International Business Final Flashcards

Terms Definitions
the chance of circumstances
available for anyone to use
export-led development
an industrialization policy emphasizing industries that will have export capabilities
Compared to negotiators from low-context cultures, those from high-context cultures want to spend more time developing general rapport and trust before addressing business details. (T/F)
mercantilism: international trade was conducted under the authority of ________
Political Union
central political apparatus coordinates the economic, social, & foreign policy
Collaborative Stratagies
Stragies include compensatory trade (country trade) which invovles reciprical commitment other than a normal cash payment. There are five types of these: bartar, clearing agreement, counter purchase, buyback, and offset.
control systems
regulate the allocation and utilization of resources
Absolute advantage
"The principle of comparative advantage", generally attributed to David Ricardo in his 1817 Principles of Political Economy and Taxation extends the range of possible mutually beneficial exchanges. It is not necessary to have an absolute advantage to gain from trade, only a comparative advantage. This means that one need only to be able to make something at a lower cost, in terms of other goods sacrificed, to oneself to gain from trade.
a foreign-exchange instrument such as an option or futures contract that derives its value from the underlying currency
goods or services leaving the country
free trade pact between Brazil, Argentina, Paraguay, Uruguay and Venezuela in 1988.
When two or more organizations participate in a joint venture the arrangement may be referred to as a consortium. (T/F)
Control is defined as management's planning, implementation, evaluation, and correction of performance to ensure that the organization meets its objectives. (T/F)
Companies prefer to invest in developing countries because those countries offer large markets, less business risk and greater political stability.(T/F)
interaction between domestic and foreign environmental forces of between sets of foreign environmental forces
international environment
international organization of 191 member nations dedicated to the promotion of peace and global stability: has many functions related to business.
united nations
believed that society should ve stratified into classes with those best suited to rule
Buys and uses the goods and services
Pricing Policy
Consists of Uniform, Differentied, and Objective, and Marginal Cost pricing.

Uniform Pricing: when you have a strong brand name and you have the same price everwhere (there is no difference in the purchasing power)

Differentied pricing: you have a weak brand name and you have different prices in different markets

Objective pricing (on a different notecard)

Marginal cost pricing: here you only cover the variable cost of the product. The fixed cost for this product is treated as a sunk cost. You sell so long as you cover the variable cost of the product.
the situation in which decision making is done at the home office rather than at the country level
offshore manufacturing
any manufacturing that takes place outside of a company's home country. a type of foreign direct investment
Established in 1973 to promote a customes union between the English-speaking Caribbean countries by 1991, but it failed.
Corporate Social Responsibility
concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment
triple bottom line
economic, social, and environmental performance that simultaneously satisfies demands of all stakeholders
spillover effect
situations in which the marketing program in one country results in awareness of the product in other countries
in the forward market, the difference between the spot rate and the forward rate; in the spot market, the difference between the bid (buy) and offer (sell) rates quoted by a foreign exchange trader
freight forwarder
a company that facilitates the movement of goods from one country to another
Export-Import Bank
independent agency of the U.S. government to provide financial aid that will facilitate exports and imports.
Kaizen is the Japanese process of continuous improvement and the cornerstone of TQM.(T/F)
A dollar-for-dollar reduction of tax liability that must coincide with the recognition of income is known as a _____.
tax credit
In most industrial countries, such as the United States, governments collect very detailed demographic and purchasing data, which are available relatively inexpensively to any company or individual.(T/F)
all the forces influencing the life and development of the firm
external forces: the many foreign and domestic laws governing how international firms must operate
all forms of discrimination against imports other than import duties
nontariff barriers
Industry component of a limited number of large firms
A company is trying to raise capital, what are they trying to raise?
Working Capital Managment
Consists of intra-corporate funds and external funds.
a transaction in which money does not change hands but we barter or swap goods
virtual organization
a form of company that acquires strategic capabilities by creating a temporary network of independent companies, suppliers, customers, and even rivals
a process by which both labor and management participate in the management of a company
Objective of business
How to maximize return to shareholders.
What are the advantages/disadvantages of a Gold standard system?
Advantages:Stability in foreign exchange systemBuilt in adjustment mechanism(If trade deficit goes up then gold and money supply and price will adjustDisadvantages:Limited felibility in monetary policy (No gold=problem)
the idea that a colony should export more goods than it imports; and that a colony should sell at higher prices and buy at lower prices
Chicago Mercantile Exchange (CME) Group
major foreign exchange market
export strategy
specification of the key issues that shape the success of an export venture
Spot Rate
rate at which foreign exchange dealer converts currency on any particular day.
What is NAFTA?
North American Free Trade AgreementSet up to:1.eliminate tariffs and non tariff barriers2.Harmonize trade rules3.reduce restrictions on FDI and services
In _____ an exporter turns over its export receivables, sometimes for a small administrative fee, to a funding source who gives the exporter about 80 to 85 percent of value of the receivables up front and then collects the debt itself, paying the balance
JIT is the sourcing of raw materials and parts just as they are needed in the manufacturing process.(T/F)
principles that explain what is good right and is bad wrong and that prescribe a code of conduct and decision making based on these definitions. Recent corporate scandals caused by managerial misconduct, unethical behavior harms stock price, decisioins to
business ethics
difference in nominal interest rates supported by two nations currencies will cause an equal but opposite change in their spot exchange rates
international fisher effect
Describe Hofstede’s culture framework:
(5 things)
Power distance
Uncertainty avoidance
Long-term orientation
What is uncertainty avoidance?
Uncertainty Avoidance – tolerance for ambiguity and use of structures to make things predictable
occurs when a firm (licensor) grants a foreign entity (licensee) the right to produce its product, use its production processes, etc
Multipoint Competition
arises when two or more enterprises encounter each other in different reional markets, etc
Qualifications for PCNM
This manager needs to have cultural adaptability, knowledge of the local environment, communication skills, abiility to acheive with limited resources, mental and physical strength, as well as family support.

