Notes, summaries, assignments, exams, and problems for Economy

Small Business Advantages:

• Greater focus: focus where they want; in places with greater profitability; in specific markets
• Greater cachet: greater sense of exclusiveness so they can charge more for their output, leading to higher profit margins
• Greater motivation: more prestige can motivate managers/employees
• Competitive advantage: giving a more personalized service and being more flexible
• Less competition: focusing on a niche gives limited competition
• Internal growth: slowly, steady and out of the existent operations of the business. They don't take many risks. Expands by selling more products or by increasing its product range. Usually self-financed
• External growth: quick and riskier methods. Expands by entering into an arrangement with another

External Growth through Mergers

Motives for Mergers

• Financial Motives:
  • Portfolio Effect: Reduces risk while maintaining the firm’s rate of return.
  • Access to Financial Markets: Attracts prestigious investment bankers, facilitates debt and equity financing, and leverages cash positions.
  • Tax Inversions: Moving headquarters overseas to optimize tax liabilities.
  • Tax Loss Carryforward: Utilizing the reported tax losses of an acquired company to shield the earnings of the acquiring firm.
• Non-financial Motives:
  • Expansion of management and marketing capabilities.
  • Acquisition of new products.
  • Horizontal Integration: Acquisition of direct competitors.
  • Vertical Integration: Acquisition of buyers or sellers in the supply chain.
  • Synergistic Benefits: Achieving the

Values and Attitudes

Values and attitudes vary between nations, and even vary within nations. So if you are planning to take a product or service overseas make sure that you have a good grasp the locality before you enter the market. This could mean altering promotional material or subtle branding messages. There may also be an issue when managing local employees.

Education

The level and nature of education in each international market will vary. This may impact the type of message or even the medium that you employ.

Social Organizations

This aspect of Terpstra and Sarathy’s Cultural Framework relates to how a national society is organized.

Technology and Material Culture

Technology is a term that includes many other elements. It includes questions... Continue reading "International Marketing: Key Factors to Consider" »

Consumer

person who buys things or uses

Retailer

company or persona who sells directly to the public, especially through shops

Wholesaler

person or company that sells goods in large quantities to shop keepers

Manufacturer

person or organization that makes goods

Distribution

person or company that supplies goods to shops or another business

Transaction

business done between people, often involving a buyer and seller

Goods

things that are produced to be sold

Services

doing something for customers but not producing goods

Value

how much something is worth in money

Supply

quantity of goods available

Turnover

the value of the goods or services sold during a certain period of time

Margin

difference between costs and selling price

Discount

reduction in the usual price of something

Deposit

small... Continue reading "Understanding the Consumer Goods Industry: Key Terms and Concepts" »

Chapter 21: International Financial Management Concepts

Key International Finance Terminology

• Know all terms and their definitions.

Multinational Corporations (MNCs)

What is a multinational corporation? MNCs engage in various forms of international business:

• Exporter
• Licensing Agreement
• Joint Venture
• Fully Owned Foreign Subsidiary

Foreign Exchange Rates and Influencing Factors

Understand foreign exchange rates and the factors that influence them:

• Purchasing Power Parity (PPP) and the Purchasing Power Parity Theory
  • Practice Problems 3, 4
• Inflation
• Interest Rates and the Interest Rate Parity Theory
• Balance of Payments (A trade surplus strengthens the currency; a trade deficit weakens it.)
• Government Policies (e.g., central bank’s actions)
• Other factors: stock

Elements Influencing the GDP:

Consumption:

Consumption is the value of goods and services bought by people.

An increase of consumption will cause GDP to increase. This means there is an increase in living standards as more people can consume higher levels of goods and services.

Increased GDP per Capita will improve government finances. This is because people will pay more income tax and more VAT; firms will pay more corporation tax. Also, the government will spend less on income support and unemployment benefits. Therefore, the budget deficit will decrease. Also, the government could decide to spend more on investing in the economy, e.g. spending on better roads. This will enable higher rates of growth in the long term.

An increase of consumption... Continue reading "Factors Influencing GDP Growth and Stability" »

Global Marketing Channels and Logistics

Key Concepts in Physical Distribution

Intermodal Transportation

A freighter loaded with 40-foot shipping containers utilizes **Intermodal Transportation**.

A French winery packs its wine in a 40-foot container, utilizing **Intermodal Transportation**.

Inventory Management Tools

An important new tool for inventory management is: **RFID** (Radio-Frequency Identification).

Inventory management is primarily focused on: **ensuring cost control**.

Logistics and Physical Distribution

Order processing, warehousing, and transportation are components of: **Physical Distribution and Logistics**.

Physical distribution and logistics are concerned [with many operational aspects, but not typically] **designing in-store displays*

Exercises in International Trade

1. Define the Following Terms:

• Forwarding Agent: A person, agency, or enterprise engaged in the collection, shipment, and delivery of goods. For example, a company that arranges the transportation of products from a manufacturer to a retailer.
• Green Channel: The route followed when passing through customs at an airport or other port of entry for passengers who claim to have no dutiable goods to declare.
• Customs: The official organization responsible for collecting taxes (duties) on goods entering a country and preventing the entry of illegal goods.
• Freight: Goods transported in bulk by truck, train, ship, or aircraft.
• Invoice: A document listing goods supplied or services rendered, stating the sum of money owed for

Inventory and Logistics Fundamentals

• The less frequently a product is ordered, the lower the inventory carrying costs: FALSE
• The term "logistics" management describes: TRUE
• Three of the world's five largest retailers: TRUE
• Trucks' capability is second only to water: FALSE
• Water transportation is rated "low": TRUE
• Which of the following transportation modes is fastest: Air

Global Retail Strategy and Market Entry

• The reason why Saks Fifth Avenue has licensed: TRUE
• The retail environment in developing countries presents: Mom-and-pop stores
• To motivate shopkeepers to stock more of P&G's products: Golden Store Program
• Walmart pulled out of Germany: TRUE
• What solution did Andersen Consulting provide: Package the bread in plastic bags
• When a company uses intermodal

The Necessity of a Firm's Mission Statement

Firms require a clear mission statement for several critical reasons, as it defines the organization's purpose and trajectory. A well-defined mission statement:

• Helps to determine the direction for the company.
• Displays the future vision of the company.
• Provides the basis for organizational alignment.
• Offers a structure for decision making.
• Helps to frame strategy and facilitates helpful changes.
• Assists in both strategy implementation and evaluation.

Understanding Porter's Five Forces Model

Porter's Five Forces Model is a crucial framework for analyzing industry competition and developing robust business strategy. The five forces are:

1. Rivalry Among Competing Firms

   This force usually takes the form of jockeying