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International Business chapter 1-3

international business
A business whose activities are carried out across national borders
foreign business
the operations of a company outside its home or domestic market
multidomestic company (MDC)
an organization with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences
global company (GC)
an organization that attempts to standardize and integrate operations worldwide in all functional areas
international company (IC)
A company that conducts business across national borders. global or multidomestic company
environment
all the forces surrounding and influencing the life and development of the firm
uncontrollable forces
External forces over which management has no direct control, although it can exert an influence
controllable forces
Internal forces that management administers to adapt to changes in the uncontrollable forces
domestic environment
all the uncontrollable forces originating in the home country that surround and influence the firm’s life and development
foreign environment
all the uncontrollable forces originating outside the home country that surround and influence the firm
international environment
Interaction between domestic and foreign environmental forces or between sets of foreign environmental forces
self-reference criterion
unconscious reference to one’s own cultural values when judging behaviors of others in a new and different environment
foreign direct investment (FDI)
direct investments in equipment, structures and organizations in a foreign country at a level that is sufficient to obtain significant management control; does not include mere foreign investment in stock markets
exporting
the transportation of any domestic good or service to a destination outside a country or region
importing
the transportation of any good or service into a country or region, from a foreign origination point
economic globalization
the tendency toward an international integration of goods, tech, info, labor, and capital, or the process of making this integration happen
mercantilism
an economic philosophy based on the belief that 1.a nations wealth depends on accumulated treasure, usually precious metals such as gold or silver and 2. to increase wealth, government policies should promote exports and discourage imports
absolute advantage
theory that a nation has absolute advantage when it can produce a larger amount of a good or service for the same amount of inputs as can another country or when it can produce the same amount of a good or service using fewer inputs than could another country
comparative advantage
theory that a nation having absolute disadvantages in the production of two goods with respect to another nation has a comparative or relative advantage in the production of the good in which its absolute disadvantage is less
offshoring
locating activities in another nation
exchange rate
The price at which one currency is exchanged for another.
currency devaluation
the lowering of a currency’s price in terms of other currencies
resource endowment
Theory that countries export products requiring large amounts of their abundant production factors and import products requiring large amounts of their scarce production factors
overlapping demand
theory that trade in manufactured goods will be greater between nations with similar levels of per capita income, and that the goods traded will be those for which consumers in both countries demand the same good
product differentiation
the development of products that have unique differences, with the intent of positivity influencing demand
international product life cycle (IPLC)
a theory explaining why a product that begins as a nations export eventually becomes its import
economies of scale
situations where the average cost of producing each unit of output decreases as a plant gets larger and output increases
experience curve
Reduction of unit costs of production as accumulated volume increases, due to improved efficiency resulting from increased cumulative experience and learning.
national competitiveness
a nations relative ability to design, produce, distribute or service products within an international trading context while earning increasing returns on its resources
portfolio investment
the purchase of stocks and bonds to obtain a return on the funds invested
direct investment
the purchase of sufficient stock in a firm to obtain management control
monopolistic advantage theory
theory that foreign direct investment is made by firms in monopolistic industries possessing technical and other advantages over indigenous firms
internalization theory
the concept that to obtain higher return on its investment a firm will transfer its superior knowledge to a foreign subsidiary rather than sell it in the open market
dynamic capability
theory that for a firm to successfully invert overseas, it must have not only ownership of unique knowledge or resources but the ability to dynamically create and exploit these capabilities over time
eclectic theory of international production
theory that for a firm to invest overseas, it must have three kinds of advantages ownership specific internalization and location specific
new institutional theory
understanding of institutions as social constructs, a collection of norms that structure the relations of individuals to one another
formal institutions
institutions that influence behavior through laws and regulations
informal institutions
institutions that influence behavior through norms, values, costumes and ideologies
united nations (UN)
192 member organization dedicated to the promotion of peace and stability of the world
general assembly
deliberative body of the UN made up of all member-nations, each with one vote regardless of size, wealth or power
security council
main peacekeeping body of the UN, composed of 15 members including 5 permanent members
economic and social council (ECOSOC)
UN body concerned with economic and social issues such as trade, development, education, and human rights
international court of justice (ICJ)
UN body that makes legal decisions involving disputes between national governments
secretariat
the staff of the UN, headed by the secretary-general
bretton woods
1944 conference at which allied nations’ treasury and central bank representatives met to establish the International Monetary Fund and the World Bank
International monetary Fund (IMF)
institution that fosters global monetary cooperation, financial stability international trade, high employment and sustainable economic growth and reduction of poverty
world bank
institution that lends money for development projects
special drawing rights (SDRs)
an international reserve asset established by the IMF
per value
stated value
world trade organization (WTO)
an international organization that deals with rules pf trade between nations
Doha Development agenda
WTO extended conference on trade
trade related intellectual property rights (TRIPS)
refers to the WTO agreement that protects copyrights trademarks, trade secrets, and other intellectual property matters
organization for economic cooperation and development (OECD)
group of developed countries dedicated to promoting economic expansion in its member nations
Free trade area (FTA)
area in which tariffs among members have been eliminated but members keep their external tariffs
customs union
collaboration that adds common external tariffs to an FTA
common market
customs union that includes mobility of services, people, and capital within the union
complete economic integration
integration on economic and political levels
north American free trade agreement (NAFTA)
agreement creating a free trade area among canada mexico and the united states
mercosur or mercosul, the common market of the south
a south american customs union of argentina paraguay brazil and uruguay
association of southeast asian nations (ASEAN)
agreement among southeast asian nations that began as a security agreement and has developed toward a common market
european union (EU)
a body of 27 european countries committed to economic and political integration
european monetary union (EMU) or economic and monetary union
EU group that established use of the euro in the 17 country euro zone
european parliament
EU legislative body whose members are popularly elected from member nations
council of the european union
the EU’s primary policy setting institution
european commission
body responsible for the EU’s day to day operations
european central bank
the central bank for europe’s single currency, the euro
european court of justice
the highest court of the EU it interprets EU law

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