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ITTL
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ITTL

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Questions and Answers

Which regional economic organization was formed as a replacement of the former preferential trade area (PTA)?

  • Indian Ocean Rim Association (IORA)
  • Common Market of Eastern and Southern Africa (COMESA) (correct)
  • South Asian Association for Regional Cooperation (SAARC)
  • Asia Pacific Economic Cooperation (APEC)

    • The Asia Pacific Economic Cooperation (APEC) accounts for 60% of the world GDP.

    True

    Which country is the largest trader in the South Asian Association for Regional Cooperation (SAARC)?

    India

    The goal of the Indian Ocean Rim Association (IORA) is to enhance cooperation within the ______ Region.

    <p>Indian Ocean</p> Signup and view all the answers

    Match the following focus areas with the Indian Ocean Rim Association (IORA):

    <p>Maritime safety and security = IORA Trade and investment facilitation = IORA Fisheries management = IORA Disaster risk management = IORA</p> Signup and view all the answers

    What is the purpose of an ABC analysis in supply chain management?

    <p>To categorize suppliers based on their contribution to purchase volume</p> Signup and view all the answers

    What percentage of suppliers are represented in the 'C' category in an ABC analysis?

    <p>50%</p> Signup and view all the answers

    In the ABC analysis, approximately 30% of suppliers fall into category '___'.

    <p>B</p> Signup and view all the answers

    Geopolitics primarily focuses on the study of a country's climate and topography.

    <p>False</p> Signup and view all the answers

    What is the main idea behind the Long Cycle Theory in geopolitics?

    <p>Connection between war cycles, economic supremacy, and world leadership</p> Signup and view all the answers

    What is the scope of international trade?

    <p>Between continents and countries</p> Signup and view all the answers

    Logistics involves the process of planning, implementing, and controlling the transportation of goods, services, and information from the point of origin to the point of consumption.

    <p>True</p> Signup and view all the answers

    What is the purpose of a Free Trade Zone?

    <p>No duties are charged in that particular zone</p> Signup and view all the answers

    In a Customs Union, members agree to reduce or abolish trade barriers between themselves and establish mutual ____________ against outsiders.

    <p>tariffs and quotas</p> Signup and view all the answers

    Match the following trading blocks with their characteristics:

    <p>European Economic Area (EEA) = Consists of 27 EU member states and 3 EFTA states North American Free Trade Agreement (NAFTA) = The world's largest free trade area Mercado Comun del Cono Sur (MERCOSUR) = 5th largest economy with four founding members Asean Economic Community (AEC) = Third largest economy in Asia</p> Signup and view all the answers

    Is there an upper limit in vessel size? If yes, why?

    <p>Yes, there is an upper limit in vessel size. It's due to the limitation of the size of the port.</p> Signup and view all the answers

    What is the key facilitator of trade growth according to the text?

    <p>Container shipping</p> Signup and view all the answers

    Why do recessions have different impacts on consumption levels? Select the correct statement:

    <p>Durable goods experience significant impacts</p> Signup and view all the answers

    Container shipping carries approximately __% of all international seaborne trade in volume.

    <p>16</p> Signup and view all the answers

    Foreign Direct Investments (FDI) flows refer to financial flows from abroad to invest locally.

    <p>False</p> Signup and view all the answers

    What is the primary difference between offshoring and outsourcing?

    <p>Offshoring allows the company to still own and control the process in a lower cost location, whereas outsourcing involves handing over process ownership to a third party.</p> Signup and view all the answers

    What are some common reasons for offshoring?

    <p>Lower costs in communication and IT</p> Signup and view all the answers

    Nearshoring involves transferring a business operation to a nearby country rather than a more distant one, while ____ involves moving the activities back to the original home market.

    <p>backshoring/reshoring</p> Signup and view all the answers

    Integration in the supply chain is always synonymous with collaboration.

    <p>False</p> Signup and view all the answers

    What is the main risk faced by exporters related to changes in the political landscape of the country where the business is being conducted?

    <p>Political risk</p> Signup and view all the answers

    Which type of currency is characterized as politically and economically stable, widely accepted, and preferred for international transactions?

    <p>Hard currency</p> Signup and view all the answers

    Cargo insurance covers the loss or damage of goods during transportation.

    <p>True</p> Signup and view all the answers

    Exchange rate risk is related to fluctuations in exchange rates, which can impact the value of the exporter's revenues when converted into their _______ currency.