*PCNM is most needed when strong control is desired and when operations have just begun. They are also important to have if there are racial disputes in the area, and when you want to train foreign peoples in managment.
Effects of translation exposure
concerned with the present measurement of past events
arm's-length price
A price between two companies that do not have an ownership interest in each other
Multinational Corporation (MNC)
A multinational corporation (MNC) is a business that has direct investments (in the form of marketing or manufacturing subsidiaries) abroad in multiple countries.

1. Resource Transfer Effects

¡FDI can make a positive contribution to a host economy by supplying capital, technology, and management resources that would otherwise not be available
country or regional manager
business leader of a specific geographic area or region-CONs- Although being locally responsive can be a virtue, it also encourages the fragmentation of the MNE into highly autonomous, hard to control fiefdoms.
import broker (customs broker)
an individual who obtains various government permissions and other clearances before forwarding necessary paperwork to the carrier that will deliver the goods from the dock to the importer
Letter of Credit
documents issued by a bank indicating they will make payments upon presentation of particular documents.
If a Spanish company floated a bond issue in German marks in Germany, this would be an example of a _____.
foreign bond
a problem of ______ _____ is what happens to trade if one country has an ____ ____ in both products.
absolute advantage
Describe some of the different environmental factors the international environment poses for those companies doing business globally (i.e., what are some of the factors that a company should examine in order to evaluate country risk?).
(4 things)
regulatory, political, economic, technological
Intl Trade
occurs when a firm exports goods or services to consumers in another country
Corn Laws
placed a high tariff on imports of foreign corn
Time Draft
You only need to write a signiture in order to take the shipment or delivery. Payment is not required immediatly.
balance sheet compensation plan
MNEs use this to manage expatriate accounts. it develops a salary structure that equalizes purchasing power accross countries so expatriates have the same living standard in their foreign posting that they had at home--no matter which country their assignment takes them
International Product Life Cycle Theory
Four stages in cycle:1.Intro of Product-Production of product and Intro of product in industrial country 2.Growth of Product-Product and technology becoming standardized-still in developed countries3.Maturity of Product-Product moves to limited developing countries4.Decline of Product-Product makes its way to small countries and is imported into US and other developed countries

