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zero-sum game A situation in which an economic gain by one country results in an economic loss by another.
worldwide product division structure Business organizational structure based on product divisions that have worldwide responsibility.
worldwide area structure Business organizational structure under which the world is divided into areas
World Trade Organization (WTO) The organization that succeeded the General Agreement on Tariffs and Trade (GATT) as a result of the successful completion of the Uruguay round of GATT negotiations. The organization that succeeded the General Agreement on Tariffs and Trade (GATT)
World Intellectual Property Organization Group of 188 countries that have signed international treaties designed to protect intellectual property.
World Bank International institution set up to promote general economic development in the world’s poorer nations.
wholly owned subsidiary A subsidiary in which the firm owns 100 percent of the stock.
voluntary export restraint (VER) A quota on trade imposed from the exporting country’s side, instead of the importer’s; usually imposed at the request of the importing country’s government.
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
accounting standards Rules for preparing financial statements.
ad valorem tariff A tariff levied as a proportion of the value of an imported good.
administrative trade policies Administrative policies, typically adopted by government bureaucracies, that can be used to restrict imports or boost exports.
Andean Pact A 1969 agreement between Bolivia, Chile, Ecuador, Colombia, and Peru to establish a customs union.
antidumping policies Designed to punish foreign firms that engage in dumping and thus protect domestic producers from unfair foreign competition.
antidumping regulations Regulations designed to restrict the sale of goods for less than their fair market price.
arbitrage The purchase of securities in one market for immediate resale in another to profit from a price discrepancy.
ASEAN(Association of South East Asian Nations) Formed in 1967, an attempt to establish a free trade area between Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand.
auditing standards Rules for performing an audit.
backward vertical FDI Investing in an industry abroad that provides inputs for a firm’s domestic processes.
balance-of-payments accounts National accounts that track both payments to and receipts from foreigners.
balance-of-trade equilibrium Reached when the income a nation’s residents earn from exports equals money paid for imports.
banking crisis A loss of confidence in the banking system that leads to a run on banks, as individuals and companies withdraw their deposits.
barriers to entry Factors that make it difficult or costly for firms to enter an industry or market.
barter The direct exchange of goods or services between two parties without a cash transaction.
basic research centers Centers for fundamental research located in regions where valuable scientific knowledge is being created; they develop the basic technologies that become new products.
bilateral netting Settlement in which the amount one subsidiary owes another can be canceled by the debt the second subsidiary owes the first.
bill of exchange An order written by an exporter instructing an importer, or an importer’s agent, to pay a specified amount of money at a specified time.
bill of lading A document issued to an exporter by a common carrier transporting merchandise. It serves as a receipt, a contract, and a document of title.
Bretton Woods A 1944 conference in which representatives of 40 countries met to design a new international monetary system.
bureaucratic controls Achieving control through establishment of a system of rules and procedures.
business ethics The accepted principles of right or wrong governing the conduct of businesspeople.
buyback Agreement to accept percentage of a plant's output as payment for contract to build a plant.
capital account In the balance of payments, records transactions involving the purchase or sale of assets.
capital controls Restrictions on cross-border capital flows that segment different stock markets; limit amount of a firm’s stock a foreigner can own; and limit a citizen’s ability to invest outside the country.
capital flight Residents convert domestic currency into a foreign currency.
CARICOM An association of English-speaking Caribbean states that are attempting to establish a customs union.
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.
centralized depository The practice of centralizing corporate cash balances in a single depository.
channel length The number of intermediaries that a product has to go through before it reaches the final consumer.
civil law system A system of law based on a very detailed set of written laws and codes.
class consciousness A tendency for individuals to perceive themselves in terms of their class background.
class system A system of social stratification in which social status is determined by the family into which a person is born and by subsequent socioeconomic achievements. Mobility between classes is possible.
code of ethics A formal statement of the ethical priorities of a business or organization.
collectivism An emphasis on collective goals as opposed to individual goals.
COMECON Now-defunct economic association of Eastern European Communist states headed by the former Soviet Union.
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.
common law system A system of law based on tradition, precedent, and custom. When law courts interpret common law, they do so with regard to these characteristics.
common market A group of countries committed to (1) removing all barriers to the free flow of goods, services, and factors of production between each other and (2) the pursuit of a common external trade policy.
communist totalitarianism A version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship.
communists Those who believe socialism can be achieved only through revolution and totalitarian dictatorship.
comparative advantage The theory that countries should specialize in the production of goods and services they can produce most efficiently. A country is said to have a comparative advantage in the production of such goods and services.
competition policy Regulations designed to promote competition and restrict monopoly practices.
