Business Environment Exam - Final Exam Review

**Business Environment Final Exam** **The levels of Regional Economic Integration:** **A free trade** area eliminates most barriers to the trade of goods and services among the members of the countries. Example: EFTA European Free Trade Association -- between Norway, Iceland, Liechtenstein, and Sw...

**Business Environment Final Exam** **The levels of Regional Economic Integration:** **A free trade** area eliminates most barriers to the trade of goods and services among the members of the countries. Example: EFTA European Free Trade Association -- between Norway, Iceland, Liechtenstein, and Switzerland, which focuses on trade of industrial goods, and precludes agriculture. **A Custom Union** eliminates all barriers to the trade of goods and services among the members of the countries and adopts a common external trade policy. Example: Andean Pact (Bolivia, Columbia, Ecuador and Peru). **A Common Market** eliminates all barriers to the trade of goods and services among members, adopts a common external trade policy and also allows for the free movement of the factors of production. Example: MERCOSUR between Brazil, Argentina, Paraguay, Uruguay and Venezuela. **A Political Union** involves a central political collective that coordinates the economic, social, and foreign policy of member states. Example: The European Union. **Modes of Entry:** **Exporting.** Which by definition is selling products that were produced in one country and sold in another. Often characterized as the first step a manufacturing firm will take to expand into foreign markets. It is typically considered a lower risk investment and is sometimes used as a starting point for firms to expand further in the future. **Does it work for all firms?** The quick answer is no, exporting is most suitable for firms with products that can be scaled easily within the manufacturing process, pre-established logistical pathways, and be able to adapt to foreign markets and regulations, typically for service-based businesses, exporting is not very effective. **Turnkey Projects.** A contractor will manage the project in its entirety, which will deliver a ready to operate facility to the client. These are mostly seen in the energy, construction, or large-scale manufacturing industries and includes elements such as equipment setup, process design and employee training. **What project parameters are normally associated with this approach?** Expensive upfront capital investment, complex processes, clear deadlines and deliverables, and is often customized to the client's specific requirements and specifications. **Licensing.** A licensor will allow a foreign company to use intellectual property such as trademarks or patents in exchange for royalties. This is typically a minimal investment and will provide limited control over operations. **Franchising**. Is a form of licensing where the franchisor sells the intellectual property but also imposes operational standards. This is common in retail and fast-food chains; they follow strict operational guidelines to maintain brand consistency. **Joint Ventures.** Is a partnership where two firms from different countries share ownership, control and profits. It is a shared risk and investment, provides internal local knowledge to the foreign party, however, can provide potential conflict due to difference in goals and management styles. **Wholly Owned Subsidiary.** This occurs when the foreign firm owns the entire operation in the new target country. This can be done through a term known as a brownfield investment, where they would acquire an existing operation through a merger or a simple acquisition. This is a high risk and cost endeavour, that gives the firm full control over the operations and has high potential for long term profit. **E-Commerce.** Uses a website to market and sell products or services globally. This enables firms to reach international cliental directly, reduces costs associated with other expansion methods such as retailors to sell their product, and can be scaled quite easily for small to medium sized firms. **What is the difference between and exporting as a mode of entry?** E-commerce sells directly to customers, while exporting is a channel in which firms will rely on distributors to manage logistics and local market presence. For example, if I sell chairs online and ship directly to a customer that would be an e-commerce transaction but if I were to send a load of chairs to a distributor in a foreign country for them to sell in their local market, that would be exporting. A table of information about the cost of a company Description automatically generated with medium confidence **International Organizational Strategy:** A set of planned actions taken by managers to help a company meet its objectives. **Global (Standardization) Strategy** increase profitability and growth by reaping the cost reductions from economies of scale, learning effects, and location economies. The goal is to pursue a low-cost strategy on a global scale. This makes the most sense when there are strong pressures for cost reductions, demands for local responsiveness are minimal and clients are globalized. **International:** takes products first produced for the domestic market and sells them internationally with only minimal local customization. This approach makes most sense when there is low-cost pressures and low pressure from the local response, closely related to the exporting mode of entry. **Transitional** is the attempt of simultaneously achieve low costs through location economies, economies of scale, and learning effects, differentiate the product offering across geographic markets to account for local differences, and coordinate a multidirectional flow of knowledge and skills between the firms' global subsidiaries. This makes most sense when the cost pressure and the pressure for local responsiveness are high. **Multi -- domestic strategy (localization)** increases profitability by customizing goods or services, so they cater to the preferences in the different international markets. This makes the most sense when there are substantial differences across the nations in regard to the client's preferences and when the burden of cost is not very high. **The Implications on the managers,** the chosen strategy can determine the extent, scale and scope of how cooperate supports this endeavour, the choice of strategy can determine the extent of the firm's strategy and can determine how diversified the firm's functions are including HR, Finance, Accounting and Supply Chain. **Distribution** **Marketing Channels** exist to create **utility** for customers such as place (convenient location of the product), time (Product available in a timely manner), form (product is processed in proper condition and is ready to use) and information (general communication about the product) utilities. A **distributor** carries products or brands on a selective basis, and an **agent** is one who negotiates transactions between 2 or more parties but does not take on the title of the goods being transferred. **Channel Establishment:** **Direct Involvement** is where a company establishes its own sales force or operates its own retail stores, **Indirect involvement** is when the company utilizes independent agents, distributors, and wholesalers. These strategies must fit the company's competitive position and marketing objectives within each national market. **Logistics** are the title within supply chain that refers to the planning, implementation, and controlling of the movement of materials, products, and services from point of origin to point of consumption. Logistics are consistently influenced by the deregulation of economics worldwide, the changes in consumer behaviour, technology, and world events. Its evolution is constant with the growing business solutions industry. **Order Processing** involves order entry into a company system, the handling of that order, and the distribution or delivery of it. A **warehouse** is used to store goods until sold, where as **distribution centers** are designed to receive goods efficiently and then fill orders. **Transportation** requires strategy to choose the shipping strategy with the right combination of reliability, cost, speed, accessibility, capability and ease of tracing. **Choosing the right strategy** is extremely important, international markets present limits even to the most successful strategies, with sometimes active infrastructures/society and cultural getting in the way. **Working with distributors** requires you to pick them based on qualities such as their capability of market development, rather than just picking one with a couple customer contacts. Treat them as long-term partners, and not temporary market-entry tools. **Global retailing strategies**: **Organic growth** where a company uses its own resources to open a store on a greenfield site or acquire one from an existing retail facility **Franchise** is an appropriate strategy when the entry barrier is low, and the market is culturally distant in terms of consumer behaviour or retail structure. **Chain Acquisition** is when a company with multiple existing outlets in a foreign country are purchased. **Brownfield sites** are often previously developed land that is no longer in use or may be contaminated from previous activity. **Greenfield** is rural land that has not been built on yet (undeveloped).