Globalization
Worldwide interconnections in virtually every sphere of activity including the spread of products, technology, information, and job opportunities. Can result in blurred boundaries between nations, organizations, and investors
Trade
The actions of buying and selling goods and serviced
Capital
Financial assets such as funds but also equipment, facilities, and other means of production
1. Trade and Transactions2. Capital and Investment Movements3. Migration and Movement of People4. Dissemination of Knowledge
Four fundamental aspects of globialization
EconomicCulturalPolitical
Three major areas of globalization
Outsource
To obtain goods or services from an outside or foreign supplier
Cultural Globalization
Transmission of ideas, meanings, and values around the world in such a way that extends and intensified social relations
Nongovernmental Organizations (NGOs)
Not for profit organizations that are independent of the government and are active in humanitarian causes
Economic Globalization
Refers to the widespread international movement of goods, capital, services, technology, and information
Subsidies
A sum of money granted by the government to assist and industry or business
Intellectual Property
A work or invention that is a result of creativity, such as a manuscript
Financial Instrument
A monetary contract between parties
Stakeholder Analysis
A technique to identify and assess the important key people, groups of people, or institutions that may significantly influence the success of an organization's activity, project, or business
Foreign Direct Investment
When a firm invests assists directly into a foreign country's buildings, equipment, or organizations
Stage 1: Market EntryStage 2: Product SpecializationStage 3: Value Chain DisaggregationStage 4: Value Chain Re-engineeringStage 5: Creation of New Markets
The five stages of becoming a global company
McKinsey Global Institute
An organization whose mission is to help leaders in the commercial, public, and social sectors develop and understanding of the evolution of the global economy
Stage 1: Market entry
Stage when companies enter the new countries using business models similar to the ones deployed in their home markets
Stage 2: Product specialization
Stage when companies transfer the full production process of a particular product to a single, low-cost location and export the goods to various consumer markets
Stage 3: Value Chain Disaggregation
Stage when companies disaggregate (separate into its component parts) the production process and focus on completing each activity in the most advantageous location
Stage 4: Value Chain Reengineering
Stage when companies seek to further increase their cost savings by re-engineering their processes to suit local market conditions by substituting lower cost labor for capital
Stage 5: Creation of New Markets
Stage when companies focus on market expansion
Opportunities for Scale
Cost advantages due to an increase in the amount of output and a decrease in the cost per unit
Market OpportunitiesCostCompetitionGovernment
Four industry globalization drivers
Scope
To develop efficiencies in terms of variety not volume
1. Ethical Business Practices2. Organization Structure3. Public Relations4. Leadership5. Legal and Regulatory Structure6. Infrastructure7. Technology
7 Drawbacks of Global Expansion
Market Driver
Drivers: Opportunity for scale and scope; convergence of needs; needs and wants of the market
Cost Drivers
Drivers: Economies of scale and scope; exploiting cost of factors of production
Competition Drivers
Drivers: New markets; Increased levels of trade
Government Driver
Drivers: Favorable policies; Support for industry
1. Organizations2. Governmental Organizations3. NGOs
What are the different forms of international business?
Importer
Sells products and services that are sources from other countries
Exporter
Sells products and services that are sources from its home country in foreign countries
Foreign Direct Investment
When a firm invests assets directly into a foreign country's buildings, equipment, or organizations
Organizations
Engages in foreign business such as exporting, importing, foreign direct investment
Governmental Organization
Engages in creating international treaties to issues such as trade, environment, or child labor; maintain embassies and consulates in foreign countries
Non-Governmental Organization (NGO)
Includes any nonprofit, voluntary citizens group that are organized on a local, national, or international level
Six Sigma
A method that provides tools for organizations to increase performance and decrease process variation
CultureAdministrationGeographyEconomics
CAGE components
Human capital
The education and skills of workers
Gini Coefficient
Measures the inequality among values of a frequency distribution such as levels of income
Happy Planet Index
Measures how well nations are doing at achieving long, happy, sustainable lives
Political system
The system of politics and government in a country; it governs a complete set of rules, regulations, institutions, and attitudes.
