149 Cards in this Set
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globalization
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the widening set of interdependent relationships among people from different parts of a world divided into nations
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international business
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all commercial transactions, incl. sales, investments, and transportation, that take place between two or more countries
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born-global companies
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start out with a global focus bc of founders' international experience and bc comm advances help them
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clustering/agglomeration
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when new companies locate in areas w numerous competitors and suppliers
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sovereignty
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the freedom to act without externally imposed restrictions
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merchandise exports and merchandise imports
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tangible goods also sometimes referred to as visible exports and imports
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service exports and service imports
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non-merchandise international earnings
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turnkey operations
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construction projects performed under contract and transferred to owners when they're operational
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management contracts
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one company provides personnel to perform functions for another
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licensing agreements
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when one company allows another to use its assets (trademarks, patents, copyrights, expertise); they receive ROYALTIES from this
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franchising
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when one party allows another to use a trademark as an essential asset of the franchisee's business. the franchisor also assists continuously in the operation of the franchisee's business
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foreign direct investment (FDI)
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when the investor takes a controlling interest in a foreign company
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portfolio investment
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a non controlling financial interest in another entity (stock in a company or loans to a company/country in bonds/bills/notes)
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collaborative arrangements
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companies working together on something
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strategic alliance
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refers to an agreement that is of critical importance to one or more partners or an agreement that does not involve joint ownership
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multinational enterprise (MNE)
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refers to a company with foreign direct investments. also referred to as multinational corporation/multinational company (MNC)
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transnational company (TNC)
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united nations term for multinational enterprise
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Wealth of Nations
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novel published 1776 by adam smith, - extremely important to economics
- called for letting countries specialize and trade
- "commerce"
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Das Kapital
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1848 novel by marx, claims smith to be wrong in his interpretations, but with the right concepts
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proletariat
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the class of wage-earners (especially industrial workers), in a capitalist society, whose only possession of significant material value is their labour-power
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bourgeoisie
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the social class who owns the means of production and whose societal concerns are the value of property and the preservation of capital, to ensure the perpetuation of their economic supremacy in society
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aristocracy
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the dominant class during the feudal stage of economic development
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political system
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the structural dimensions and power dynamics of a government
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individualism
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refers to the primacy of the rights and role of the individual
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laissez-faire
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"leave things alone"
- government should not interfere in business affairs
- people behave and the market operates according to the neoliberal principles of market fundamentalism
- people maximize personal performance without threatening the welfare of society
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collectivism
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stresses the supremacy of human interdependence within the context of the community
- emphasizes the primacy of the collective over the interests of the individual
- argentina, china, mexico, egypt
- collectivism in the business world holds that the ownership of assets, the allocation …
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political ideology
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- stipulates how society ought to function and outlines the methods by which it will do so
- for ex, ideal of freedom
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pluralism
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- arises when two or more groups in a country differ in terms of language, class structure, ethnic background, tribal legacy, or religion.
- competing ideologies requires governments to negotiate solutions
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political spectrum
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of the various forms of political ideologies, it specifies a basic conceptual structure and guides the assessment of a complex issue
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political freedom
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measures the degree to which fair and competitive elections occur, the extent to which individual and group freedoms are guaranteed, the legitimacy ascribed to the rule of law, and the existence of freedom of the press
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Democracy
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- gov of the ppl/by the ppl/for the ppl
- all citizens are politically and legally equal; all are equally entitled to freedom of thought, opinion, belief, speech, and association; and all equally command sovereign power over public officials
- endorses individualism
- PAGE 140
- Busin…
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Totalitarianism
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- subordinates the individual to the interests of the collective
- a single agent monopolizes political power and uses it to regulate many, if not all, aspects of public and private life
- eliminates dissent thru indoctrination, persecution, surveillance, etc
- types
- authoritarianis…
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free country
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exhibits open pol competition, respect for civil liberties, independent civic life, and independent media (USA, australia, india)
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partly free country
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limited pol rights and civil liberties, corruption, wear rule of law, ethnic and religious strive, unfair elections, censorship (guatemala, pakistan)
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not free country
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few to no pol rights and civil liberties. the gov allows minimal to no exercise of personal choice and controls a large share if not all of business activity (china, russia, saudi, vietnam)
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Third wave of democratization
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- the third major surge of democracy in the 20th century that began in 1974. ultimately doubled the number of countries led by democratic govs
- powered by
- failure of totalitarian regimes to deliver economic progress
- fall of berlin wall punctuated this change
- improved communicat…
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political risk
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- the potential loss arising from a change in government policy
- risk that pol decisions, events, or conditions will affect a country's business environment
