Fluent Essays

Assigned Chapters to this round: Chapters 9, 10, 11, 12, 13, and/or 14. BEFORE YOU SUBMIT YOUR REPORT, Please make sure that the article meets the conditions of the publishing source, publishing time, and relevance to the assigned corresponding readings that are presented in both the course schedule.Making the Connection (Current Event Exercises). To further illustrate real-world examples of subject topics, every individual student is required to submit TWO making the connection reports. The purpose of this assignment is to analyze critically (not summarize) recent article(s) that illustrates several key issues, concepts, challenges, and problems that we have discussed in a certain module. The article should be a major article (not articles that are 1 or 2 paragraphs in length) and have relevance to assigned international business topics. The article(s) should be published on or after August 1, 2019. There are two scheduled making the connection rounds. Each round of the assignment will correspond with a number of assigned chapters (see the course schedule below). Your report must provide a “so what” or what you’ve learned from the article. You must critically analyze several concepts from the assigned readings for each round and demonstrate how these concepts are connected to the core story discussed in the article. Read the “making the connection rubric” before embarking on this assignment. You have to gather relevant information for your report from one or more of the following high quality business press outlets; Wall Street Journal, The Economist, Fortune, Forbes, Business Week, reuters.com, The New York Times, Barrons Magazine, Financial Times, http://money.cnn.com/, and/or http://www.bbc.co.uk/news/business/. All of the journals identified in this list are searchable in MSU databases, Academic Search Complete, Business Source Premier or ABI/Inform. I require that you read from the previous list because the depth of reporting and insights provided by the major papers exceed most of the capabilities of the regional and some national papers. Articles published in any other sources will not be accepted. It is the student’s responsibility to make sure that the article meets the conditions of the publishing source, publishing time, and relevance to the assigned corresponding chapters that are presented in the course schedule (see below). Failing to meet any of these three conditions will result in a grade of zero on the assignment.The requirements for this exercise areIdentify an article(s) published on or after August 1, 2019, with a subject that is relevant to a topic from the corresponding rounds reading material.A complete citation for the article (source, date, page, etc.),A write up—a minimum of three doubled-spaced pages long (with 1” margins and 12 point font), and error-free.Please submit an electronic copy of both your written report and the article(s) to the appropriate designated drop box on Blackboard.The write up Must follow the following outline and include the following three clearly labeled sections (1) Succinctly discuss the major focus of the article (1/4 of the report), (2), A discussion of how the topic relates to international business concepts covered in the corresponding chapters of the assignment round (either demonstrating support for course concepts or contradicting concepts) (1/2 of the report) (3) What is your reaction to the issue and/or what solutions would you propose? Give your analysis/critique of how you think the organization(s) is handling the situation from an international business point of view (1/4 of the report). You MUST Use headings per the outline above. Make sure that the bulk of the review is your analysis, comments, and views about the merits of the issue and not just the mere summary of the article. Read the “making the connection rubric” before embarking on this assignment. chapter_9_10_11.docx Unformatted Attachment Preview Chapter:9 REGIONAL ECONOMIC INTERGATION This chapter pursued three main objectives: to examine the economic and political debate surrounding regional economic integratíon; to review the progress toward regional economic integration in Europe, the Americas, and elsewhere; and to distinguish the important implications of regional economic integration for the practice of international business. The chapter made the following points: 1. A number of levels of economic integration are possible in theory. In order of increasing integration, they include a free trade area, a customs union, a common market, an economic union, and full political union. 2. In a free trade area, barriers to trade among member countries are removed, but each country determines its own external trade policy. In a customs union, internal barriers to trade are removed, and a common external trade policy is adopted. A common market is similar to a customs union, except that a common market also allows factors of production to move freely among countries. An economic union involves even closer integration, including the establishment of a common currency and the harmonization of tax rates. A political union is the logical culmination of attempts to achieve ever-closer economic integration. 3. Regional economic integration is an attempt to achieve economic gains from the free flow of trade and investment between neighboring countries 4. Integration is not easily achieved or sustained. Although integration brings benefits to the majority, it is never without costs for the minority. Concerns over national sovereignty often slow or stop integration attempts. In 2016, these concerns resulted in Britain voting for exit from the EU. 5. Regional integration will not increase economic welfare if the trade creation effects in the free trade area are outweighed by the trade diversion effects. 6. The Single European Act sought to create a true single market by abolishing administrative barriers to the free flow of trade and investment among EU countries. 