Anarchy
The absence of organized government; individuals have the right to choose what happens
Monarchy
A government in which a single person rules until he or she dies or abdicated the throne
Absolute Monarchy
Governments where a monarch has absolute or unmitigated power
Constitutional Manarchy
Governments of nations that recognize monarchs but require that these figures abide by the laws of a greater constitution; feature prime ministers
Oligarchy
An elite group holds the power of the government
Dictatorship
Power is held by a single person (or very small group of people) who wields complete and absolute authority over a government and its population
Democracy
Form of government that strives to provide all citizens an equal voice, or vote, in determining state policy, regardless of socioeconomic status
Totalitarian Dictatorship
A dictatorship in which the dictator controls all aspects of its subjects lives, including occupations, religious beliefs, and the number of children each family is permitted to have
Macroeconomic
A branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole
1. Centered around a family or tribe and guided by tradition2. Found in hunt-gatherer and nomadic societies; everyone consumed and produces the same goods3. Relies on bartering4. Members product what they need with no surplus5. Eventually, the economy evolves to some form of currency
5 characteristics of a traditional economy
1. Collective or state ownership of capital (such as money, property, and other physical assets)2. The state determines inputs and outputs3. Labor is allocated according to state plans4. Private ownership is not possible5. Prices and paying for goods and services are regulated by the state with little regard to costs; often a currency does not exist but resources are given to citizens as needed
5 distinguishing features of a command economy
1. It is standard for all goods and services to be privately owned.2. People are free to choose to produce, sell, and purchase goods at the price set with the capital they possess3. Every seller aims to make the most profit possible4. Market economy relies on an efficient market in which all buyers and sellers have equal access to the same information5. Competition keeps prices low6. Government interference is at the minimum that is necessary to ensure that markets are functioning correctly
6 characteristics of a market economy
CivilCommonReligious
Three types of conventional systems of law
Civil Law
Countries under this system of law have more detailed, prescriptive laws in which the role of the judge is to investigate whether a law has been broken
Common Law
This legal system is based on precedence. The role of the judge is to hear arguments from both parties and make a judgment, which is used as a precedent for future cases
Religious Law
This legal system is based on religious beliefs
Special Drawing Right (SDR)
International type of money reserve created by the IMF used to loan money to member countries
Balance of Payments
The difference in total volume between payments into and out of the country over a period of time
Fixed-Rate Currency Exchange System
When a country's currency value is fixed or pegged by a monetary authority against the value of another currencyC a basket of currency, or another measure of value
To promote international economic cooperationTo promote international tradeTo promote employmentTo promote exchange rate stability By making financial resources available to member countries to meet their balance of payment needs
Objectives of the IMF
Collateral
Something pledged as security for repayment of a loan to be forfeited in the event of a default
1. Prior actions2. Quantitative Performance Criteria3. Indicative Targets4. Structural Benchmarks
Four conditions of the IMF
Prior Actions
Actions that a country agrees to before the IMF's executive board approves financing or completes a review
Quantitative Performance
Criteria that are specific and measurable conditions that a country must meet to complete a review
Indicative targets
Quantitative targets used to measure a country's progress in meeting the IMF's requirements
Structural benchmarks
Nonquantitative measures such as social safety nets
A country doesn't need collateral, but has to correct financial practices that led to debt in the first place to ensure the country can pay back its loan to support other struggling countries
Conditionality of the IMF
Being owned and directed by the governments of the member nations
Which activity of the IMF affects policy making?
IMF
Is a cooperative institution and provides more effective currency exchange
Privatization
Selling government holdings to private companies
Deregulation
The removal of regulations or restrictions in a particular industry
Result currency exchange change between nations
Original purpose of the IMF
Provides means for nations to easily exchange currencyProvides oversightOffers loans to member organizations
Evolved purpose of the IMF
1. Conditionalities may make conditions worse in a struggling country2. Poor countries are underrepresented3. Does not consider effects on the environment
3 criticisms of the IMF
AAA Rating
The highest possible rating that may be assigned by a credit rating agency for a bond
Debt Instrument
A tool used by a company or any other entirety to raise money or capital
1. Helping build sustainable economic growth2. Investing in people3. Building resilience to shocks and threats
3 World Bank Priorities
1. To end extreme poverty2. To improve the income of the lowest 40% of citizens in each country
2 World Bank Goals
Commodities
A raw material or primary agricultural product that can be bought or sold
Mercantilism
One of the earliest economic theories, which states that a country's wealth was determined by the amount of gold and silver they had in their possession
Trade surplus
When the value of a country's exports is greater than the value of goods being imported
Nation-States
When a group of people are conscious of sharing a common identity and the same culture
Protectionism
