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Tag Archive 'international business'

The retrenchment strategy is the most interesting corporate-level strategy. It represents the point at which a company realizes that something they are doing is not sustainable, and that reducing size (and thus, costs) is the best course of future action. In my experience, it is extremely uncommon for companies to purposefully take this strategy. Whenever I have been around reduction, it is almost always completely unplanned and not well thought out. Generally, these companies have not been managed by “professionals,” but rather by technicians specialized in the company’s business. If more companies re-evaluated their value-chain frequently, and put thought into the company direction, there would be more success out there.

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As two of the larger economies in the European Union, France and Germany had the most to gain from the creation of a common currency. The most important factor for a common currency is the reduction of cost in international trade between nations using the currency. The cost of changing currency is removed, thus saving money for both importers and exporters. Similarly, a common currency promotes stability. Since the value of currency no longer fluctuates within the EU, managers no longer need to worry whether they will have the necessary funds to meet obligations if there is a sudden change in an exchange rate. Finally, tying the currency of several nations together creates a larger economy behind that currency. This in turn should make the currency more powerful in international financial markets.

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As our textbook defines it, the international capital market is a “network of individuals, companies, financial institutions, and governments that invest and borrow across national boundaries” (p. 227). In other words, the international capital market is what allows investment to flow across national borders. This is important to US firms as it increases the amount of investment that can flow into the US. Additionally, by giving US borrowers access to a larger range of lenders, US firms are able to drive down the cost of capital. Lower cost of capital means greater access to the funding necessary to drive growth.

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H. Ross Perot, Jr. and AllianceTexas have benefited mightily from NAFTA. According to Forbes in 2013 (Helman), Alliance was the top foreign trade zone in the US with imports of greater than $4 Billion per year. Although this FTZ has benefitted from the lowering of tariffs anywhere, NAFTA is quite possibly the most important agreement thanks to Fort Worth’s proximity to Mexico.

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[QFD] Foreign Direct Investment

Although I am not familiar with Foreign Direct Investments in the Dallas/Fort Worth area, I am familiar with some of the ways the governments of Texas and Austin intervened in FDI to bring Samsung to Austin. The most crucial intervention a government can offer a foreign company is financial incentive. In the case of Samsung, the biggest incentive was tax abatements by the local district. This lowered the tax burden of Samsung as the built their first assembly plant outside of Korea. Often local governments will require that companies commit to a certain number of jobs at an expected pay level before they will commit to tax incentives. In this way, governments can guarantee not only the number of jobs, but the quality of those jobs.

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