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legal system
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specifies the rules that regulate behavior, the processes by which laws are enforced, and the procedures used to resolve grievances
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ceteris paribus
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a legal system aims to institute rules that support business formation, regulate transactions, and stabilize relationships
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constitutional law
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part of modern legal systems. translates the country's constitution into an open and just legal system; defines the authority and procedure of pol bodies to est. laws
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criminal law
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part of modern legal systems. safeguards society by specifying what conduct is criminal and prescribing punishment to those who breach these standards
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civil and commercial laws
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part of modern legal systems. ensure fairness and efficiency in business transactions
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common law system
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- relies on tradition, judge made precedent, and usage
- stare decisis (precedent) is a distinguishing feature
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civil law system
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relies on systematic codification of accessible, detailed laws
- unbounded by precedent
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theocratic law system
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- relies on religious doctrine, precepts, and beliefs
- ultimate legal authority vested in religious leaders based on their interpretation of the sacred text
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customary law system
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- reflects the wisdom of daily experience or spiritual legacies and philosophical traditions
- anchors the law in many indigenous communities, defining the rights and responsibilities of members
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mixed system
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emerges when a nation uses two or more of the preceding types - theocratic or customary law
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the rule of man
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- holds that ultimate power resides in a person whose word and whim, no matter how unfair or unjust, is law
- instrumental device of totalitarianism
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the rule of law
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- institutes a just political and social environment, guarantees the enforceability of fcommercial contracts and business transactions and safeguards property rights and individual freedom
- sets unequivocal standards
- officials are accountable to the law of the land
- laws are clear,…
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country of origin
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- the country where a product was grown, produced, or manufactured
- COOL - country of origin labelling
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choice of law clause
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- in contracts, stipulates whose laws govern dispute resolution
- obliges both parties to negotiate a compromise in the event the law changes
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intellectual property
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the creative ideas, innovative expertise, or intangible insights that give an individual, company, or country a competitive advantage
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intellectual property right
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grants the registered owner of inventions, literary and artistic works, symbols, names images, designs the right to determine the use of his or her property
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economic freedom
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is the "absolute right of property ownership, fully realized freedoms of movement for labor, capital and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself
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Economic Freedom Index
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- estimates the extent to which a government constrains free choice and free enterprise for reasons that go beyond the need to protect property, liberty, safety, and efficiency
- rests on adam smith's notion that "basic institutions that protect the liberty of individuals to pursue their…
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economic system
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organizes the production, distribution, and consumption of goods and services
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market economy
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- a system whereby individuals, rather than gov, make most economic decisions
- anchored in philosophy of capitalism and its principle that private ownership confers inalienable property rights that legitimize profits earned by one's own initiative, investment, and risk
- grants people …
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command economy
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- in which the gov owns and controls resources, commanding the authority to decide what products to make/quantity/price/and in what way
- in theory, communism champions state ownership of resources and control of all economic activity
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mixed economy
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- fall between market and command economies
- economic decisions are principally market driven and ownership is largely private, but the gov intervenes to allocate resources
- socialism advocates regulating economic activity with an eye toward social equality and fair distribution of we…
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gross national income (GNI)
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- is the broadest measure of a country's economy
- measures the value of all production in the domestic economy together with the income that the country receives from other countries, less similar payments it has made to other countries
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gross national product (GNP)
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is the value of all final goods and services produced within a nation in a given year, plus the income earned by its citizens abroad, minus the income earned by foreigners from domestic production
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gross domestic product (GDP)
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is the total value of all goods and services produced within a nation's borders, no matter whether domestic or foreign owned companies make the product
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purchasing power parity (PPP)
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is the number of units of a country's currency required to buy the same amount of goods and services in the domestic market that one unit of income would buy in another country
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green economics
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- holds that each country is a component of, and dependent on, the natural world
- measuring the monetary quantity of market activity without accounting for the associated social and ecological costs misrepresents performance
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sustainable development
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- calls for economic activity that meets the needs of the present without compromising the ability of future generations to meet their own needs
- (page 203)
- net national product
- genuine progress indicator
- human development index
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happynomics
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- calls for moving from the concept of financial prosperity to the idea of emotional prosperity
- gross national happiness
- happy planet index
- your better life index
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inflation
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is the sustained rise in prices measured against a standard level of purchasing power
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deflation
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is the opposite of inflation; prices go down instead of up
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reflation
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is increasing the money supply and reducing taxes to accelerate economic activity
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misery index
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is the sum of a country's inflation and unemployment rates
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debt
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- is the total of a governments financial obligations
- measures what the state borrows
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internal debt
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type of debt; results when the government spends more than it collects in revenues