The theory or practice of protecting a country's domestic industries from foreign competition by taxing imports
Navigation Acts
British Acts in 1651 to tighten and protect trade between Asia, American colonies, Africa, and England. Trade had to come in English ships. The purpose was to use American colonies to increase British finances and power
Government subsidies
Money paid by the government to help and organization or industry reduce its costs
Free trade
International trade left to its natural course without tariffs, quotas, and other restrictions
Absolute Advantage
The ability of an individual or group to produce a good or service more efficiently than another
Production Possibility Frontier (PPF)
A curve that shows various combinations of the amount of two that can be produced within the limits of the given resources and technology
Slope
The gradient of a graph at any point calculated as the change in y over the change in x
Hecksher-Ohlin Theory
Stated that countries would produce and export goods that required resources or factors that were in abundant supply and therefore cheaper; in contrast, countries would import goods that required resources that were in short supply but higher demand
Country Similarity Theory
Theory that proposed that customers in countries that are in the same or similar stage of development would have similar preferences; takes brands and customer loyalty, technology, and quality into account
Global Strategic Rivalry Theory
Theory that focused on Multinational corporations and their efforts to gain a competitive advantage against other global firms; to prosper, they must develop competitive advantage
Barriers to Entry
The obstacles that make it difficult for a new company to enter a given market. These barriers may include technology challenges, start-up costs, or government regulations
Economies of Scale
A proportionate savings in costs gained by an increased level of production
Convertible
A currency that can be used to buy or sell without government restrictions
Resource endowments
Refers to the skill and abilities of a country's workforce, the natural resources available within its borders, and the sophistication of its capital stock
Economic sanctions
Commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual
Value chain
The process or activities by which a company adds value to an article, including production, marketing, and the provision of after-sales services
Producer Surplus
The difference between how much money producers want to sell a good for an how much they receive by selling it
Wholesaler
A person or company that sells goods in large quantities at low prices, typically to retailers
Quotas
A limited quantities of a particular product that can be produced, exported, or imported under official controls
Consumer Surplus
The difference in price between the highest price a consumer is willing to pay for a good or service an what they actually paid
Import tariff
Taxes on goods that are imported into a country
Export tariff
Taxes on goods leaving a country
Protective tariff
Tariffs that protect a domestic industry by making imported goods more expensive than equivalent goods produced domestically
Revenue tariff
Tariffs levied to raise revenue for the government
Specific tariff
Import taxes expressed in an amount of money per unit inported
Ad volerem tariff
Import taxes based on a fixed percentage of the assessed commercial value of imported goods
Compound tariff
Taxes on imported goods that are a combination of a fixed amount and an amount based on the value of the goods
Absolute quota
Quota that strictly limits the quantity of goods that may enter a country
Tariff-rate quota
Quota that permits a specified quantity of imported goods to enter a country at a reduced rate during the quota period
Voluntary export restraint
A trade restriction on the quantity of a good that an exporting country is allowed to export to another country
Autarky
A political or economic system that becomes self-sufficient to survive
Government Procurement Programs
The process of buying goods and services by a government agency through a specific process of issuing bid proposals and seeking responses from companies
Export subsidies
A government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low cost loans, tax relief for exporters, or government-financed international advertising
Countervailing duties
Import taxes imposed on certain goods to prevent dumping or counter export subsidies
Economic inefficiency
An economic state in which every resource is not optimally allocated to serve each individual or entity in the best way possible by minimizing waste and inefficiency
Trade diversion
Trade is diverted from a more efficient exporter toward a less efficient one by the formation of s free trade agreement or a customs union
Dumping
The practice of charging a lower price for a product in foreign markets than in the firm's home market
Must be approved by a Senate 2/3 vote
How are treaties made?
Must be approved by the US senate and the house of representatives
How are trade agreements made?
Free Trade Agreement
Economic agreement between countries to allow free trade between members
Colonialism
The policy or practice of acquiring full or partial political control over another country to exploit it economically
Portfolio Investment
An investment in another country is purely financial and does not involve any management responsibility; investing in a company's stocks, bonds, or assets but not to control the firms operations
Diversifying
The process of allocating capital in a way that reduces the exposure to any one particular asset or risk
Foreign Direct Investment (FDI)
An investment in or the acquisition of foreign assets with the intent to control and manage them; don't by purchasing assets, investing in the company or new property, plant and equipment, or participating in a joint venture
Most Favored Nation
Each and every nation that participated in the WTO is obligated to give all investors the same treatment as it produces its most favored trading partners
10% ownership of the firm
What is the threshold to be considered a direct investment?