¡Firms prefer to acquire existing assets because

¡mergers and acquisitions are quicker to execute than greenfield investments
¡it is easier and perhaps less risky for a firm to acquire desired assets than build them from the ground up
¡firms believe they can increase the efficiency of an acquired unit by transferring capital, technology, or management skills
Grey market (p. 625)
The selling and handling of goods through unofficial distributors (it’s authorized and not illegal in comparison to the Black Market which is unauthorized). It exists because of market imperfections. Grey market can undermine the longer-term viability of the distributorship system, cause a company’s operations in different countries to compete with each other, and prevent companies from changing what the market will bear in each country.
Organization of Petroleum Exporting Countries (OPEC)
a producers' alliance among 12 petroleum-exporting countries that attempt to agree on oil production and pricing policies
What are some benefits of economic intergration?
1.Economices of Scale2.Improved efficiency3.Improve bargaining power
CEOs in _____ have the highest total compensation.
the United States
What is an indirect quote?
european term - amount of USD
What are ethical considerations?
1. The higher the moral significance of the values at stake, the more one is justified in pressing for conformity with one’s views.
2. The less the moral significance, the more one is justified in accommodating or negotiating.
3. The position of the other party must be treated respectfully.
4. The freedom and autonomy of those who differ should be respected.
Spot Exchange Rate
Rate @ which a foreign exchange dealer converts currency on any particular day.
Payment methods for International Trade
Include: a) Cash in advance

b)open account

c) Trade draft/bill of exchange (unconditional order of payment made by the exporter to the importer, but the payment is still subject to the importers willingness and ability to pay)

d) Letter of credit: This is an instrument by which an importers bank guareentees to pay an exporter when paper documents are presented. The Letter of credit must be recevied by the exporter before shipment takes place.
The Big Mac index
the “basket of goods” and is made the same way in 120 different countries. It is a good way to compare a country’s actual exchange rate with one predicted by the PPP thermo based on relative prices of Big Macs and is a test on whether a currency is undervalued or not.
Political aspect of globalization provides:
process of losing the sovereighty of the nation state. Note here that this is also an important drawback to F.D.I.

3. National Sovereignty and Autonomy      

¡ Many host governments worry that FDI is accompanied by some loss of economic independence
¡Key decisions that can affect the host country’s economy will be made by a foreign parent that has no real commitment to the host country, and over which the host country’s government has no real control
irrevocable letter of credit
a letter of credit that cannot be canceled or changed without the consent of all parties involved
Which of the following statements regarding ISO 9000:2000 is accurate?
ISO 9000: 2000 evaluates the management of the manufacturing process according to standards it has created in 20 domains from purchasing to design to training.
What does UNCTAD stand for?
the United Nations Conference of Trade and Development
5 dysfunctions of a team
absense of trust, fear of conflict, lack of commitment, avoidance of accountability, inattention to results
What is ascription?
1. Respect based on who or what you are.
2. People are born into a position of influence.
3. Use of titles tends to be important.
Purchasing power parity
the law of one price for all goods and services and is found from any individual set of prices
Cultural aspect of globalization provides:
"the west on the rest" and cultrual convergencec. Meaning that the cultures of the west are impacting the rest of the world, and cultures which at one time were very unique, are not converging into new cultures.

¡It is common for firms in the same industry to

1.have similar strategic behavior and undertake foreign direct investment around the same time their investment activities towards certain locations at certain stages in the product life cycle
North American Free Trade Association (NAFTA)
a free trade agreement involving the United States, Canada and Mexico that went into effect on January 1, 1994 and will be phased in over a period of 15 years
Decentralized decision making is most appropriate when
local adaptation is needed to ensure success in international operations.
bid/ask spread , what is it?
represents the bank's fee for service in effecting the currency exchange between two parties (if DC popular, spread will be small, no worry about risk of buying currency)
What are contextual and personal communication?
deals with formality, whom is spoken to

Contextual (more formal)

Personal (less formal)
The radical view
¡The radical view has been in retreat because of
¡the collapse of communism in Eastern Europe
¡the poor economic performance of those countries that had embraced the policy
¡the strong economic performance of developing count
argues that the MNE is an instrument of imperialist domination and a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries

South American Community of Nations (CSN)
members of CAN and MERCOSUR formed CSN to liberalize trade and eventually have a common currency, parliament, and passport.
what are the disadvantages to forward contracts?
- loss of opportunity gains from favourable currency moves
liability from both parties to transact
What are the different ways in which verbal communication styles might vary across cultures?
(4 things)
1. Indirect vs. Direct
2. Succinct vs. Exacting vs. Elaborate
3. Contextual vs. Personal
4. Affective vs. Instrumental
unconfirmed letter of credit – (pg 352-353)
A letter of credit that is only assured by the exporter's bank and no 'confirming' bank also guarantees the letter.

¡a surge in the volume of FDI worldwide
¡an increase in the volume of FDI directed at countries that have recently liberalized their regimes

¡In recent years, there has been a strong shift toward the free market stance creating
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