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external debt
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type of debt; results when a government borrows money from lenders outside the country, such as private commercial banks, other govs, or international financial institutions
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income distribution
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often defines a market's performance and potential
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gini coefficient
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- measures the extent to which the distribution of resources deviates from a perfectly equal distribution
- a score of 0 implies perfect equality
- a score of 1 implies perfect inequality (1 person has all income)
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poverty
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is the condition in which a person or community lacks the essentials for a minimum standard of well being and life
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base of the pyramid phenomenon
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the billions of poor ppl that are seen as inaccessible and unprofitable yet arguably represent the next market frontier of the global economy
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balance of payments (BOP)
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aka statement of international transactions reports a country's economic transactions with the rest of the world
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INDUSTRIAL REVOLUTION
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appx 1848-1989
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ICTT REVOLUTION
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- 1989-now
- some say 150 years of industrial revolution have been equivalent to 25 years of ICTT revolution
- for example, progression of ways we listen to music (phonograph -> streaming)
- new centers of information created
- new business systems
- Dubai one of the fastest growing …
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interventionist government
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- connections are important
- "racketeering"
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liberal
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- has to do with people wanting to exercise their freedoms
- southern europe you aren't treated as much of an individual
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Mercantilism
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- oldest trade theory
- a country's wealth is measured by its holdings of "treasure" aka gold
- countries should export more than they import
- Government policies
- govs restricted imports and subsidized production that otherwise could not compete
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trade surplus
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- / favorable balance of trade
- indicates a country is exporting more than it imports
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trade deficit
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- / unfavorable balance of trade
- indicates more imports than exports
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Neomercantilism
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describes the approach of countries that try to run favorable balances of trade in an attempt to achieve some social or political objective
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absolute advantage
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Theory
- different countries produce some goods more efficiently than others
- questions why one should buy domestically something cheaper from abroad
- Adam Smith
- reasoned that unrestricted trade would lead to specialization
- labor could become more skilled by repeating the same …
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natural advantage
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- comes from climatic conditions, access to certain natural resources, or availability of certain labor forces
- helps explain where items might be best produced
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acquired advantage
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- comes from competitiveness in manufactured goods, usually in either product or process technology
- creates new products, displaces old ones, alters trading-partner relationships
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competitive advantage
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THeory
- gains from trade will occur even in a country that has absolute advantage in all products, because the country must give up less efficient output to produce more efficient output
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nontradable goods
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are products and services seldom practical to export bc of high transportation costs (haircuts etc)
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theory of country size
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- large countries usually depend less on trade than small ones
- size of the economy
- developed countries account for well over half of the world's exports
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factor proportion theory
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- factors in relative abundance are cheaper than factors in relative scarcity
- explains differences in cost of production factors
- people and land
- manufacturing locations
- capital, labor rates, and specialization
- process technology
- product technology
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country-similarity theory
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- most trade takes place among developed countries because they produce and consumer more, emphasize technological breakthroughs in different industrial sectors, and produce differentiated products and services
- specialization and acquired advantage
- product differentiation
- the eff…
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Product life cycle theory (PLC)
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- states that the production location of certain manufactured products shifts as they go through their life cycle
- four stages
- introduction
- early production stage generally occurs in a domestic location
- growth
- sales growth attracts competitors to the market
- maturity
- wo…
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The diamond of national competitive advantage
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- a theory showing four features as important for competitive superiority
- demand conditions
- factor conditions
- related and supporting industries
- firm strategy, structure, and rivalry
- limitations
- existence of these conditions guarantees nothing
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factor mobility theory
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as both quantity and quality of countries factor conditions change, so do their relative capabilities
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protectionism
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- governmental restrictions and competitive support
- all countries regulate the flow of goods and services across their borders
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infant industry argument
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- holds that a government should shield an emerging industry from foreign competition by guaranteeing it a large share of the domestic market until it can compete on its own
- Underlying Assumptions
- Risks in Designating Industries
- Determining Probability of Success
- Who Should Be…
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industrialization argument
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presumes that the unregulated importation of lower priced products prevents the development of a domestic industry
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terms of trade
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the quantity of imports that a given quantity of a country's exports can buy
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export-led development
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the promotion of the development of industries that export their output
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comparable access argument
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companies and industries are entitled to the same access to foreign markets as foreign industries and companies have to their markets
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dumping
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companies exporting below cost or below their home country price
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optimum tariff theory
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states that a foreign producer will lower its prices if the importing country places a tax on its products
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essential-industry argument
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when governments apply trade restrictions to protect essential domestic industries during peacetime so the country is not dependent on foreign supplies during war
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Tariffs
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(aka duties)
a tax that governments levy on a good shipped internationally