Dividend repatriation
The return of earnings from foreign subsidies to their parent companies back in the home country
Market capitalization
The total dollar value of a company's outstanding shares of stock, which can be sensitive to growth rates, exchange rate stability, health of the foreign banking system, liquidity of the stock and bond market, interest rates, and level of foreign exchange reserves held by the central banks
Horizontal FDI
When a company is trying to open a new market
Vertical FDI
When a company invests internationally to provide input into its core operations— usually in its home country
Greenfield FDI
When multinational corporations enter into developing countries to build NEW factories or stores; starts from the beginning
Brownfield FDI
When a company or government entity purchases or leases existing production facilities to launch a new production activity; modifying or upgrading existing facilities
Multinational corporations
Change agents that drive trade and investment flows that allow for economic growth
Regional Economic Integration
A unification between states or countries with a partial or full abolition of tariff and non tariff restrictions on trade between them; the ideal would be free trade
1. Free trade area2. Customs unions3. Common market4. Economic union5. Political union
Five Stages of Economic Integration
Political Union
When a single nation is formed and a mutual organization confederates all policies; USA
Free Trade Area
Allows basic economic cooperation so member countries remove barriers to trade among themselves; no mutual policy on trading with nonmember countries; NAFTA
Common Market
Permits the formation of economically integrated markets between member countries, removing trade barriers and any restrictions on the movement of labor, technology, and capital; Common Market for Eastern and Southern Africa
Customs Union
Offers economic collaboration by removing trade barriers between member countries and establishing a mutual trading policy with nonmembers; Mercosur
Economic Union
When countries enter into an economic agreement to remove barriers to trade and adopt common economic policies; members use a common currency, harmonized taxes monetary, and fiscal policy; European Union
1. Encourages specialization2. Lowers prices3. Provides more choices on goods and services4. Increases productivity5. Allow for more efficient use of natural resources
5 goals of a trade bloc
Exchange rates
The price of one currency expressed in terms of units of another countrh
Trade bloc
A free-trade zone formed by one or more tax, tariff, and trade agreement between two or more countried
Preferential tariff
A tariff that is lower for some nations than others
Dollarize
A country that is not the United States uses the U.S. dollar as its currency
Foreign Exchange Market
The market in which people use one currency to buy another
Exchange Rate Regime
The way in which an authority manages its currency in relation to other currencies and the foreign exchange market
Floating exchange rate
A system where the value of currency in relation to others is allowed to freely fluctuate subject to market forces
Fixed exchange rates
A system where a currency's value is tied to the value of another single currency, to a basket of other currencies, or to another measure of value, such as gold
Pegged exchange rate
A currency system that fixes and exchange rate around a certain value, but still allows fluctuations, usually within certain values, to occur
Stronger Dollar
Stronger or weaker dollar? Foreign currency buys less US dollars
Stronger Dollar
Stronger or weaker dollar? US dollar will buy more of a foreign currency
Weaker Dollar
Stronger or weaker dollar? Foreign currency buys more US dollars
Weaker Dollar
Stronger or weaker dollar? US dollar will but less of a foreign currency
Robber Barons
Corporations and cartels that monopolized business in the period following the American civil war
Monopoly Power
When a specific person or enterprise is the only supplier of a particular product
Consumer
A person who needs, uses, or has used a particular service or product
Antitrust laws
Consumer production policy used to limit unfair business practices related to competition and control of prices
Monopoly
Market in which a single producer is a price maker that can determine the price level by deciding what quantity of goods to produce
Blood Diamonds
Diamond mined in war zones and sold in order to finance ware efforts
Perfectly competitive market
A market in which no individual is colonic actor can affect the price of a good
World Trade Organization (WTO)
An international organization that works at standardizing competitive market practices in conjunction with the internal laws of individual nations
Protect the process of competition for the benefit of consumers
Basic objective of antitrust laws
The European Union (EU)
European Statute established in 1952 with the purpose of reducing the ability for one country/region to gain a monopoly on critical natural resources
Sherman Antitrust Act
The first American antitrust policy. Established in 1890, it dealt with limiting the power of price-controlling cartels
Competition lawsAntimonopoly laws
Other names for antitrust laws
Natural resources
What was the main purpose is creation of the EU?
Collective Environment
Understanding that the environment not only belongs to everyone to enjoy but is also everyone's shared responsibility
United Nations Environment Programme (UNEP)
Branch of the United Nations that deals specifically with worldwide environmental problems
Paris Agreement
Universal global climate deal aimed at keeping long-term global temperature increase at below 2°C
National Environmental Policy Act (NEPA)
American environment act from the 1970s that required federal agencies to prepare environmental impact statements for every recommendation or report
Environmental Protection Agency (EPA)
American agency established in the 1970s with the goal of monitoring the environmental practices of industry
Sovereign rights of nations
What makes the enforcement of UNEP regulations difficult?