    <p>domestic</p> Signup and view all the answers

    What is the process of organizing suppliers into tiers based on their importance to the supply chain called?

    <p>Supplier tiering</p> Signup and view all the answers

    What is one of the main reasons for companies outsourcing manufacturing?

    <p>Reduce direct and indirect costs</p> Signup and view all the answers

    What are factors to consider when choosing a mode of freight transportation?

    <p>Freight rates to be charged</p> Signup and view all the answers

    What is volumetric charging based on?

    <p>dimensions of the consignment</p> Signup and view all the answers

    Road transport has limitations in terms of capacity for weight and volume. True or False?

    <p>True</p> Signup and view all the answers

    What is the goal of sustainable logistics?

    <p>To reduce negative impacts associated with freight movement</p> Signup and view all the answers

    Service supply chains are characterized by standardization and repeatability.

    <p>False</p> Signup and view all the answers

    In a service supply chain, services are inseparable from the point of consumption, making them ________ from the service provider.

    <p>created</p> Signup and view all the answers

    Match the service attribute with its impact on purchasing:

    <p>Intangibility = Vague SLA’s Heterogeneity = Subjective, user dependent Perishability = Requires more communication, you can’t store services Inseparability = Service is created at point of consumption; tight coupling</p> Signup and view all the answers

    What is the goal of the international Kyoto Protocol in terms of carbon emissions reduction by 2050?

    <p>60%</p> Signup and view all the answers

    What advice would you give to a company that is looking to replace multiple 3PL relationships with a single 4PL solution?

    <p>Some things to consider if wanting to switch to a 4PL solution are costs, speed, performance levels, security, and history of the company.</p> Signup and view all the answers

    How does the value chain differ from the supply chain?

    <p>The supply chain typically sees material flows moving downstream from the supplier to the customer, while value flows move in the opposite direction: from the customer to the supplier.</p> Signup and view all the answers

    What are the Seven Wastes of Lean Production?

    <p>Inappropriate processing</p> Signup and view all the answers

    The Bullwhip-effect refers to a phenomenon where inventory levels remain consistent along the supply chain.

    <p>False</p> Signup and view all the answers

    Study Notes

    International Trade and Logistics

    • International trade involves the exchange of goods and services between countries.
    • Trade is a key aspect of international trade, including the exchange of goods, services, data, and knowledge.
    • Logistics involves the planning, implementation, and control of procedures for the efficient and effective transportation and storage of goods, including services and related information.

    Supply Chain Management

    • Supply Chain Management (SCM) is the management of a network of relationships within a firm and between interdependent organizations and business units.
    • SCM involves the flow of goods, money, information, and reverse flow, and includes material suppliers, purchasing, production facilities, logistics, finance, and information from the original producer to the final consumer.

    Transport

    • Transport plays a crucial role in international trade and logistics, involving the movement of goods from one place to another.
    • Different modes of transport include land, air, and sea transport.
    • Transport does not add value to the raw material, assembly part, or finished product, but makes it available where the customer wants it.

    Trade Between Countries

    • There are two basic types of trade between countries:
      • Countries trade because they cannot produce certain goods or services themselves.
      • Countries trade because they can produce goods or services at a lower opportunity cost.

    Comparative Advantage

    • The concept of comparative advantage, introduced by David Ricardo, states that a country should specialize in producing goods for which it has a relative advantage and exchanging them for other goods from nations with a comparative advantage.

    Evolution of World Trade

    • The growth of world trade has been influenced by various factors, including the establishment of international institutions, wars, and economic crises.
    • The growth rate of international trade has varied over time, with periods of rapid growth and decline.

    Protectionism

    • Protectionism is a policy of protecting domestic industries by restricting imports through tariffs, quotas, and other measures.
    • Methods of protection include tariffs, non-tariff barriers, domestic subsidies, and import deposits.