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export tariffs
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collected by the exporting country
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transit tariffs
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collected by a country thru which goods pass
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import tariffs
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collected by importing country
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specific duty
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assessing a tariff on a per unit basis
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ad valorem duty
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a tariff assessed as a percentage of the item's value
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compound duty
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both types assessed on the same product
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subsidies
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- direct assistance to companies to make them more competitive
- agricultural subsidies
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quota
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limits the quantity of a product that can be imported or exported in a given time frame, typically per-year
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voluntary export restraint
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country a asks country b to voluntarily reduce its companies' exports to country a
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embargoes
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a specific type of quota that prohibits all trade
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import or exports license
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potential importers or exporters secure permission from government authorities before conducting trade transactions
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foreign exchange control
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requires an importer to apply to a gov agency to secure the foreign currency to pay for the product
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countertrade 1
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aka Offsets
gov requirements in the importing country where the exporter to a foreign gov must provide additional economic benefits such as jobs or technology as part of the transaction
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Comparative Advantage
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- has to do with things difficult to change
- "What god gave you"
- natural resources
- relatively static/unchanging
- often measured in terms of country
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Competitive Advantage
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- flexible/can change
- can be developed over time
- not only "god given"
- developed through culture
- driven by enterprises
- need not be national
- can be regional
- (basel)
- more complex, business oriented, difficult to define
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economic integration
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a term used to describe the political and monetary agreements among nations and world regions in which preference is given to member countries
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bilateral integration
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two countries decide to cooperate more closely together, usually in the form of tariff reductions
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regional integration
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a group of countries located in the same geographic proximity decide to cooperate, as with the EU
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global integration wto
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countries from all over the world decide to cooperate through the WTO
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triad regions
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of the world: Europe, North America, Asia
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GATT
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- Predecessor to the WTO
- in 1947, 23 countries formed GATT under UN to abolish quotas and reduce tariffs
- 125 nations were members by the time WTO replaced GATT
- Trade Without Discrimination
- each member nation must open its markets equally to every other member nation
- most fa…
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Most Favored Nation (MFN)
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clause: once a country and its trading partners had agreed to reduce a tariff, that cut was automatically extended to every other member country
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World trade organization (WTO)
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- 153 members who collectively account for more than 97% of world trade
- Most favored nation
- exceptions:
- developing countries manufactured products given preferential treatment
- concessions granted to members within a regional trading alliance, such as EU not extended to countri…
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Free trade agreement (FTA)
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the goal of an FTA is to abolish all tariffs between member countries
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customs union
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in addition to eliminating internal tariffs, member countries levy a common external tariff on goods being imported from nonmembers
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common market
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a form of regional economic integration in which countries abolish internal tariffs, use a common external tariff, and abolish restrictions on factor mobility
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static effects
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are the shifting of resources from inefficient to efficient companies as trade barriers fall
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dynamic effects
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are the overall growth in the market and the impact on a company caused by expanding production and by the company's ability to achieve greater economies of scale
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Economies of scale
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the average cost per unit falls as the number of units produced rises; occurs in regional integration because of the growth in the market size
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culture
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- learned norms based on values, attitudes, and beliefs of a group of people
- integral part of a nation's operating environment
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Cultural collision
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- occurs when divergent cultures come into contact
- major problems occur under two conditions
- when a company implements practices that are less effective than intended
- when a company's employees encounter distress because of difficulty in accepting or adjusting to foreign behavior…
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cultural imperialism
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involves imposing certain elements from an alien culture that over time becomes part of subject culture
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hierarchy of needs theory
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states that people try to fulfill lower level needs before moving onto higher level ones
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power distance
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superior - subordinate interaction preferences
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uncertainty avoidance
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in countries where this is high, most employees prefer to follow set rules even if breaking them may be in the company's best interests; prefer to stay with their employers
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future orientation
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living for the future
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fatalism
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believing every event in life is inevitable
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low context cultures
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people generally regard only firsthand, directly on subject information as relevant
- little time on small talk, get to point
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high context cultures
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peoplee regard seemingly peripheral information as pertinent
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monochronic
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working sequentially
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polychronic
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working simultaneously on variety of tasks
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idealism
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establishing overall principles before trying to resolve small issues
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