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WHAT ARE THE PROBLEMS WITH MASS PRODUCTION? Long production runs created massive inventories that had to be stored in large warehouse If the initial machine settings were wrong, long production runs resulted in the production of a large number of defects The mass production system was unable to accommodate consumer preferences for product diversity ISO 9000 ISO 9000 certifies quality standard to firms that focuses management attention on the need to improve the quality of products and processes ANTIDUMPING POLICY Designed to punish foreign firms that engage in dumping FLEXIBLE MACHINE CELLS It is another common flexible manufacturing technology ENUMERATE THE TYPE OF CONTROL SYSTEMS. Personal controls Bureaucratic control Output control Cultural control INFANT INDUSTRY ARGUMENT It is by far the oldest economic argument for government OUTFLOWS OF FDI Flow of FDI out of a country OLIGOPOLY An industry composed of a limited number of large firms FLOW OF FDI Refers to the amount of FDI undertaken over a given time period (normally a year) WHAT ARE THE INSTRUMENTS OF TRADE POLICY? Tariffs Subsidies Import quotas Voluntary export restraints Local content requirements Administrative policies Antidumping duties GLOBAL STANDARDIZATION STRATEGY Focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies. MINIMUM EFFICIENT SCALE Level of output at which most plant level scale economies are exhausted

2 BASIC STRATEGIES FOR LOCATING PRODUCTION ACTIVITIES Concentrated production favored Decentralized production favored FACTORS TO CONSIDER IN LOCATING ITS PRODUCTION ACTIVITIES Country factor Technological factor Product factor SPECIALIZED ASSET An asset whose value is contingent upon a particular relationship existing LEARNING EFFECTS Refers to cost savings that come from learning by doing EXPERIENCE CURVE It refers to systematic reductions in production costs that have been observed to occur over the life of product EXCHANGE RATE The rate at which are currencies is converted into another WHAT ARE THE ADVANTAGES OF BUYING? Strategic flexibility Lower costs Offsets LOGISTICS Activity that controls the transmission of physical materials through the value chain, from procurement through production and into distribution 2 BASIC STRATEGIES FOR CREATING VALUE AND ATTAINING A COMPETITIVE ADVANTAGE Low cost Differentiation LIMITATION OF EXPORTING Transportation cost Trade barriers POLITICAL ARGUMENTS FOR GOVERNMENT INTERVENTION Protecting consumers Protecting human rights Protecting jobs and industries National stability Retaliation PROFIT GROWTH Measured by the percentage increase in net profits over time FORWARD EXCHANGE Occurs when 2 parties agree to exchange currency and execute the deal at some specific date in the structure

CURRENCY SWAP Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates VOLUNTARY EXPORT RESTRAINT A quota on trade imposed by the exporting country, typically at the request of the importing countrys government 3 ISSUES CENTRAL TO PRODUCTION AND LOGISTICS Where to produce What to make and what to buy How to coordinate a globally dispersed manufacturing and supply system DIFFERENTIATION Refer to a strategy that focuses primarily on increasing the attractiveness of a product EXPORTING Involves producing goods at home and then shipping them to the receiving country for sale EXPERIENCE CURVE Refers to systematic reductions in production costs that have been observed to occur over the life of a product LEARNING EFFECTS It refers to cost savings that come from learning by doing WHAT ARE THE 2 CONCLUSIONS THAT CAN BE DERIVED FROM ECONOMIC ANALYSIS OF THE EFFECT OF IMPORT TARIFFS? Tariffs are generally pro-producer and anti-consumer Import tariffs reduce the overall efficiency of the world economy LOW COST STRATEGY ON LOWERING PRODUCTION COSTS Refers to a strategy that focuses primarily TARIFF Is a tax levied on import or exports SUBSIDY Is a government payment to a domestic producer ADMINISTRATIVE TRADE POLICIES Bureaucratic rules designed to make it difficult for imports to enter a country INFANT INDUSTRY ARGUMENT The oldest economic argument for government intervention ROUND TARIFF RATES Highest rate that can be charged DIFFERENT STRATEGIES FOR COMPETING GLOBALLY Global standardization Transnational International Localization