __________, run counter to each other.
(1) finding the most effective way to departmentalize to take advantage of the efficiencies gained from specialization of labor and (2) coordinating the activities of those departments to enable the firm to meet its overall objectives.
Regarding the way international companies are structured and integrated:
No single structure is best for all companies and contexts. Rather, managers have to consider the nature of their company’s international operating environment and strategy—both currently and how they are expected to change in the future—when deciding when and how to modify the company’s organizational structure.
Companies that adopted the global organizational form felt that this organization would:
Of course, this organizational type is used for both multinational (multidomestic) and global companies. Global companies that use it consider the division in which the home country is located as just another division for purposes of resource allocation and a source of management personnel.
The international structural stages model suggests that a typical evolutional path for an international company's structure would be:
1. International Division, 2. Worldwide Product Division/Geographic Area Division (Alternative paths of Development of the Structure of International Companies), 3. Global Matrix
The regionalized organization seems to be popular with companies that:
manufacture products with a rather low, or at least stable, technological content that require strong marketing ability. It is also favored by firms with diverse products, each having different product requirements, competitive environments, and political risks. Many producers of consumer products, such as prepared foods, pharmaceuticals, and household products, employ this type of organization
The common characteristic of multinationals that are organized by function at the upper level is a narrow:
Global Corporate Form-Function…The commonality among the users of the functional form is a narrow and highly integrated product mix, such as that of aircraft manufacturers or oil refining companies.
An organization in which top-level divisions are required to heed input from a staff composed of experts of another organizational dimension in an attempt to avoid the double-reporting difficulty of a matrix organization but still mesh two or more dimensions is known as a:
A structure organized by more than one dimension at the top level is known as a:
Problems with the matrix structure include that:
One problem with the matrix is that the two or three managers (if it is a three-dimensional matrix) must agree on a decision. This can lead to less-than-optimum compromises, delayed responses, and power politics in which more attention is paid to the process than to the problem. When the managers cannot agree, the problem goes higher in the organization and takes top management away from its duties. Dow Chemical Company, which has operations in more than 175 countries, changed its organizational structure from a geographic matrix to one of global business processes and 16 global business units that have individual global profit-and-loss responsibility.
The potential benefits of the virtual corporation concept include that:
In particular, it permits greater flexibility than is associated with more typical corporate structures. Rather than building competence from the ground up and incurring high startup costs that could limit future production decisions, virtual corporations form a network of dynamic relationships that allow them to take advantage of the competencies of other organizations in order to respond rapidly to changing circumstances
A global mindset involves:
It has been argued that global mindset has two key components: (1) intellectual intelligence, which includes business acumen, and (2) global emotional intelligence, which includes self-awareness, cross-cultural understanding, cultural adjustment, and cross-cultural effectiveness. 2 These two components provide the foundation for the global behavior skills that comprise a person’s global leadership style.
The interdependence that confronts global leaders results from:
interdependence (although dispersed geographically, the different units of the company are systematically linked to each other rather than being isolated and are increasingly dependent on external organizations)
Global leaders confront increased ambiguity because:
they are given such vague information. ambiguity (the challenge of dealing with information that lacks clarity and incorporates both quantitative and qualitative dimensions, hindering the understanding of cause-and-effect relationships)
Project GLOBE found that:
some leadership traits overlap across cultures.different nations evidenced both similar and dissimilar perspectives regarding the traits of leaders. The leadership traits that were found to be universally acceptable included decisive, informed, honest, dynamic, administratively skilled, coordinator, just, team builder, effective bargainer, dependable, win–win problem solver, plans ahead, intelligent, and excellence oriented. Leadership traits that were viewed universally as being unacceptable included ruthless, egocentric, asocial, nonexplicit, irritable, noncooperative, loner, and dictatorial..
Acceptable leadership traits across cultures, according to Project GLOBE, include:
Global leadership can be regarded as different in kind from domestic leadership because:
Global leadership is leadership behavior that occurs in the more complex global context, where the challenge of leadership is exacerbated based on the dimensions of multiplicity, interdependence, ambiguity, and dynamism. The degree of difference between domestic and global leadership in the level of demands on skills and their applications is so great, and the nature of the possible outcomes that can be produced within a global context can be so profoundly greater, that global leadership can ultimately be regarded as being different in kind from domestic leadership.
The roles of the global leader include:
The Pyramid Model of Global Leadership identifies:
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