Globalization
Movement from thinking about markets in terms of geographic areas to thinking about them as something that transcends borders; the shift towards a more integrated and interdependent world economy
World-wide sourcing
All types of businesses are getting inputs from several global locations
Globalization of markets
Merging of historically distinct and separate national markets into one huge global market;
Globalization of production
Sourcing of goods and services from locations around the globe to take advantage of national differences in cost and quality factors of production
Factors of production
inputs into the productive processes of a firm, including labor management, land, capital, and technological know how
General Agreement on Tariffs and Trade (GATT)
International treaty that committed signatures to lowering barriers to the free flow of goods across national borders and led to the WTO
World Trade Organization
Primarily responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO member states (97% of world trade countries)
International Monetary Fund
International institution set up to maintain order in the international monetary system
United Nations
International organization made up of 193 countries to promote peace, security, and cooperation
G20
Comprises the finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the EU and European Central Bank
International Trade
Occurs when a firm exports goods or services to consumers in another country
Foreign Direct Investment (FDI)
Direct investment in business operations in a foreign country
Two factors that underlie trend towards greater globalization
Declining barriers to international trade and technological chanve
Moore's Law
The power of microprocessor technology doubles and its costs of production fall in half every 18 months
Stock of FDI
The total accumulated value of foreign-owned assets at a given time
Multinational Enterprise
A firm that owns business operations in more than one country
International Business
Any firm that engages in international trade or investment
Two major forces in the global economy
trade and investment
Political economy
The political, economic, and legal systems of a country
Political system
System of government in a nation
Collectivism
A political system that emphasizes collective goals as opposed to individual goals
Socialist
Someone who believes in public ownership of the means of production for the common good of society
Communists
Those who believe socialism can be achieved only through revolution and totalitarian dictatorship
Social Democrats
Those committed to achieving socialism by democratic means
Privitization
The sale of state-owned enterprises to private investors
Individualism
An emphasis on the importance of guaranteeing individual freedom and self-expression
Democracy
Political system in which government is by the people, exercised either directly or through elected representatives
Totalitarianism
Form of government in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited
Representative Democracy
A political system in which citizens periodically elect individuals to represent them in government
Communist Totalitarianism
A version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship
Theocratic Totalitarianism
A political system in which political power is monopolized by a party, group, or individual that governs according to religious principles
Tribal Totalitarianism
A political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power
Right-Wing Totalitarianism
A political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to th
Market Economy
An economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced
Command Economy
An economic system where the allocation of resources, including determination of what goods and services should be produced, and in what quantity, is planned by the government
Legal system
System of rules that regulate behavior and the processes by which the laws of a country are enforced and through which redress of grievances is obtained
Common Law
A system of law based on tradition, precedent, and custom; when law courts interpret common law, they do so with regard to these characteristics
Civil Law System
A system of law based on a very detailed set of written laws and codes
Theocratic Law System
A system of law based on religious teachings
Contract
A document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved
Contract Law
The body of law that governs contract enforcement
United Nations Convention on Contracts for the International Sale of Goods (CIGS)
A set of rules governing certain aspects of the making and performance of commercial contracts between sellers and buyers who have their places of business in different nations
Property Rights
Bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource
Private action
The theft, piracy, blackmail and the like by private individuals or groups
Public action
The extortion of income or resources of property holders by public officials, such as politicians and government bureaucrats
Foreign Corrupt Practices Act
US law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical action
Intellectual Property
Products of the mind, ideas; can be protected by patents, copyrights, and trademarks
Patent
Grants the governor of a new product or process exclusive rights to the manufacture, use, or sale of that invention
Copyrights
The exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit
Trademarks
The designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products
World Intellectual Property Organization
An international organization whose members sign treaties to agree to protect intellectual property
Paris Convention for the Protection of Intellectual Property
International agreement to protect intellectual property
Product Safety Laws
Set certain safety standards to which a product must adhere
Product Liability
Involves holding a firm and its officers responsible when a product causes injury, death, or damage
Cross-cultural literacy
Understanding how the culture of a country affects the way business is practiced
Culture
A system of values and norms that are shared among a group of people and that when taken together constitute a design for living
Values
Abstract ideas about what a society believes to be good, right, and desirable
Norms
Social rules and guidelines that prescribe appropriate behavior in particular situations
Society
Group of people who share a common set of values and norms
Folkways
Routine conventions of everyday life
Mores
