International Business Strategies

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Questions and Answers

What is one of the main reasons companies go abroad?

To diversify their risks by entering new markets (correct)

To reduce their export capacities

To acquire inputs less competitively than they can at home

To become overly dependent on one location or market

What is an external driver of international business?

Shift in consumer preferences

Technological progress worldwide (correct)

Global economic downturn

Changes in local government policies

What is the term used to describe the recent trend towards lowering trade barriers?

Mercantilism

Liberalization (correct)

Globalization

Protectionism

Why do companies go abroad to acquire inputs?

To acquire inputs more competitively than they can at home Signup and view all the answers

What is a benefit of going abroad for companies with surplus capacities in their home country?

Utilizing their surplus capacities and exporting to new markets Signup and view all the answers

What affects international business by raising general awareness of foreign markets or products?

Technological progress worldwide Signup and view all the answers

What is a risk that companies may face if they become overly dependent on one location or market?

Production and sales risks Signup and view all the answers

What is one of the factors that has helped to improve global communications and logistics?

Technological progress worldwide Signup and view all the answers

What is the primary reason for the accumulation of value at different speeds in various parts of different value chains?

Diverse levels of internalization of activities by companies Signup and view all the answers

What has been the trend in FDI flows over the past decade?

A sharp rise in North-South flows, South-South flows, and lately South-North flows Signup and view all the answers

What is a primary driver of international business for companies seeking to expand sales?

Desire to leverage existing competencies in a new, foreign market Signup and view all the answers

What is a consequence of the rise in global trade volumes and FDI since the 1990s?

An increase in the complexity of international business Signup and view all the answers

What is a key factor in the decision to internalize activities for companies?

The desirability of achieving critical mass and economies of scale Signup and view all the answers

What is a key insight from the study of international business?

That macro analyses of national political interest are linked to micro discussions of business strategy Signup and view all the answers

What is a consequence of the rise of certain LDCs, starting with the Asian ones?

A shift in the distribution of benefits from international business Signup and view all the answers

What is a key driver of the growth of international business?

The desire to expand sales in a new, foreign market Signup and view all the answers

What is a significant obstacle to managers succeeding outside of their home country?

Xenophobia Signup and view all the answers

What is the primary purpose of studying international business?

To develop strategies to overcome obstacles to success abroad Signup and view all the answers

What is the term used to describe a company's output as the culmination of a series of acts in which raw materials are transformed into semi-processed goods and finally end products?

Value chain Signup and view all the answers

What is a key component of a multinational enterprise (MNE)?

Subsidiaries located in different parts of the world Signup and view all the answers

What is offshore foreign direct investment an example of?

Pillar of international business Signup and view all the answers

What is the term used to describe activities undertaken during the earlier production phases?

Upstream Signup and view all the answers

What is a key requirement for successful international business?

Ability to relativize one's own outlook Signup and view all the answers

What is a central concept in international business that helps companies understand their output?

Value chain Signup and view all the answers

Study Notes

Reasons for International Business

Companies go abroad when their domestic economy is too small to buy all of their output, leaving surplus capacities in their home country factory.
Going abroad allows companies to diversify their risks, reducing dependence on one location or market.
Companies also go abroad to acquire inputs more competitively than they can at home, such as physical resources, cheap labor, or technology.

External Drivers of International Business

Technological progress has improved global communications and logistics, facilitating international business.
The regulatory framework, including liberalization and trade barriers, affects international business.
The rise in global trade volumes and foreign direct investment (FDI) has led to an increase in international business.

Value Chains and Foreign Direct Investment

Companies internalize activities to accumulate value at different speeds in various parts of different value chains.
Economists compare the value-added contents of national imports versus exports, known as the terms of trade.
FDI flows have increased, with a shift from North-North flows to North-South, South-South, and South-North flows.

Challenges of International Business

Companies face obstacles due to xenophobia and protectionism, requiring "insiderization" strategies to succeed.
Managers need to relativize their own worldview to succeed in international business.

Multinational Enterprises and Configurations

Multinational enterprises (MNEs) range from huge companies operating globally to small and medium-sized businesses operating overseas sporadically.
MNEs are often structured into configurations comprising a head office and subsidiaries located in different parts of the world.

Value Chain and Offshore Foreign Direct Investment

The value chain perceives a company's output as the culmination of a series of acts, from raw materials to end products.
Activities during the earlier production phases are called upstream, while those during the later marketing phases are called downstream.
Offshore foreign direct investment is a second pillar of international business, alongside cross-border trade.

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Description

Learn about the reasons why companies expand internationally, including diversified risk and surplus capacities. Understand the benefits and importance of going abroad for business.