International Business
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| Globalization | process by which perceived distance is shrinking, material culture is starting to look the same the world over, national economies are merging into one.
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| Who has the highest level of ouput in the world? | US
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| US GDP? | $42, 129 per capita
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| How much of the worlds GDP doe the US produce? | 20.4
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| Globalization of markets? | refers to the merging of historically distinct & separate natikonal markets into 1 huge global marketplace.
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| What % of small businesses export? | 90%
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| Globalization of production? | Sourcing of goods & services from locations around the globe to take advantage of national differences in the cost & quality of various factors of production.
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| Factors of production? | Components of production such as labor, energy, land, & capital
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| GATT | General Agreement on Tariffs & Trade.
Intl treaty that committed signatories to lowering barriers to the free flow of goods across national borders; led to the WTO (World Trade Organization.
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| What is the WTO responsible for? | Primarily policing the world traiding systems and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO member states.
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| What do critics accuse the WTO of? | The org is usurping the national sovereignty of individual nation-states.
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| What does IMF stand for? | International Monetary Fund
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| What is the difference between the IMF & the World Bank? | IMF was setup to maintain order in the international monetary system and the World Bank was set up to promote economic development.
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| What are considered infrastructure investments | Building dams or roads
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| What stipulations does the IMF make to give loans to cash strapped nation-states? | Adopt specific economic policies aimed at returning their troubled economies to stability and growth.
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| United Nations? | Intl org made up of 191 countries charged with keeping internaltional peace, developing cooperation between nations, amd promoting human rights.
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| What are the four purposes of the UN? | To maintain international peace and security, develop friendly relations amoung nations, cooperate in solving international problems and in promoting respect for human rights and to be a center for harmonizing the actions of the nations.
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| Factors of production | Labor, energy, land, & Capital
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| Intl Trade | occurs when a firm exports goods or services to consumers in another country
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| FDI | Foreign Direct Investment
occurs when a firm invests resources in business activities outside its home country.
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| Moore's Law | Premise that the power of microprocessor technology doubles & its cost of production drops in half every 18 mo's.
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| Stock of FDI | total accumulated value of foreign owned assets at a given time.
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| MNE | Multinational enterprise
any business that has productive activities in 2 + countries.
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| Political economy | political, economic, and legal sytems of a country are interdependent; they interact and influence each other.
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| Political system | system of govt in a nation
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| Collectivism | political system that stresses the primary of collective goals over individual goals
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| Plato | believed that society should ve stratified into classes with those best suited to rule
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| Socialism | political system that believes in state ownership of a country's means of production, distribution, & exchange so that all can benefit
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| Communits | Those who believe that socialism can only be realized through violent revolution & totalitarian dictatorship
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| Social Democrats | Those who believed in achieving socialism through democratic means
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| Individualism | The philosophy that an individual should have freedom in his or her economic & political pursuits.
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| Representative Democracy | Citizens periodically elect individuals to represent them in govt functions
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| Communist Totalitarian | Advocating socialisism can only be achieved through a totalitarian dictatorship
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| Right-Wing Totalitarianism | Politial pwr is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts political freedom & speech
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| Tribal Totalitarianism | Political system that a party or group represent interests of a particular tribe monopolizes political pwr
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| Market Economy | Interaction of supply & demand determines the quantity in which goods & sercvices are produced
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| Command Economy | Govt plans the allocation of resources
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| Legal System | rules that regulate behavior by which the laws of a country are enforced
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| Common Law | System of law based on tradition, precedent, & custom
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| Civil Law System | system of law based on a derailed set of written laws and codes
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| Theocratic Law System | system of law based on religious teachings
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| Property Rights | Bundle of legal rights over the use to which a resource is put and over the use of any income that may be derived
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| Organization Culture | refers to values & norms shared among employees of an org.