    Regions in World Trade

    • There are several regional trading blocs, including:
      • European Economic Area (EEA)
      • North American Free Trade Agreement (NAFTA)
      • Mercado Comun del Cono Sur (MERCOSUR)
      • Asean Economic Community (AEC)
      • Common Market of Eastern and Southern Africa (COMESA)
      • Asia Pacific Economic Cooperation (APEC)
      • South Asian Association for Regional Cooperation (SAARC)
      • Indian Ocean Rim Association (IORA)
      • Latin American Integration Association (LAIA)
      • Southern African Development Community (SADC)

    Organisations in World Trade

    • Several international organisations play a crucial role in promoting and regulating international trade, including:
      • International Monetary Fund (IMF)
      • The World Bank
      • General Agreement on Tariffs and Trade (GATT)
      • World Trade Organization (WTO)

    Balance of Payments and Management

    • A country's balance of payments is a measure of its trade and financial transactions with other countries.
    • The balance of payments includes the balance of trade, which is the difference between a country's exports and imports.

    Managing Exchange Rates

    • Exchange rates can be managed through various methods, including fixed exchange rates, floating exchange rates, and devaluation.
    • The gold standard, which was established in the 19th century, provided a system of fixed exchange rates and was used until the mid-20th century.### International Trade and Finance
    • After World War II, the IMF established a new system of fixed exchange rates, which were pegged to gold.
    • Nations could make minor adjustments to their exchange rates in cases of fundamental disequilibrium, but major adjustments were only allowed in extreme circumstances.
    • By the 1960s, the system became unstable, and the US abandoned the gold standard in 1971, followed by the UK and France.

    Marketing and Trade

    • The 4Ps approach is a simplistic but useful interpretation of the basic decision-making areas of the marketing plan: Product, Place, Price, and Promotion.
    • Trade and distribution channels include:
      • Direct: selling directly to the end-user.
      • Commission agent: responsible for selling, promotion, and order getting, but does not handle goods.
      • Distributor: purchases goods from the manufacturer and resells them at a profit.
      • Retailer: sells goods to the end-user.
      • Local company: set up in various forms, such as sales office, stockist, assembly facility, or manufacturing facility.

    Licensing and Franchising

    • Licensing is the sale of intellectual property, such as patents, know-how, trade names, or copyright, in return for disclosure fees and royalties.
    • Licenses are granted to:
      • Control the selling operation (prevent cheap copies).
      • Implement a standard company policy.
      • Ensure royalties are immune from exchange/transfer control.

    INCOTERMS and Payment Methods

    • INCOTERMS is a detailed breakdown of the seller's and buyer's duties.
    • Methods of payment are measured on:
      • New customer.
      • Long-term partnerships.
      • New destination.
    • Payment methods include:
      • Cash in advance.
      • Letter of credit.
      • Bank guarantee.

    Geopolitics and Country Risk

    • Geopolitics is the study of the effect of a country's position and population on its politics.
    • Country risk refers to the uncertainty associated with investing in a particular country, which can lead to losses for investors.
    • Risks include:
      • Geopolitical risk: associated with wars, terrorist acts, and tensions between states.
      • Country-level risk: emerges from the national political environment, government stability, or legislation.
      • Regulatory risk: arises from changes in laws and regulations.
      • Social risk: arises from groups, such as trade unions or consumer organizations, that can affect markets and companies.

    International Business and Trade

    • The ABC analysis is a method of categorizing suppliers based on their purchase volume:
      • A: 20% of suppliers add 80% of the purchase volume.
      • B: Additional 30% of suppliers add 15% of the purchase volume.
      • C: 50% of suppliers represent only 5% of the purchase volume.
    • The export order process involves a logical sequence of tasks, including:
      • Enquiry.
      • Quotation.
      • Purchase order.
      • Order acknowledgement.
      • Order process and progress.
      • Packing and marking.
      • Space booking.
      • Documents prepared.
      • Goods dispatched.
      • Payment received.

    Globalisation and International Trade

    • The reduction of trade barriers between countries has led to the growth of international trade.
    • Maritime transport is becoming increasingly important, with a causal link between trade, maritime transport, and economic development.
    • Growth in international trade is driven by:
      • Growth in technical machinery.
      • Better transportation methods.
      • Increased demand for goods and services.
    • Container shipping is a key facilitator of trade growth, with a 16% share of international seaborne trade in volume and 50% in value.

    Impacts of Disruptions in Supply Chains

    • Recessions can range from light to severe, with varying levels of decline in consumption, trade, and freight rates.
    • The level of impact on consumption is related to the value of goods, with basic goods and luxury goods being the most resilient.
    • Durable goods, discretionary goods, and capital equipment are more susceptible to recessionary forces.
    • During recessions, consumers lose spending capacity, leading to postponed spending on durable goods.