Norms seen as central to the functioning of social life
Social structure
The basic social organization of a society
Group
An association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other's behavior
Social strata
Hierarchical social categories based on family background, occupation, and income
Social Mobility
the extend to which individuals can move out of the social strata into which they are born
Caste System
a system of social stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime
Class System
a system of social stratification in which social status is determined by the family into which a person is born and subsequent socioeconomic achievements; mobility between classes is achievable
Class Consciousness
the tendency for individuals to perceive themselves in terms of their class background
Religion
system of shared beliefs and rituals that are concerned with the realm of the cared
Ethical Systems
set of moral principles, or values, that are used to guide and shape behavior
Power Distance
how a society deals with the fact that people are unequal in physical and intellectual capabilities. Cultures that are high on this let inequalities grow over time, cultures that are low on this try to play inequalities down
Individualism vs. Collectivism
focuses on the relationship between the individual and his/her fellows
Uncertainty Avoidance
measures the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty
Masculinity vs. Femininity
relationship between gender roles and work
Confucian Dynamism
Captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors
Timing of Entry
entry is early when a firm enters a foreign market before other foreign firms and late when a firm enters after other IB's have established themselves
First-Mover Advantages
advantages accruing to the first to enter a market
First-Mover Disadvantages
disadvantages associated with entering a foreign market before other IB's
Pioneering Costs
costs than an early entrant has to bear that a later entrant can avoid
Exporting
Sale of products produced in one country to residents of another country
Turnkey Project
a project in which a firm agrees to set up an operating plant for a foreign client and hand over the "key" when the plant is fully operational
Licensing
an arrangement in which a licensor grants the rights to intangible property to the licensee for a specified period and receives a royalty fee in return
Franchising
a specialized form of licensing in which the franchiser not only sells intangible property (usually trademark) to franchisee, but also insists that the franchisee agree to abide by strict rules on how it does business
Joint Venture
establishing a firm that is jointly owned by two or more otherwise independent firms
Wholly Owned Subsidiary
subsidiary in which the firm owns 100% of the stock
Business Ethics
accepted principles of right or wrong governing the conduct of businesspeople
Ethical Strategy
a course of action that does not violate a company's business ethics
Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
An OCED convention that establishes legally binding standards to criminalize bribery of foreign public officials in IB transactions and provides for a host of related measures that make this effective
Social Responsiblity
the idea that businesspeople should consider social consequences of economic actions when making business decisions
Ethical Dilemma
a situation in which there is no ethically acceptable solution
Organization Culture
the values and norms shared among an organization's employees
Cultural Relativism
belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate
Righteous Moralism
the belief that a multinational's home country standards of ethics are the appropriate ones for companies to follow in foreign countries
Naive Immoralism
the belief that if a manager of a multinational sees that firm from other nations are not following ethical norms in a host nation, the manager should not either
Utilitarian Approaches to Ethics
these hold that the moral worth of actions or practices is determined by their consequences
Kantian Ethics
based on the belief that people should be treated as ends and never purely as means to the ends of others
Rights Theories
a 20th century theory that human beings have fundamental rights and privileges that transcend national boundaries and cultures
Universal Declaration of Human Rights
a UN document that lays down the basic principles of human rights that should be adhered to
Just Distribution
a distribution of goods and services that is considered fair and equitable
Code of Ethics
A business's formal statement of ethical priorities
Stakeholders
The individuals or groups that have an interest, stake, or claim in the actions and overall performance of a company
Internal Stakeholders
People who work for or own the business such as employees, directors, and stockholders
External stakeholders
Individuals or groups that have some claim on a firm such as customers, suppliers, and unions
Balance of Payments Accounts
national accounts that track both payments to and receipts from foreigners
Current Account
in the balance of payments, records transactions involving the export or import of goods and services
Current Account Deficit
occurs when a country imports more goods, services, and income than it exports
Current Account Surplus
occurs when a country exports more goods, services, and income than it imports
Capital Account
records one-time changes in the stock of assets
Financial Account
records transactions that involve the purchase or sale of assets
Free Trade
the absence of barriers to the free flow of goods and services between countries
New Trade Theory
the observed pattern of trade in the world economy may be due in part to the ability of firms in a given market to capture first-mover advantages
Mercantilism
an economic philosophy advocating that countries should simultaneously encourage exports and discourage imports (trade surplus)
Zero-Sum Game
a situation in which an economic gain by one country results in an economic loss by another
Absolute Advantage
a country has an absolute advantage in the production of a product when it is more efficient than any other country at producing it
Constant Returns to Specialization
the units of resources required to produce a good are assumed to remain constant no matter where one is a on a country's production possibility frontier
Factor Endowments
a country's endowment with resources such as land, labor, and capital
Economies of Scale
unit cost reductions associated with a large scale output