1. Review for Final Business 187 – Global Dimensions of Business Prof. Wood

2. Format of the final will resemble the format of the midterms  Approximately 30 multiple choice questions  Two essays

3. The multiple choice will cover…  Key points from before the 2 nd midterm (See handout with “Elements to Remember from Before the 2nd Midterm” – available on web site )  More emphasis on questions from the last part of the course To be reviewed in these slides

4. Review of chapters since the 2 nd midterm

5. Key points in Chap. 17: Export and Import Strategies (Micro view)  Before the midterm Ch. 16 covered the macro view of marketing strategy Market potential analysis Gap analysis (for where you already have sales) International pricing Distribution systems Push vs. pull marketing

6. Ch. 17 deals with specific details of exporting  Characteristics of exporters Probability of being an exporter increases with company size (revenues) Export intensity, the % of revenues coming from exports, is not correlated with size  U.S. Government help: Export Assistance Centers of the International Trade Administration (ITA)

7.  “Distribution” is “the course – physical path or legal title – that goods take between production and consumption.” Includes both shipping and the process by which the product is sold  Intermediaries in distribution Sales representatives (“reps”) do not take title Distributors actually buy your goods from you Export management companies  handle everything, but rare in U.S.

8. Getting paid  Letter of credit – document that obligates buyer’s bank to pay when goods ship (usually very reliable) Buyer proves to his bank he has the money to pay His bank authorizes another bank in exporter’s country to pay as soon as exporter proves the goods have shipped  Open account – the seller just sends a bill (often very dangerous)

10. Key points from Chap. 21 – Human Resource Management  International HR Managerial Terms Locals – citizens of the countries in which they are working  Least expensive Expatriates – non-citizens  Home-country national  Third-country national

11.  Selecting the right expatriate Focus on technical competence first Then  adaptiveness  flexibility, tolerance  Cost of living adjustments  Difficulties of returning to home country Reverse culture shock Former expatriate suddenly has less status Home folks have different interests

12. Key points from Chap. 18 – Global sourcing  Important terms Supply chain (everything) Logistics (the movement and storage)  Tradeoffs among efficiency, dependability, quality, flexibility, innovation  Centralized (global) vs. regional vs. multi-domestic manufacturing

14. In the 18 th century, economists started to advocate free trade  “Every individual seeks the most advantageous employment for his capital”  “Study of his own advantage necessarily leads him to prefer that employment most advantageous to society” - Adam Smith, 1776

15. Some basic free-market economics  Two fundamental principles 1.The price for which sellers are willing to sell a product indicates what the resources to produce (and sell) it are worth. 2.The price for which buyers will buy indicates what the product is worth to the buyer  So economists think anything that manipulates prices is dangerous

16. Quantitative analysis shows we can produce more through free trade  Comparative advantage theory shows trade improves productivity even when one nation is more efficient in everything

17. “Free trade” means no barriers  The principle: You should have the same incentives when you consider a product from abroad as from your home country.

18.  Economists prefer income taxes or sales taxes (on everything) rather than tariffs ( on particular imports) For any given amount of revenue raised, income and sales taxes disrupt the market less than tariffs  Most economists only make exception for tariffs to protect infant industries – industries that lack comparative advantage, but could develop it soon

19. In the 19 th century, free trade was widely practiced  In Europe, tariffs were low or non-existent  But after WW I and especially in the early 30s, nations raised tariffs to protect their domestic economies  A disastrous depression followed

20. GATT was created to prevent the mistakes of the ‘30s from repeating  It provided a framework for negotiating reductions in tariffs and non-tariff barriers  The WTO continued the process and provided an enforcement mechanism to prevent new barriers

21. So – usually tariffs are not free trade  The WTO (and most economists) discourage use of tariffs to raise funds to protect an industry that already has comparative advantage

22. Do you support complete free trade? 