Kyoto Protocol (1997)
Treaty that the US originally supported, but the Senate failed to ratify the treaty stating the treaty threatened the US economy and did not require developing nations to lower their emissions at the same rate as developed countries
Sweatshop
A factory that is guilty of some sort of labor abuse or violation such as unsafe working conditions, employment of children, mandatory overtime, unsafe working conditions, and so on
Globalization
Worldwide interconnection sin virtually every sphere of activity including the spread of products, technology, information, and job opportunities. Can result in blurred boundaries between nations, organizations, and investors
National Labor Committee
A nongovernmental organization involved in anti-sweatshop activities and the implementation of labor laws
Worst Forms of Child Labor Convention, 1999
Convention that aimed to eliminate all practices of child slavery or those similar to slavery
The Maritime Labor Convention (MLC), 2006
Convention that set out a bill of rights for all seafarers
Domestic Workers Convention, 2011
Convention aimed at protecting domestic workers from abuse and exploitation
Contract
A legally enforceable promise
Damaged
Recompense for the injured party by the party that breaches the contract
Vertical structure of law
A structure of law where those at the top govern those at the bottom
Uniform Commercial Code (UCC)
Source of contract law in the US
Horizontal structure
Structure of law where neither party is in a legally dominant position over the other
Horizontal laws
Laws that govern disputes on a horizontal structure
UN Convention for the International Sale of Goods (CISG)
United Nations treaty that applies to the international sales of commercial goods
Apple Inc. vs Pepper
Antitrust court case in which a group of iPhone users have accused Apple of monopolistic practices via the app store
Deepwater Horizon oil spill
A 2010 industrial accident that is considered the largest oil spill in history
Oil Pollution Act of 1990
US law that strengthened the EPA's ability to prevent and respond to oil spills
The Clean Water Act
A US federal law governing water pollution
Trade-Related Aspects of Intellectual Property Rights (TRIPS)
a WTO agreement governing intellectual property law
Patents
Protects inventions and improvements to existing inventions for a limited period of time in exchange for details public disclosure of those inventions
Trademark
Protection for any word, name, symbol, device, or combination used in commerce to identify and distinguish the goods of one manufacturer or seller from goods manufactured or sold by others
Copyright
Form the protection provided by the laws of the US to the authors of original works of authorship including literary, dramatic, musical, artistic, and certain other intellectual works
World Intellectual Property Organization (WIPO)
Established in 1967 by the UN to implement global policy related to intellectual property
Ethics
Field of philosophy that deals with the morality of what is considered right or wrong
Sarbanes-Oxley Act of 2002
Law aimed st increasing level of ethical transparency within corporate America
Whistleblower
A person who exposes any kind of information or activity that is deemed illegal, unethical, or not correct within an organization
Organizational ethics
How an organization ethically responds to an internal or external stimulus
Business Ethics
The contemporary standards or sets of values that govern the actions and behavior of individuals in the business organization and the action of the business itself
Ethical Consumerism
A movement in which consumers make purchasing decisions based on a company's ethical profile
Corporate Social Responsibility (CSR)
The ethical role of a corporation in society
UN Global Compact
a non binding UN pact aimed at encouraging businesses to adopt sustainable and socially responsible policies and to report on implementation
Global Reporting Initiative
An international standards organization that assists organizations in understanding and communicating their impact on ethical issues such as human rights, climate change, and corruption
Stakeholders
All parties who have a stake in the performance and output of the corporation
Cultural norms
Shared, sanctioned, and integrated systems of beliefs and practices that are passed down through generations and characterize a cultural group
Conflict of Interest
Ethical challenges in which multiple interests are at conflict with one another
Grease payments
A business practice or paying small inducements in order to expedite decisions and trasnactions
Securities and Exchange Commission (SEC)
An independent US agency aimed at regulating the nations securities industry
Multilevel marketing
Marketing strategy in which revenue is derived from a non salaried worker selling the company's products or services and earning a commission
Corruption Perceptions Index
Tracks, rates, and ranks 180 countries based on their levels of corruption and illicit behaviors
Open Government Information Regulations
Chinese regulation (2008) that established limited rules for government information disclosure and public participation
Power distance
One of Hofstede's six dimensions of national culture. It describes how formal and authority focused a society is
Bribery
Cash payment or other bonus that benefits an individual but provides little advantage to the company
Teapot Dome Scandal
A scandal dating back to the 1920s in which an American cabinet official received a jail sentence and fine for the first time for adopting bribery practices
US Foreign Corrupt Practices Act
Outlawed bribery of foreign officials
due diligence
When officers adequately investigate and enforce procedures
Internal Controls
The redundancies that are built into a system to make sure that it functions property
Discrepancies
Accounting errors that occur unintentionally
Irregularities
Misrepresentations of accounting data with the intent to defraud
UK Bribery Act
A UK act that enhances UK law related to bribery, including bribery of foreign corporations
Internal auditing
A control in which the company investigates and evaluates employees' compliance with company policies and procedures
Organizational structure
The formal way a company divides labor, groups employees, and assigns responsibilities
