BMAL 590 LEGAL ENVIRONMENT OF BUSINESS EXAM
QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS
"Glocal"
The trend of organizations that think globally but act locally
Few, if any, companies can be called purely local.
OECD - Organisation for Economic Co-operation and Development Countries
Whereas the resources and capabilities to harness new technologies are available in the developed
world, natural resources are often found in emerging economies and developing countries.
More than a third of the world's population is in one continent - Asia. Just two countries, China and
India, account for nearly 2.5 billion people. It is not surprising that corporations look at these countries
as huge markets.
Exporting
Export refers to sending goods produced in the firm's home country to be marketed in other host
countries.
,Exports are governed by the laws of the home country (which may prevent certain goods and services
being exported) and those of the host country (which may prohibit some goods, restrict quantities,
impose customs and countervailing duties, and in some cases may impose anti-dumping duties).
Thus, firms need to study the fine print before getting into exports.
Exporting enables the firm to exploit economies of scale in existing facilities and reduces risk that may
arise out of having operations in another country.
Exporting becomes unviable to certain countries due to geographic distance and related transportation
costs, or where the other country imposes restrictions and/or high customs duties.
Other options in going global include:
Licensing
Franchising
Joint ventures
Strategic alliances
Wholly-owned subsidiaries
Acquisitions
Licensing
a firm in the host country manufactures goods under license to a company that is paid royalties on the
sales
, Licensing is beneficial in low-tech sectors. In hi-tech sectors, licensing has the risk of losing valuable tacit
knowledge.
Franchising:
common in industries such as fast food, coffee, and services
Franchising works well in the services sector. The key is due diligenceand trust.
Joint ventures:
firms enter into a co-operative arrangement with a firm in the host country, usually with equity
participation
Joint ventures are politically acceptable in most countries because they enable a firm in the host country
to upgrade its own capabilities. On the other hand, many joint ventures fail because of a breakdown in
trustbetween the partners.
Strategic alliances:
co-operative arrangements for a specific purpose
Wholly-owned subsidiaries:
the firm invests 100% of the funds required in the host country
Wholly-owned subsidiaries are beneficial from the firm's perspective. Most countries have limitations for
100% foreign investment except in sectors where the host country may be lacking or favors foreign direct
investment to leapfrog certain technologies.
QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS
"Glocal"
The trend of organizations that think globally but act locally
Few, if any, companies can be called purely local.
OECD - Organisation for Economic Co-operation and Development Countries
Whereas the resources and capabilities to harness new technologies are available in the developed
world, natural resources are often found in emerging economies and developing countries.
More than a third of the world's population is in one continent - Asia. Just two countries, China and
India, account for nearly 2.5 billion people. It is not surprising that corporations look at these countries
as huge markets.
Exporting
Export refers to sending goods produced in the firm's home country to be marketed in other host
countries.
,Exports are governed by the laws of the home country (which may prevent certain goods and services
being exported) and those of the host country (which may prohibit some goods, restrict quantities,
impose customs and countervailing duties, and in some cases may impose anti-dumping duties).
Thus, firms need to study the fine print before getting into exports.
Exporting enables the firm to exploit economies of scale in existing facilities and reduces risk that may
arise out of having operations in another country.
Exporting becomes unviable to certain countries due to geographic distance and related transportation
costs, or where the other country imposes restrictions and/or high customs duties.
Other options in going global include:
Licensing
Franchising
Joint ventures
Strategic alliances
Wholly-owned subsidiaries
Acquisitions
Licensing
a firm in the host country manufactures goods under license to a company that is paid royalties on the
sales
, Licensing is beneficial in low-tech sectors. In hi-tech sectors, licensing has the risk of losing valuable tacit
knowledge.
Franchising:
common in industries such as fast food, coffee, and services
Franchising works well in the services sector. The key is due diligenceand trust.
Joint ventures:
firms enter into a co-operative arrangement with a firm in the host country, usually with equity
participation
Joint ventures are politically acceptable in most countries because they enable a firm in the host country
to upgrade its own capabilities. On the other hand, many joint ventures fail because of a breakdown in
trustbetween the partners.
Strategic alliances:
co-operative arrangements for a specific purpose
Wholly-owned subsidiaries:
the firm invests 100% of the funds required in the host country
Wholly-owned subsidiaries are beneficial from the firm's perspective. Most countries have limitations for
100% foreign investment except in sectors where the host country may be lacking or favors foreign direct
investment to leapfrog certain technologies.