7. Seventeen EU members now use a common currency, the euro. The economic gains from a common currency come from reduced exchange costs, reduced risk associated with currency fluctuations, and increased price competition within the EU. 8. Increasingly, the European Commission is taking an activist stance with regard to competition policy, intervening to restrict mergers and acquisitions that it believes will reduce competition in the EU 9. Although no other attempt at regional cconomic integration comes close to the EU in terms of potential economic and political significance, various other atempts are being made in the world. The most notable include NAFTA in North America, the Andean Community and Mercosur in Latin America, and ASEAN in Southeast Asia. 10. The creation of single markets in the EU and North America means that many markets that were formerly protected from foreign competition are now more open. This creates major investment and export opportunities for firms within and outside these regions. 11. The free movement of goods across borders, the harmonization of product standards, and the simplification of tax regimes make it posible for firms based in a free trade area to realize potentially enormous cost economies by centralizing production in those locations within the area where the mix of factor costs and skills is optimal. 12. The lowering of barriers to trade and investment among countries within a trade group will probably be followed by increased price competition. Chapter:10 The Foreign Exchange Market This chapter explained how the foreign exchange market works, examined the forces that determine exchange rates, and then discussed the implications of these factors for international business. Given that changes in exchange rates can dramatically alter the profitability of foreign trade and investment deals, this is an area of major interest to international business. The chapter made the following points: 1. One function of the foreign exchange market is to convert the currency of one country into the currency of another. A second function of the foreign exchange market is to provide insurance against foreign exchange risk. 2. The spot exchange rate is the exchange rate at which a dealer converts one currency into another currency on a particular day. 3. Foreign exchange risk can be reduced by using forward exchange rates. A forward exchange rate is an exchange rate governing future transactions. Foreign exchange risk can also be reduced by engaging in currency swaps. A swap is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. 4. The law of one price holds that in competitive markets that are free of transportation costs and barriers to trade, identical products sold 5. Purchasing power parity (PPP) theory states the price of a basket of particular goods should be roughly equivalent in each country. PPP 6. The rate of change in countries relative prices depends on their relative inflation rates. A countrys inflation rate seems to be a function 7. The PPP theory of exchange rate changes yields relatively accurate predictions of long-term trends in exchange rates but not of short-term in different countries must sell for the same price when their price is expressed in the same currency. theory predicts that the exchange rate will change if relative prices change. of the growth in its money supply. movements. The failure of PPP theory to predict exchange rate changes more accurately may be due to transportation costs, barriers to trade and investment, and the impact of psychological factors such as bandwagon effects on market movements and short-run exchange rates. 8. Interest rates reflect expectations about inflation. In countries where inflation is expected to be high, interest rates also will be high. 9. The international Fisher effect states that for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates. 10. The most common approach to exchange rate forecasting is fundamental analysis. This relies on variables such as money supply growth, inflation rates, nominal interest rates, and balance-of-payments positions to predict future changes in exchange rates. 11. In many countries, the ability of residents and nonresidents to convert local currency into a foreign currency is restricted by government policy. A government restricts the convertibility of its currency to protect the countrys foreign Page 291 exchange reserves and to halt any capital flight. 12. Nonconvertibility of a currency makes it very difficult to engage in international trade and investment in the country. One way of coping with the nonconvertibility problem is to engage in countertrade-to trade goods and services for other goods and services. 13. The three types of exposure to foreign exchange risk are transaction exposure, translation exposure, and economic exposure. 14. Tactics that insure against transaction and translation exposure include buying forward, using currency swaps, and leading and lagging payables and receivables. 15. Reducing a firms economic exposure requires strategic choices about how the firms productive assets are distributed around the globe Chapter:11 The international Monetary System This chapter explained the workings of the international monetary system and pointed out its implications for international business. The chapter made the following points The gold standard is a monetary standard that pegs currencies to gold and guarantees convertibility to gold. It was thought that the gold standard contained an automatic mechanism that contributed to the simultaneous achievement of a balance-of-payments equilibrium by all countries. The gold standard broke down during the 1930s as countries engaged in competitive devaluations. 