    Container Shipping

    • Container shipping started in the mid-1950s and has led to:

      • Quicker, safer, and more effective movement of freight.
      • Scale increases, leading to advantages of scale.

    • Container shipping carries approximately 16% of all international seaborne trade in volume and 50% in value.

    • The impact of recessions on container shipping can be significant, with changes in production, transportation, and trade (supply) leading to a decline in merchandise trade.### Global Trade and Logistics

    • Bulk carriers, containerships, oil tankers, and LNG are types of vessels used in global trade.

    • The top 5 trade lanes generating the most trade and transport are:

      • Transpacific
      • Transatlantic
      • Euro-Asia

    • The top 3 commodities traded on the Asia to Northern/Europe trade lane are:

      • Electrical machinery
      • Metal manufactures
      • Textiles

    • The top 3 commodities traded on the Northern Europe/Mediterranean to Asia trade lane are:

      • Cork and wood
      • Pulp and waste paper
      • Crude fertilizers and minerals

    Measuring Logistics Performance

    • The Global Logistics Performance Index (LPI) is a tool to help countries identify challenges and opportunities in their trade and logistics performance.
    • The LPI scores of high-income countries are 48% higher than those of low-income countries.
    • The top 5 countries performing well on logistics are:
      • Germany
      • Sweden
      • Belgium
      • Austria
      • Japan
    • The Liner Shipping Connectivity Index (LSCI) is generated from five components:
      • Maximum vessel size in a country's ports
      • The number of companies providing services to a country's ports
      • The number of services offered by liner companies
      • The number of ships deployed on services to a country's ports
      • TEU capacity on the deployed ships
    • The top 5 economies with LSCI are in Asia:
      • China
      • Singapore
      • South Korea
      • Malaysia
      • Hong Kong

    Globalization and Localization

    • Globalization refers to a mix of economic, social, technological, cultural, and political changes throughout the world.
    • Examples of globalization include:
      • Commercial shipping
      • Global product flows (e.g., Barbie dolls with parts made in different countries)
    • Multinational companies (MNCs) have assets and facilities in other countries, with a centralized office for global management.
    • Transnational corporations (TNCs) operate in other countries, with no centralized management system.
    • Examples of MNCs include:
      • McDonald's
      • Apple
    • Companies can adopt different approaches to internationalization:
      • Ethnocentricity: adopting a superior approach, not changing products or services for other markets
      • Polycentricity: adopting a host country perspective, adapting products or services for local markets
      • Geocentricity: adopting a global perspective, tailoring products or services for local markets as needed
      • Glocalization: thinking globally, acting locally

    Foreign Direct Investment (FDI)

    • FDI refers to financial flows from a local company to invest abroad.
    • FDI is significant in the global economy and can dictate a country's success.
    • Countries compete to attract FDI by offering incentives, such as low corporate tax rates.

    Risks in International Trade

    • Physical risk: risk of loss or damage to goods during transportation.
    • Credit risk: risk of non-payment by the buyer.
    • Political risk: risk of changes in the political landscape affecting business operations.
    • Exchange rate risk: risk of fluctuations in exchange rates affecting revenue.
    • Mitigating physical risk:
      • Port security
      • Improved packaging
      • Quality control
      • Insurance contracts
    • Credit risk can be managed through:
      • Insurance
      • Credit control measures
      • Payment methods (e.g., cash in advance, open account)
    • Exchange rate risk can be managed through:
      • Contingency planning
      • Currency accounts
      • Forward exchange contracts
      • Currency options

    Supply Chain Relationships and Logistics Service Providers

    • Trends in the manufacturing sector emerging from globalization:
      • New sourcing patterns
      • International networks of production
      • Development of supply networks
    • MNCs implement their own supply chain operation and management practices across countries.
    • Recent trends:
      • Global competition
      • Sourcing
      • Presence
      • Competitors, partners, and customers from around the world
      • Global access to knowledge and new technologies
      • High level of customer awareness and expectation
    • Outsourcing:
      • Selecting an outsource partner
      • Actively managing the partner
      • Service Level Agreements (SLAs) and performance metrics
    • Supplier development:
      • Improvement efforts in both parties' interests
      • New and better products and solutions provided by suppliers
    • Virtual organizations outsource almost everything.
    • Supplier tiering:
      • Top Tier: Direct partners that help assemble the end product
      • Tier 2: Sub-suppliers to Tier 1 partners
      • Tier 3: Raw materials suppliers

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