Conglomerates
Large corporations made up of several combines companies, often forms through mergers and takeovers
Subsidiaries
Companies completely owned or controlled by a parent company
Divisions of labor
Dividing organizational activities into small tasks
Organizational chart
A visual map of the roles and relationships within an organizations and how functions and responsibilities are divided
Vertical and horizontal linkages
Lines on an organizational chart showing the relationships within an organization
Unity of command
One employee should only report to one person
Functional/departmental structure
Employees are divided into departments related to a functional area of the business, such as marketing, production, Human Resources, IT, and customer service; traditional organizational structure
Divisional structure
Employees are divided into departments based on different markets the company serves, product areas, and/or geographic regions; common in large, international corporations
Matrix structure
Employees can be put on different teams to maximize creativity and idea flow; common in high-tech and engineering firms
Teams structure
Composed of people with complementary skills working together for a common purpose ; less hierarchical with shared leadership and objectives
Departmentalization
Grouping a business's people, tasks, and resources into units
Functional departmentalization
Organizing a company's people, tasks, and resources based on business functions such as marketing, production, and sales
Product departmentalization
Organizing a company's people, tasks, and resources based on goods or services
Process departmentalization
Organizing a company's people, tasks, and resources based on a production proces
Customer departmentalizaion
Organizing a company's people, tasks, and resources based on the type of customer served
Geographic departmentalization
Organizing a company's people, tasks, and resources based on a geographic region
Tall structures
Organizational structures with many levels
Flat structures
Organizational structures with few levels
multinational corporation (MNC)
A company that operates in two or more countries
economies of scale
A proportionate savings in cost gained by an increased level of production
Economies of scope
The savings from producing more than one type of item
Specific Strategic Business Unit (SBU)
An independent division within a large company with responsibility for specific products or activities
Centralization
The degree to which decision-making authority is concentrated at higher levels in an organization and business functions controlled in a central location
Centralized Companies
Companies with structures that limit decision making to higher levels in the organizational hierarchy
Decentralized Companies
Companies with structures that distribute the authority to make decisions to lower levels of employees who are closer to the problem
Global integration
The degree to which a company is able to use the same products and methods in multiple countries
Local responsiveness
The degree to which a company must customize its products and methods to meet the conditions in other countries
Export Strategy
An international commerce strategy that focuses on shipping domestic products to other countries
Standardization strategy
A strategy for international commerce that does not customize products for local markets
Multidomestic strategy
A strategy of international commerce that customizes products to each country
Transnational Strategy
An international commerce strategy that combines the aspects of standardization and multidomestic strategies
Portfolio investment
An investment in a country is purely financial and does not involve any management responsibility
Foreign Direct Investment (FDI)
An investment strategy of investing in a foreign market through direct involvement in the operations of a company, either by acquisition or partnership or by creating a new business
Acquisition
The act of taking over ownership or controlling a business
Capital
Financial assets such as funds but also equipment, facilities, and other means of production
Disincentives
Something that discourages people from an action
Exporting
Sending goods to another country to sell
Licensing
A type of contract that allows one party to use another's property as their own without paying royalties for a designated length of time
Franchising
A system where a business grants an entrepreneur the right to use their products, names, and processes in exchange for a percentage of the profits
Partnering
An agreement between two or more entities to share responsibilities for a business
Strategic allowances
An agreement between two companies to cooperate on a mutually beneficial project
Standardization
The process of making everything conform to expectations and guidelines for consistency
Brand
A type of product made by a particular company under a particular name
Economies of scale
A proportionate savings in cost gained by an increased level of production
Multibrand strategy
The practice of a company offering different brand of similar products for different markets
Product adaptation
The process of changing a product in some way so it is more acceptable or desirable in a particular market
Localize
Modify something to appeal to people in a specific location
Glocalization
The process of adapting to local markets while maintaining a global identity
Locensor
A person or company who owns a product but provides it to someone else as part of an agreement
Licensee
A person or company who has entered into an agreement with someone to use their products or service for a specified period of time
Strategic plan
A formal agreement on priorities, focus, and goals
Vertical Integration
The combination of two or more stages of production in one company
Horizontal Integration
The expansion at a single point in the supply chain, often through the combination of two or more similar companies
Distributor
Someone who supplies goods to a business
Export Management Company (EMC)
A private company that is hired to act as a company's export department
Greenfield venture; high risk because companies assume all the risk
Which method of entering an international market offers the most potential for above-average returns?