Confucian dynamism Theory that Confucian teachings affect attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors.
constant returns to specialization The units of resources required to produce a good are assumed to remain constant no matter where one is on a country’s production possibility frontier.
contract Document that specifies conditions of an exchange and details rights and obligations of involved parties.
contract law Body of law that governs contract enforcement.
control systems Metrics used to measure performance of subunits.
controlling interest A firm has a controlling interest in another business entity when it owns more than 50 percent of that entity’s voting stock.
Convention on Combating Bribery of Foreign Public OECD agreement to make the bribery of foreign public officials a criminal offense.
copyright Exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and dispose of their work as they see fit.
core competence Firm skills that competitors cannot easily match or imitate.
corporate culture The organization's norms and value systems.
cost of capital Price of money.
Council of the European Union Represents the interests of EU members and has authority to approve EU laws.
counterpurchase A reciprocal buying agreement.
countertrade The trade of goods and services for other goods and services.
countervailing duties Antidumping duties.
Court of Justice Supreme appeals court for EU law.
cross-cultural literacy Understanding how the culture of a country affects the way business is practiced.
cross-licensing agreement An arrangement in which a company licenses valuable intangible property to a foreign partner and receives a license for the partner’s valuable knowledge; reduces risk of licensing.
cultural controls Achieving control by persuading subordinates to identify with the norms and value systems of the organization (self-control).
cultural relativism Belief that ethics are culturally determined, and a firm should adopt the ethics of the culture in which it is operating.
culture The complex whole that includes knowledge, belief, art, morals, law, custom, and other capabilities acquired by a person as a member of society.
currency board Means of controlling a country’s currency.
currency crisis Occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defen
currency speculation speculationInvolves short-term movement of funds from one currency to another in hopes of profiting from shifts in exchange rates.
currency swap Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.
currency translation Converting the financial statements of foreign subsidiaries into the currency of the home country.
current account In the balance of payments, records transactions involving the export or import of goods and services.
current account deficit The current account of the balance of payments is in deficit when a country imports more goods and services than it exports.
current account surplus The current account of the balance of payments is in surplus when a country exports more goods and services than it imports.
current cost accounting Method that adjusts all items in a financial statement to factor out the effects of inflation.
current rate method Using the exchange rate at the balance sheet date to translate the financial statements of a foreign subsidiary into the home currency.
customs union A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy.
D’Amato Act Act passed in 1996, similar to the Helms-Burton Act, aimed at Libya and Iran.
debt loan Requires a corporation to repay loan at regular intervals.
deferral principle Parent companies are not taxed on the income of a foreign subsidiary until they actually receive a dividend from that subsidiary.
democracy Political system in which government is by the people, exercised either directly or through elected representatives
deregulation Removal of government restrictions concerning the conduct of a business.
diminishing returns to specialization Applied to international trade theory, the more of a good that a country produces, the greater the units of resources required to produce each additional item.
dirty-float system A system under which a country’s currency is nominally allowed to float freely against other currencies, but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value.
draft An order written by an exporter telling an importer what and when to p
drawee The party to whom a bill of lading is presented.
dumping Selling goods in a foreign market for less than their cost of production or below their 'fair' market value.
eclectic paradigm Argument that combining location-specific assets or resource endowments and the firm’s own unique assets often requires FDI; it requires the firm to establish production facilities where those foreign assets or resource endowments are located.
e-commerce Conducting business online through the Internet.
economic exposure The extent to which a firm’s future international earning power is affected by changes in exchange rates.
economic risk The likelihood that events, including economic mismanagement, will cause drastic changes in a country’s business environment that adversely affect the profit and other goals of a particular business enterprise.
economic union A group of countries committed to (1) removing all barriers to the free flow of goods, services, and factors of production between each other, (2) the adoption of a common currency, (3) the harmonization of tax rates, and (4) the pursuit of a common exter
economies of scale Cost advantages associated with large-scale production.
efficient market A market where prices reflect all available information.
ending rate The spot exchange rate when budget and performance are being compared.
equity loan Occurs when a corporation sells stock to an investor.
ethical dilemma Situation in which no available alternative seems ethically acceptable.
ethical strategy A course of action that does not violate business ethics.
ethical systems Cultural beliefs about what is proper behavior and conduct.
ethnocentric behavior Behavior that is based on the belief in the superiority of one’s own ethnic group or culture; often shows disregard or contempt for the culture of other countries.
ethnocentric staffing A staffing approach within the MNE in which all key management positions are filled by parent-country nationals.
ethnocentrism Belief in the superiority of one’s own ethnic group or culture.
eurobonds A bond placed in countries other than the one in whose currency the bond is denominated.
eurocurrency Any currency banked outside its country of origin.
eurodollar Dollar banked outside the United States.
