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International Business Study Guide 3

International Business Study Guide 3
Klingman, D.
International strategic management – comprehensive and ongoing management planning process
aimed at formulating and implementing particular international strategy to effectively compete in the
Strategic planning - developing international strategy
International strategies – comprehensive frameworks for achieving a firm’s fundamental goals
“In Practice” blurb – International businesses can benefit from global efficiencies,
multinational flexibility, and worldwide learning; organizational structure that allows for these
“In Practice” blurb – Four basic approaches to competing internationally: home replication,
multidomestic, global, transnational
Distinctive competence – What do we do exceptionally well, compared to competitors?
Scope of operations – Where are we going to conduct business? Countries, regions in a
country, cluster of countries
Resource development – In order to compete in these countries, how should we allocate our
resources to them?
Synergy – How can different elements of our business benefit each other?
Mission statement – clarifies the organization’s purpose, values, and directions
SWOT analysis – strengths, weaknesses, opportunities, threats
Environmental scan – systematic collection of data about all elements of the firm’s external and
internal environments to include markets, regulatory issues, competitors’ actions, production costs,
and labor productivity
Value chain – breakdown of the firm into important activities: production, marketing, human resource
Strategic goals – major objectives a firm wants to accomplish by pursuing a particular course of
Tactics – way of accomplishing specific goals or plans
Control framework – set of managerial and organizational processes that keep the firm moving
toward its strategic goals
Single-business strategy – firm relies on single business, product, or service, for all its revenue
Related diversification – firm to operate in several different but fundamentally related businesses,
industries, or markets at the same time
Strategic business units (SBUs) – bundling businesses together based on related or unrelated
Differentiation strategy – establish and maintain an image that the SBU’s products or services are
fundamentally unique from others in the same market
Overall cost leadership strategy – calls for a firm to focus on achieving highly efficient operating
procedures so that its costs are lower than its competitors’
Focus strategy – target specific types of products for certain customer groups or regions
“In Practice” blurb – firms need successful strategies at 3 organizational levels: corporate,
business, and functional
3 forms of business strategy: differentiation, cost leadership, and focus
Ownership advantages – tangible or intangible resources owned by a firm that grant it a competitive
advantage over its industry rivals
Liability of foreignness – reflects the informational, political, and cultural disadvantages that foreign
firms face when trying to compete against local firms in the host country market
Location advantages – factors that affect the desirability of host country production relative to home
country production
Internalization advantages – factors that make it desirable for a firm to produce a good or service
itself rather than contracting with another firm to produce it
Indirect exporting – firm sells its product to a domestic customer, which in turn exports the product, I
either its original form or a modified for
Direct exporting – sales to customs, distributors or end-users, located outside the firm’s home
Intracorporate transfer – sale of goods by a firm in one country to an affiliated firm in another
Intermediaries – third parties that specialize in facilitating imports and exports (like freight
Export management company (EMC) – firm that acts as its client’s export department (logistics)
Webb-Pomerene association – group of U.S. firms that operate within the same industry and that
are allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws
International trading company – firm directly engaged in importing and exporting a wide variety of
goods for its own account
Manufacturers’ agents – solicit domestic orders for foreign manufacturers, usually on a company
mission basis
Manufacturers’ export agents – acts a foreign sales department for domestic manufacturers, selling
those firms’ goods in a foreign market
Export and import brokers – bring together international buyers and sellers of such standardized
commodities as coffee, cocoa, and grains
Freight forwarders – specialize in the physical transportation of goods, arranging customs
documentation, and obtaining transportation services for their clients
Licensing – licensor (firm) leases the right to use its intellectual property (technology, work methods,
patents, copyrights, brand names, or trademarks) to another firm (licensee) in return for a fee
Royalty – compensation under a licensing agreement
“In Practice” blurb – international licensing can be profitable because the licensing firm can
tap into new markets while incurring little additional commitment of cash or human resources;
downside is the loss of control over what the licensee will do when granted the license
Franchising – allows the franchisor more control over the franchisee and provides for more support
from the franchisor to the franchisee
Franchisee – operates a business under the name of another (franchisor) in return for a fee
Contract manufacturing – used by firms that outsource most or all of their manufacturing needs to
other companies
Management contract – agreement where one firm provides managerial assistance, technical
expertise, or specialized services to a second firm for some agree-on time in return for compensation
Turnkey project – contract under which a firm agrees to a fully design, construct, and equip a facility
and then turn the project over to the purchaser when it is ready for operation
B-O-T project – a firm builds a facility, operates it, and later transfers ownership of the project to
some other party
Acquisition/brownfield strategy – buying existing assets in a foreign country
Greenfield strategy – involves starting a new operation from scratch
Joint ventures – are created when two or more firms agree to work together and create a jointly
owned separate firm to promote their mutual interests
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