6.8 Key Terms

Acquisition: Is a transaction in which a firm gains control of another firm by purchasing its stock, exchanging the stock for its own, or, in the case of a private firm, paying the owners a purchase price. 6.1

Contract Manufacturing: A hiring firm makes an agreement with the contract manufacturer to produce and ship the hiring firm’s goods. 6.5

Cultural And Linguistic Differences: These affect all relationships and interactions inside the company, with customers, and with the government. Understanding the local business culture is critical to success. 6.1

Experience of The Partner Company: Assessing the experience of the partner company in the market—with the product and in dealing with foreign companies—is essential in selecting the right local partner. 6.1

Exporting: Is defined as the sale of products and services in foreign countries that are sourced or made in the home country. Importing is the flipside of exporting. Importing refers to buying goods and services from foreign sources and bringing them back into the home country. 6.2

Franchising: Is the practice of licensing another firm’s business model as an operator. 6.4

Importing: Is also known as global sourcing. 6.2

Joint Venture: Business model, two or more parties agree to invest time, equity, and effort for the development of a new shared project. 6.6

Licensing: Gives a licensee certain rights or resources to manufacture and/or market a certain product in a host country. 6.3

Manufacturing: The cost to manufacture a given unit decreased because Vitrac has been able to manufacture at higher volumes and buy source materials in higher volumes, thus benefiting from volume discounts. 6.2

Market: The company has access to a new market, which has brought added revenues. 6.2

Money: Not only has Vitrac earned more revenue, but it has also gained access to foreign currency, which benefits companies located in certain regions of the world, such as in Vitrac’s home country of Egypt. 6.2

Political and Economic Issues: Policy can change frequently, and companies need to determine what level of investment they’re willing to make, what’s required to make this investment, and how much of their earnings they can repatriate. 6.1

Quality and Training of Local Contacts and/or Employees: Evaluating skill sets and then determining if the local staff is qualified is a key factor for success. 6.1