International business concepts and practice

International Business

"Countertrade denotes a whole range of barter-like agreements; its principle is to trade goods and services for other goods and services when they cannot be traded for money" (439). The popularity of the practice lies in its ability to cement alliances between nations, to guarantee certain favorable trade deals, and above all to enable trade between cash-poor nations. The tightening worldwide credit market will make international countertrade more rather than less likely to occur, as it did regionally in Asia during the 1990s. However escalating tensions between nations -- economically, politically, or militarily -- can discourage such creative economic practices.

DQ 5.

Almost by definition, industry-specific countertrade agreements will favor certain industries and generate revenue for a firm. However, regional instability or bad publicity garnered from a special arrangement from a nation with unpopular policies and labor practices, as well as excessive reliance upon such political agreements can be risky.

Chapter 14

DQ1:

This firm must locate in a nation with a highly skilled workforce, and have access to a wide range of markets where there is a high demand for advanced technology. A concentrated manufacturing strategy, ideally in a nation with low costs of labor but with high rates of education such as India would be ideal. Additionally, unlike personal products, microprocessors tend to be relatively standardized in their composition and are not specifically tailored to suit the needs of a local population. Despite the world market focus, the benefits of decentralized manufacturing would be fairly low for this product.

DQ2.

In this instance, a decentralized strategy would be better, given that a less skilled workforce is required, and the processing of the chemical might be different, depending upon the needs of the regional market. Decentralizing production would allow different regions to process the chemical to suit the local marketplace. Also, the low profit margin and moderate tariffs mean that selecting a nation with low labor costs is essential, to benefit from economies of scale.

DQ3. (a). The pros of manufacturing in-house lie in the firm's greater control over the design and manufacturing of the component part, the firm's ability to protect the uniqueness of this new technology, and the ability to guarantee the timeliness of the production of this critical part, without worrying about shipping difficulties, carelessness on the part of the outsourced firm, or strikes. (b) Outsourcing allows for selecting a low-cost location and finding a favorable currency exchange, greater flexibility to discontinue the component's use if it becomes obsolete in light of improvements in technology, avoiding a non-recoverable investment, and creating a potentially beneficial relationship with another nation.