Emerging markets
A country that is transitioning from a less developed economy to a more developed one with an expanding middle class and increasing social-political stability
Profitability
The degree that a company is able to make a profit
Sourcing
Obtaining needed materials from a supplier
Operational expenses
Expenses relating to everyday expenses
Gross Domestic Product (GDP) growth
The total value of goods and services provided in a country in a one-year period
Mature economy
A term that describes countries with a stable population and slowing economic growth
Developing economies
A term that describes countries with a less-developed industrial infrastructure and lower per capita income
Culture
The beliefs, values, mind-sets, and practices of a group of people
Collectivist
Focused on the good of the group or society over the individual
Masculine vs Femininity
One of hofstede's six dimensions of national culture. It measures how the society views traits that it considers masculine or feminine
Power distance
One of Hofstede's six dimensions of national culture. It describes how formal and authority focused a society is
Individualistic
One of Hofstede's six dimensions. It measures how focused people are on their immediate circle at the expense of the greater group
Uncertainty avoidance
One of Hofstede's six dimensions. It measures how comfortable a society is with uncertainty
Long-term orientation
One of Hofstede's six dimension. It measures how focused a society is on traits such as perserverence or shame
Short-term orientation
One of Hofstede's six dimensions. It focused on immediate gratification and fulfilling current social obligations
Indulgence vs Restraint
One of Hofstede's six dimensions. It measures the degree of freedoms and spontaneity that is valued
Guanxi
Concept in China that describes a connection based on reciprocity
Personality
A persons unique characteristics that shape thought and behavior patterns
Ethnocentrism
The belief that one's own culture is most important
Expatriates
People who live and work outside their own country
Domestic
Related to home or place of origin
Agility
Ability to move quickly and flexibly
Training
A focused educational program with a specific goal
Primary sources
Original information that could be firsthand accounts, raw data, or artifacts
Secondary sources
Information that has been passed on from an original source or interpreted
Human Resources (HR) management (HRM)
Department within an organization responsible for employment issues
Negotiate
A conversation to acheive an agreement
Performance evaluation
Formal process for evaluating an employee
Compensation
What an employee is paid in exchange for work
Ethnocentric strategy
HR strategy of hiring only people from the home country for key positions in foreign subsidiaries
Polycentric strategy
HR strategy that gives local hiring control to foreign subsidiaries
Geocentric strategy
HR strategy that takes a whole-world view of the company, hiring the best people for positions regardless of location
Repatriation
The process of transitioning employees back to their home countries
Supply chain networks
A complex, evolved form of a supply chain that included secondary support and multiple, interrelated supple and distribution lines
Supply chain
The sequence of processes involved in the production and distribution of a commodity
Value chain
The process or activities by which a company adds value to an article, including production, marketing, and the provision of after-sales services
Supply Chain Management
The management of the flow of goods or services through the process of moving from production to customer
Production planning
The allocation of resources in the production process
Distribution
The process of supplying goods to customers
Push model
Theory in supply chain management that focused decisions on the needs of the product
Production cycle
All the activities involved in creating a product
Pull model
Theory in supply chain management that based decisions and activities on the needs of the customers
Lean manufacturing principles
A collection of methods or theories for reducing waste in manufacturing
Multinational production
Manufacturing process that spans multiple countries outside a firms country of origin, usually in a coordinated multistage system
Country-of-origin effect
The effect the consumer's perception or opinion of the country where a product is made has on the consumer's perception or opinion of the product itself
Make-to-order
A manufacturing method that allows customers to customize the product
Mass production
A manufacturing method that created large amounts of identical products
Mass customization
A manufacturing method that combines the flexibility of custom production with the scale of mass production by allowing the customer to dictate some of the design elements in products that will have a wide distribution
Value to weight ratio
The value of a product per pound or kilo
Fixed costs
The necessary expenses of the manufacturing process other than the cost of materials and labor used in production
minimum efficient scale (MES)
The balance point between price and cost that allows a company to make a profit
Outsourcing
Hiring staff or business outside the company to complete business activities
Insourcing
Using in-house staff to complete a business task
Intellectual property
A creation of the mind, whether it is an invention, literary or artistic work, or unique process
Intellectual property rights
The legal protections for creations of the mind
Trade secret
Intellectual property that is kept private
Patent
The exclusive legal right granted to an inventor to profit from his or her creation
Marketing channel
The way a seller connects with a customer; sometimes called a distribution channel
Direct channel
The shortest path between producer and a consumer
Direct distribution strategy
Distribution strategy that reaches customer directly without any intermediaries
Indirect channel
An indirect path between producer and consumer with intermediaries
Indirect distribution strategy
Distribution strategy that uses intermediaries to reach customers
Debt
Amount owed to someone
Equity
Value of the shares of a company
Crowdsourcing
Enlisting the help of a large number of people, often via the Internet
Assets
A useful or valuable thing; something you own such as a building, inventory, or cash