2. The Bretton Woods system of fixed exchange rates was established in 1944. The U.S. dollar was the central currency of this system, the value of every other currency was pegged to its value. Significant exchange rate devaluations were allowed only with the permission of the International Monetary Fund (IMF). The role of the IMF was to maintain order in the international monetary system to avoid a repetition of the competitive devaluations of the 1930s and to control price inflation by imposing monetary discipline on countries Page 317 3. The fixed exchange rate system collapsed in 1973, primarily due to speculative pressure on the dollar following a rise in U.S. inflation and a growing U.S. balance-of-trade deficit 4. Since 1973, the world has operated with a floating exchange rate regime, and exchange rates have become more volatile and far less predictable. Volatile exchange rate movements have helped reopen the debate over the merits of fixed and floating systems. 5. The case for a floating exchange rate regime claims such a system gives countries autonomy regarding their monetary policy and floating exchange rates facilitate smooth adjustment of trade imbalances 6. The case for a fixed exchange rate regime claims the need to maintain a fixed exchange rate imposes monetary discipline on a country, floating exchange rate regimes are vulnerable to speculative pressure, the uncertainty that accompanies floating exchange rates dampens the growth of international trade and investment, and far from correcting trade imbalances, depreciating a currency on the foreign exchange market tends to cause price inflation. 7. In todays international monetary system, some countries have adopted floating exchange rates, some have pegged their currency to another currency, such as the U.S. dollar, and some have pegged their currency to a basket of other currencies, allowing their currency to fluctuate within a zone around the basket 8.In the post-Bretton Woods era, the IMF has continued to play an important role in helping countries navigate their way through financial crises by lending significant capital to embattled governments and by requiring them to adopt certain macroeconomic policies. 9.An important debate is occurring over the appropriateness of IMF-mandated macroeconomic policies. Critics charge that the IMF often imposes inappropriate conditions on developing nations that are the recipients of its loans. 10. The current managed-float system of exchange rate determination has increased the importance of currency management in international businesses. 11. The volatility of exchange rates under the current managed-float system creates both opportunities and threats. One way of responding to this volatility is for companies to build strategic flexibility and limit their economic exposure by dispersing production to different locations around the globe by contracting out manufacturing (in the case of low-valueadded manufacturing) and other means. Chapter:12 The Strategy of international Business This chapter reviewed basic principles of strategy and the various ways in which firms can profit from global expansion, and it looked at the strategies that firms that compete globally can The chapter made the following points: I. A strategy can be defined as the actions that managers take to attain the goals of the firm. For most firms, the preeminent goal is to maximize shareholder value. Maximizing shareholder value requires firms to focus on increasing their profitability and the growth rate of profits over time. 2. International expansion may enable a firm to earn greater returns by transferring the product offerings derived from its core competencies to markets where indigenous competitors lack those product offerings and competencies. 3. lt may pay a firm to base each value creation activity it perlbrms at that location where factor conditions are most conducive to the performance of that activity. We refer to this strategy as focusing on the attainment of location economies. 4. By rapidly building sales volume for a standardized product, international expansion can assist a firm in moving down the experience curve by realizing learning effects and economies of scale. 5. A multinational firm can create additional value by identifying valuable skills created within its foreign subsidiaries and leveraging those skills within its global network of operations. 6. The best strategy br a firm lo pursue often depends on an consideration of the pressures for cost reductions and for local responsiveness. 7. Firms pursuing am international strategy the products derived from core competencies to lbreign markets, while undertaking some limited local customization. 8. Firms pursuing an localization strategy customize their pru.duct ofllcring, marketing strategy. and business strategy to national conditions. 9. Firms pursuing an global staumlardizallion slrallcgy reaping, the cost. recluclicms come from experience curve effects and location cconnmics. 10. industries are now in competitive that llrms must lrzmsnalionzil strategy. This involves a simultaneous on reducing genius. lrnnslerrinp, skills ml and boosting lneul respolisivenaess. Implementing such an strategy may he easy. II. Strategic alliances are cooperative agreements between actual or potential competitors. 12. The advantages of alliances are that they facilitate entry into foreign markets, enable partners to share the Fixed costs and risks associated with new products and processes, facilitate the transfer of complementary skills between companies, and help firms establish technical standards. 13. A disadvantage of a strategic alliance is that the firm risks giving away technological know-how and market access to its alliance partner in return for very little. 14. The disadvantages associated with alliances can be reduced if the firm selects partners carefully, paying close attention to the firms reputation and the structure of the alliance so as to avoid unintended transfers of knowhow. 