European Commission Responsible for proposing EU legislation, implementing it, and monitoring compliance.
European Council Consists of the heads of state of EU members and the president of the European Commission.
European Free Trade Association (EFTA) A free trade association including Norway, Iceland, and Switzerland.
European Monetary System (EMS) )# EU system designed to create a zone of monetary stability in Europe, control inflation, and coordinate exchange rate policies of EU countries.
European Parliament Elected EU body that provides consultation on issues proposed by European Commission.
European Union #(EU) An economic group of 15 European nations: Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Greece, the Netherlands, Ireland, Italy, Luxembourg, Portugal, Spain, and Sweden. Established as a customs union, it is now
exchange rate The rate at which one currency is converted into another.
exchange rate mechanism (ERM) Mechanism for aligning the exchange rates of EU currencies against each other.
exclusive channels A distribution channel that outsiders find difficult to access.
expatriate A citizen of one country working in another country.
expatriate failure The premature return of an expatriate manager to the home country.
expatriate manager A national of one country appointed to a management position in another country.
experience curve pricing Aggressive pricing designed to increase volume and help the firm realize experience curve economies.
export management company Export specialists who act as an export marketing department for client firms.
Export-Import Bank (Eximbank) Agency of the U.S. government whose mission is to provide aid in financing and facilitate exports and imports.
exporting Sale of products produced in one country to residents of another country.
externalities Knowledge spillovers.
externally convertible currency Nonresidents can convert their holdings of domestic currency into foreign currency, but the ability of residents to convert the currency is limited in some way.
external stakeholders All other individuals and groups, other than internal stakeholders, that have some claim on the business.
factor endowments A country’s endowment with resources such as land, labor, and capital.
factors of production Inputs into the productive process of a firm, including labor, management, land, capital, and technological know-how.
Financial Accounting Standards Board (FASB) The body that writes the generally accepted accounting principles by which the financial statements of U.S. firms must be prepared.
financial structure Mix of debt and equity used to finance a business.
first-mover advantages Advantages accruing to the first to enter a market.
first-mover disadvantages Disadvantages associated with entering a foreign market before other international businesses.
Fisher Effect Nominal interest rates (i) in each country equal the required real rate of interest (r) and the expected rate of inflation over the period of time for which the funds are to be lent (I). That is, i 5 r 1 I.
fixed exchange rates A system under which the exchange rate for converting one currency into another is fixed.
fixed-rate bond Offers a fixed set of cash payoffs each year until maturity, when the investor also receives the face value of the bond in cash.
flexible machine cells Flexible manufacturing technology in which a grouping of various machine types, a common materials handler, and a centralized cell controller produce a family of products.
flexible manufacturing technologies Manufacturing technologies designed to improve job scheduling, reduce setup time, and improve quality control.
floating exchange rates A system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.
flow of foreign direct investment The amount of foreign direct investment undertaken over a given time period (normally one year).
folkways Routine conventions of everyday life.
foreign bonds Bonds sold outside the borrower’s country and denominated in the currency of the country in which they are issued.
Foreign Corrupt Practices Act U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions.
foreign debt crisis Situation in which a country cannot service its foreign debt obligations, whether private-sector or government debt.
foreign direct investment (FDI) Direct investment in business operations in a foreign country.
foreign exchange exposure The risk that future changes in a country’s exchange rate will hurt the firm.
foreign exchange market A market for converting the currency of one country into that of another country.
foreign exchange risk The risk that changes in exchange rates will hurt the profitability of a business deal.
foreign portfolio investment (FPI) Investments by individuals, firms, or public bodies (e.g., national and local governments) in foreign financial instruments (e.g., government bonds, foreign stocks).
forward exchange When two parties agree to exchange currency and execute a deal at some specific date in the future.
forward exchange rate The exchange rates governing forward exchange transactions.
forward vertical FDI Investing in an industry abroad that sells outputs of domestic processes.
franchising A specialized form of licensing in which the franchiser sells intangible property to the franchisee and insists on rules to conduct the business.
free trade The absence of barriers to the free flow of goods and services between countries.
free trade area A group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies.
freely convertible currency A country’s currency is freely convertible when the government of that country allows both residents and nonresidents to purchase unlimited amounts of foreign currency with the domestic currency.
fronting loan A loan between a parent company and a foreign subsidiary that is channeled through a financial intermediary.
fundamental analysis Draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.
Created by: ggutier



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