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International business chapter 1

international business
business (firm) that engages in international (cross-border) economic activities or the action of doing business abroad
global business
business around the globe including both international (cross-border) activities and domestic business activities
multinational enterprise (MNE)
firm that engages in foreign direct investments
foreign direct investment (FDI)
investments in, controlling, and managing value-added activities in other countries
emerging economies (emerging markets)
a term that has gradually replaced the term “developing countries” since the 1990s
gross national product (GNP) -
gross national product (GNP) –
measured as the sum of value added by resident firms, households, and government operating in an economy
gross domestic product (GDP) -
gross domestic product (GDP) –
total market value of all final goods and services produced within a country in a given period of time usually a calendar year
gross national income (GNI) –
GDP plus income from nonresident sources abroad – the term used by the World Bank and other international organizations to supersede the GNP term
purchasing power parity (ppp)
purchasing power parity (ppp)
adjustment made to the GDP to reflect differences in the cost of living
North America, Western Europe and Japan
acronym for the emerging economies of Brazil, Russia, India, and China
Group of 20
Group of 20
leaders of 19 major countries + EU who meet on biannual basis to discuss global economic issue
base of the pyramid
base of the pyramid
vast majority of humanity, about four billion people, live at the base of the pyramid and make less than $2,000 a year
The “Bottom Billion”
concentrated in Africa and Central Asia – 58 small countries, stuck at the bottom in terms of growth, incomes, and human department
expatriate manager
expatriate manager
a manager who works abroad, or “expat
international premium
international premium
significant compensation “package” when working overseas
formal rules
formal rules
requirements that treat domestic and foreign firms as equals enhance the potential odds for foreign firms’ success or those that discriminate against foreign firms, would undermine the chances for foreign entrants
informal rules
cultures, ethics, and norms play an important part in shaping the success and failure of firms around the globe
liability of foreignness
inherent disadvantage that foreign firms experience in host countries because of their nonnative status
close economic integration of countries and peoples of the worlds
strategy that suggests that barriers to market integration at borders are high but not high enough to completely insulate countries from each other
risk management
the identification and assessment of risks and the preparation
to minimize the impact of high-risk, unfortunate events
scenario planning
a technique to prepare and plan for multiple scenarios (either
high or low risk).
Institutional transitions
Fundamental and comprehensive changes introduced to formal and informal rules of
the game that affect firms as players
Institution-based view
success and failure of firms are enabled and constrained by institutions
Institutional framework
Formal and informal institutions governing individual and firm behavior
Formal institutions
Laws, regulations, and rules – may be imposed by home countries and host countries
Values, beliefs, and actions
Regulatory pillar
Coercive power of governments
Normative pillar
How values, beliefs, and actions of other relevant players influence behavior of focal individuals and firms
Cognitive pillar
Internalized, or taken for-granted, values and beliefs that guide individual and firm or group, behavior.
Transaction costs
Costs associated with economic transactions or, the costs of doing business
Transaction costs
Costs associated with economic transactions or, the costs of doing business
Act of seeking self-interest with guile
Political system
Rules of the game on how a country is governed politically
Political risk
Risk associated with political changes that may negatively impact domestic and foreign firms

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