Foreign currency
Any form of money in circulation in s different country
Exchange rates
The price of one currency expressed in terms of units of another currency
Venture capital
A type of high-risk investing
GAAP (Generally Accepted Accounting Principles)
A collection of accounting principles in the United States that provide guidance and standardization for financial accounting
IASB (International Accounting Standards Board)
An independent group that oversees the development and revisions of the IFRS
IFRS (International Financial Reporting Standards)
A collection of accounting principles used through much of the world outside the United states
FASB (Financial Accounting Standards Board)
An independent group that oversees the development and revision of GAAP
Political risk
Possible political changes or instability in a country that could hurt a company's financial return on a foreign investment
Macro risk
A type of political risk that applies to all foreign investments in a country
Asset seizure
An act of confiscating or taking control of private assets such as funds or property by a government
Micro risk
A type of political risk that applies to a specific foreign company or a group of foreign companies in a country
Currency
Any form of money in circulation in a country
Foreign exchange market
The market in which people use one currency to buy another currency
Spot rates
Currency exchange rates that require immediate settlement with the delivery of traded currency
Currency risk
The risk of a change in the exchange rate that will have an adverse effect
Currency translation
The act of translating currencies on a financial statement to another currency
Current Rate Method
A method of foreign currency translation that translates items on financial statements at the current exchange rate
Temporal method
A method of foreign currency translation that used exchange rates based on the rate in place when the assets and liabilities were originally acquired or incurred
Hedging
Using financial instruments to reduce adverse price movements
Derivatives
Special types of financial instruments, the prices of which are ultimately derived from the price or performance of some underlying assets
Return volatility
A measure of the variation in returns on an investment
Forward contract
A contract in which the firm agreed to pay a set rate at the beginning of a contract
Currency swap contracts
A simultaneous buy and sell of currency for two different dates
Currency option contracts
The option or right to exchange a specific amount of currency on a specific future date and at a specific agreed on rate
Currency futures contracts
Contracts that require the exchange of a specific amount of currency at a specific future date and at a specific exchange rate
Internal forward rate
A company generated forecast of future spot exchange rates
Long position
A strategy used in investing of a trader who buys an asset with expectation that it will increase in value
Short position
A strategy used in investing of a trader who sells someone else's asset with the expectation of buying it back later when it decreases in value
value added tax (VAT)
A consumption tax added to products incrementally for all stages of production but collected by the end retailer; similar to a sales tax; also called a goods and services tax (GST)
Transfer pricing
the practice of shifting assets to a subsidiary in a country with a better tax bracket
Fronting loan
A loan made between a parent company and its subsidiary through a financial intermediary such as a bank
Tax haven
A country that has very low corporate taxes
Digital divide
The inequality between groups to access knowledge and use of information in communication technologies
IT
The equipment and techniques used to manage and process information
Graphical User Interface (GUI)
A type of interface that allows users to interact with electronic devices through graphical icons and visual indicators instead of text
Database
An electronic filing system that collects and organizes data and information
Broadband
A type of high-speed wired or wireless communication
The Group of 77 and China) G77)
A coalition of 134 developing nations that join together to promote their economic interests at the UN. China participates but does not consider itself a member
International Telecommunication Union
A specialized agency of the UN responsible for communication and information issues
Jakob Nielsen
Danish web usability consultant. He holds a PHD in human-computer interaction from the technical university of denmark in copenhagen
Wireless
Communication using radio frequencies
Chief Information Officer (CIO)
An executive the responsibility for managing all information resources in an organization
Knowledge workers
Workers who develop or use knowledge, contributing to and benefiting from information used to perform planning, acquiring, searching, analyzing, organizing, storing, programming, producing, distributing, marketing, or selling functions
Management information system
The method and equipment that provide information about all aspects of a firm's operations
Machine learning algorithms
Computer systems that automatically learn from experience instead of being explicitly programmed
Deep learning
A subset of machine learning in which computers learn unsupervised data that are unstructured
DNS blocking
A strategy that makes it difficult for users to locate specific domains or websites on the internet
Virtual Private Network (VPN)
A private corporate network connected over a public network, such as the internet, it includes strong security measures to allow only authorized users to access the network
Country A exports more goods to Country B than it imports from Country B. Country A receives more monetary gain by using this practice.Which relationship does Country A have with Country B?
Trade surplus
Country A has been criticized by other countries for giving generous tax credits to its corn farmers, which enables the country's farmers to sell corn on the international markets for cheaper than all other countries.Which term is used by other countries to describe this practice?
Government subsidies
Economies of scale
A proportionate savings in costs gained by an increased level of production
Which type of tariff is put in place to specifically ensure that domestic industries are given an advantage?
Protective