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Chapter 6 Study Guide

Chapter 6
6.2–Globalization of Markets
Globalization: the trend toward a more integrated and interdependent global economy
What is causing globalization to occur more rapidly?
Declining trade barriers: tariffs are being reduced by many countries
Technology enablement: air travel, communications, access to the internet
Rise of multinational enterprises (MNEs)
Formation of global institutions: World Trade Center, World Bank, etc.
6.3–Political Economy
Political economy (of a country): consists of the political climate, the economic conditions, and the legal
system that exists in that country
● Political Climate – does the country’s system of government favor free trade?
● Economic Conditions – does the country have a sound and stable economy with
sufficient wealth to make doing business there beneficial?
● Legal system – do the laws and business norms in a country ensure that contractual
agreements can be enforced, and the assets of the business can be protected?
Culture: the norms, beliefs, attitudes, mores, and values that are commonly shared by a large number of
residents of a country
6.4–Key Strategies for Conducting Business in International Markets
6.4.1–Determine whether to modify products or services to better conform with local preferences
● Global Standard: all products/services of a company are essentially unchanged in each market;
minimizes costs
● Combination Strategy: products/services of a company are customized for some countries where
the differences are significant, and the potential demand is large enough to warrant customization
6.4.2–Determine the entry strategy that will be used when conducting business in a country
● Export: either ship products from another country to the foreign country for sale through a
distributor or retailer or sell products/services directly to customers from another country into the
foreign country
● License: sell the rights to a third party to make and/or sell the business’ products/services in a
country or countries
Franchise: authorize a business partner to use the trademarks/patents and brands and provide
guidance in how to operate the business successfully in other countries