MGTA01H3 Study Guide - Final Guide: Strategic Management, Goal Setting, Pest Analysis

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20 Apr 2012
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MGTA03 Final Exam Review
<Chapter 5: Understanding International Business>
5.1 THE RISE OF INTERNATIONAL BUSINESS
The World Marketplace
per capita income the average income per person of a country
High-income countries greater than $10,065 (e.g. Canada, U.S., Europe, Australia, South Korea)
Upper-middle-income countries between $3,255 and $10,065 (e.g. Czech, Greece, Hungary, etc.)
Low middle-income countries between $825 and $3255 (e.g. Colombia, Thailand, Guatemala)
Low-income countries less than $825 (i.e. developing countries)
- North America: United States dominates the NA business region & Canada plays large role
- Europe: Western dominated by Germany, UK, France, Italy Ecommerce and technology; Eastern
once communist now marketplace and producer (Hungary)
- Asia-Pacific: automobile, electronics, and banking industries; ASEAN (Thai, Malay, Indonesia, Viet)
Forms of Competitive Advantage
absolute advantage a nation’s ability to produce something more cheaply or better than any other country
comparative advantage a nation’s ability to produce some products more cheaply or better than it can
others (we can choose to specialize in)
national competitive advantage a country will be inclined to engage in int’l trade when factor conditions,
demand conditions, related and supporting industries, and strategies/structures/rivalries are favourable
Factor conditions are the factors of production: labour, capital, entrepreneurs, natural resources
Demand conditions reflect a large domestic consumer base that promotes strong demand for
innovative products
Related and supporting industries strong local or regional suppliers and/or industrial customers
Strategies, structures, and rivalries refer to firms and industries that stress cost reduction, product
quality, higher productivity, and innovative new products
theory of competitive advantage: no country on earth can make everything quickly, cheaply, or well; the
things you can make, make it & the things you can’t make, don’t make it
international competitiveness ability of a country to generate more wealth than its competitors in markets
Import-Export Balances
balance of trade the difference in value between a country’s total exports and its total imports
balance of payments the difference between money flowing in to and out of a country as a result of trade
and other transactions (includes: tourist spending, foreign aid-out, profit overseas-in, foreign business-out)
Country
Exports to
Imports from
United States
$369.2
$258.4
EU
28.9
38.3
Japan
10.4
11.1
Other
44.9
78.9
Exchange Rates
euro a common currency shared among most of the members of EU (excluding Denmark, Sweden, UK)
- As CAD appreciates, we can buy more US products strong: good for consumers, bad for business
- As USD depreciates, they buy fewer Canadian products
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MGTA03 Final Exam Review
5.2 BARRIERS TO INTERNATIONAL TRADE
Legal and Political Differences
quota a restriction by one nation on the total number of products of a certain type that can be imported
from another nation (i.e. a limit)
embargo a gov’t order forbidding exportation and/or importation of a particular product
subsidy a gov’t payment to help domestic business compete with foreign firms
protectionism protecting domestic business at the expense of free market competition
cartel any association of producers whose purpose is to control the supply and price of a given product
Free Trade Agreements
EU agreement among major Western Europe nations to eliminate or make uniform most trade barriers
affecting group members (e.g. Italy, Germany, France, UK); largest free marketplace; ¼ of global wealth
NAFTA agreement to gradually eliminate tariffs and other trade barriers among US, Canada, and Mexico
- FDI has increased in Canada & large trade surplus
- U.S. imports & exports with Mexico have increased
- Canada has become an exporting powerhouse; most trade intensive country in G8
PART TWO---The Business of Managing
<Chapter 6: Business Strategy>
6.2 SETTING GOALS AND FORMULATING STRATEGY
goals objectives that a business hopes and plans to achieve
Setting Goals
- Goal setting provides direction, guidance, and motivation for all managers
- Goal setting helps firms allocate resources
- Goal setting helps to define corporate culture
- Goal setting helps managers assess performance
mission statements an org’s statement of how it will achieve its purpose in the environment in which it
conducts its business
long-term goals goals set for extended periods of time, typically five years or more into the future
intermediate goals goals set for a period of one to five years
short-term goals goals set for the very near future, typically less than one year
Formulating Strategy
strategy formulation creation of a broad program for defining and meeting an org’s goals
strategy goals long-term goals derived directly from a firm’s mission statement
strategic management model: (1) establish goals; (2) analyze the environment; (3) analyze the
organization; (4) choose how to compete; (5) carry out the plan
environmental analysis the process of scanning the environment for threats and opportunities
- PEST analysis: Political, Economic, Social, Technological (over the next five years)
- Porter 5 Forces analysis: assessing industry attractiveness & position of individual firms within an
industry [Existing Competitors plus Potential Competitors, Substitute Products, Customers, Supplies]
strategic plans plans that reflect decisions about resource allocations, company priorities, and steps
needed to meet strategic goals
tactical plans generally, short-range plans concerned with implementing specific aspects of a company’s
strategic plans
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