15. Keys to making alliances work seem to be building trust and informal communications networks between partners and taking proactive steps to learn from alliance partners. Chapter:13 Entering Developed and Emerging Markets This chapter reviewed basic entry decisions and entry modes (exporting, turnkey projects, licensing, franchising, joint ventures, and wholly owned subsidiaries), and how to go about selecting an entry mode. We reviewed entering foreign markets in developed countries (e.g., United Kingdom, Sweden, United States, and similar countries) and emerging markets (e.g., Argentina, Brazil, China, India, Indonesia, Mexico, Poland, South Africa, South Korea, Turkey). We touched on market entry into less developed nations as well. The chapter made the following points: Basic entry decisions include identifying which markets to enter, when to enter those markets, and on what scale. The most attractive foreign markets tend to be found in politically stable developed and developing nations that have free market systems and where there is no dramatic upsurge in either inflation rates or private-sector debt. 3. There are several advantages associated with entering a national market early, before other international businesses have established themselves. These advantages must be balanced against the pioneering costs that early entrants often have to bear, including the greater risk of business failure. 4. Large-scale entry into a national market constitutes a major strategic commitment that is likely to change the nature of competition in that market and limit the entrants future strategic flexibility. Although making major strategic commitments can yield many benefits, there are also risks associated with such a strategy. 5. There are six modes of entering a foreign market: exporting, creating turnkey projects, licensing, franchising, establishing joint ventures, and setting up a wholly owned subsidiary. 6. Exporting has the advantages of facilitating the realization of experience curve economies and of avoiding the costs of setting up 7. Turnkey projects allow firms to export their process know-how to countries where foreign direct investment might be prohibited, thereby enabling the firm to earn a greater return from this asset. The disadvantage is that the firm may inadvertently create efficient global competitors in the process. 8. The main advantage of licensing is that the licensee bears the costs and risks of opening d foreign market. Disadvantages include the risk of losing technological know-how to the licensee and a lack light control over licensees. 9 The main advantage of franchising is that the franchisee bears the costs and risks of opening a foreign market. Disadvantages center on problems of quality control of distant franchisees. 10. Joint ventures have the advantages of sharing the costs and risks of opening co foreign market and of gaining local knowledge and political influence. Disadvantages include the risk of losing control over technology and a lack of tight control. Page 377 II. The advantages of wholly owned bubsldlaries include tight control over technological know-how. The main disadvantage is that the firm nnubl bear all the costs and risks of openingforeign market. 12. The optimal choice of entry mode depends on the strategy When technological know-how constitutesarms core competence, Wholly owned subsidiaries are pretcrred, since they best control technology. When management know-how constitutes a core competence, foreign franchises controlled byjomt ventures seem to he optimal When the firm is pursuing a global standardization or transnational strategy, the need for tight control over operations to reahae location and experience curve economies suggests wholly owned subsidiaries are the best entry mode. When establishing a wholly owned subsidiary Ill a country, d firm must decide whether to do so by a greenfield venture strategy or by acquiring an established enterprise in the target market 14. Acquisitions are quick to execute, may enable a him to preempt its global competitors, and involve buying a known revenue and profit stream. Acquisitions may fail when the acquiring him overpays for the target, when the cultures of the acquiring and acquired hims clash, when there is a high level of management attrition alter the acquisition, and when there is a failure to integrate the operations of the acquiring and acquired him. 15. The advantage of a greenhcld venture in a foreign country is that it gives the him a much greater ability to build the kind of subsidlary company that it wants For example, it is much easier to build an organization culture from scratch th in it is to change the culture of an acquired Ullll. Chapter 14: Exporting, Importing, and Countertrade This chapter examined the steps that firms must take to establish themselves as exporters. The chapter made the following points: One big impediment to exporting is ignorance of foreign market opportunities. Neophyte exporters often become discouraged or frustrated with the exporting process because they encounter many problems, delays, and pitfalls. 3. The way to overcome ignorance is to gather information. In the United States, a number of institutions, the most important of which is the U.S. Department of Commerce, can help firms gather information in the matchmaking process. Export management companies can also help identify export opportunities. 4. Many of the pitfalls associated with exporting can be avoided if a company hires an experienced export service provider (e.g., export management company) and if it adopts the appropriate export strategy. 5. Firms engaged in international trade must do business with people they cannot trust and people who may be difficult to track down if they default on an. obligation. Due to the lack of trust, each party to an international transaction has a different set of preferences regarding the configuration of the transaction 6. The problems ... 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