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| Quota Rent | extra profit producers make when supply is artifically limited by an export quota
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| Local Content Requirement | A requirement that some specific fraction of a good be produced domestically
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| Administrative Trade Policies | rules adopted by govts that can be used to restrict imports or boost exports
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| Dumping | Selling goods in a foreign market below costs of production
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| Countervailing Duties | Antidumping Policies
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| Antidumping Policies | designed to punish foreign firms that engage in dumping
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| Helms Burton Act | passed in 1996, this law allows Americans to sue foreign firms that use Cuban property confiscated from them during Cuba's 1959 revolution
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| D'Amato Act | Passed in 1996, this law allows Americans to sue foreign firms that use property in Libya or Iran confiscated from Americans
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| Infant Industry Argument | Proposal that developing countries have a potential comparative adcantage in manufacturing
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| Strategic Trade Policy | Govt policy aimed at either helping the countries domestic firms retain first-mover gains
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| Corn Laws | placed a high tariff on imports of foreign corn
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| Smoot Hawley Act | passed in 1930, US law erected a wall of tariff barriers against imports
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| Greensdield Investment | establisment of a new operation in a foreign country
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| Flow of FDI | amount of FDI UNDERTAKEN OVER A GIVEN TIME PERIOD; NORMALLY A YR
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| Stock of FDI | total accumulated value of foreign owned assets at a given time
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| Gross fixed capital formation | summarizes the totsl smount of capital invested in factories, stores,etc
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| Oligopoly | Industry component of a limited number of large firms
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| Multipoint Competition | arises when two or more enterprises encounter each other in different reional markets, etc
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| Eclectic Paradigm | Theory that combining localtion specific assets or resource endowmenrs and the firms own unique assets often requires FDI.
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| Exporting | sale of products produced in 1 country to residentsof another country
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| Licensing | occurs when a firm (licensor) grants a foreign entity (licensee) the right to produce its product, use its production processes, etc
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| Location-specific advantages | advantages that arise from utilizing resource endowments or assets thar are tied to a particular foreign location & that a firm finds valuable to combine with its own unique assets, etc
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| Pragmatic Nationalism | FDI has both benefits & costs
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| Balance of Payment Accounts | national accounts that track both payments to and receipts from foreigners
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| Current Account | in the balance of payments, this records transactions involving the esport or import of goods & services
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| Offshore Production | FDI undertaken to serve the house market
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| Regional Economic Integration | Agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barrirtd to the free flow of goods
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| Free Trade Area | Area in which all barriers to the trade of goods & services among member countries are removed
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| EFTA | includes norway, iceland,switzerland; most enduring free tade agreement
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| Customs Union | group of countries committed to eliminating tade barriers & adopting a common external trade policy
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| Common Market | has no barriers to trade ntwn member countries Pg. 265
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| Economic Union | involes the free flow of products and factors of production btwn member countries & the adoption of a common external trade policy
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| Political Union | central political apparatus coordinates the economic, social, & foreign policy
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| Trade creation | occurs when high cost domestic producers are replaced by low cost producers within the free trade area.
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| Trade diversion | occurs when lower cost external suppliers are replaced by higher costs suppliers w/in the free trade area
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| Treaty of Rome | provided the cration of a m\common market
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| Maastricht Treaty | Treaty committing members of the EC to adopt a common currency
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| Andean Pact | Agreement unites Bolivi, Chile, Ecuador, Peru
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| Mercosur | Free trade pact btwn Brazil, Argentina, Paraguay, Venezula, etc
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| Foreign Exchange Rate | Rate @ which 1 currency is converted into another.
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| Foreign Exchange Market | A market for converting the currency of 1 country into that of another country.
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| Foreign Exchange Risk | Ris that changes in exchange rates will hurt the probabibility of a business deal
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| Currency Speculation | Moving funds from one currency to another over the short term in hpoes of profiting from shifts in exchange rates
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| Hedging | Insuring 1's bus against froeign exchage risk by using forward exchanges or currency swaps.
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| Spot Exchange Rate | Rate @ which a foreign exchange dealer converts currency on any particular day.
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| Forward Exchange | When 2 parties agree to exchange currency & execute a deal @ some specific date in the future.
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| Currency Swap | simultaneous purchase & sale of a given amount of foreign exchange for two different value dates. pg. 301
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| Arbitrage | Purchase of securitir\es in 1 market for immediate resale in another market to profit from a price discrepancy.
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| Law of 1 Price | principle that in comparative markets free of transportation costs & barriers to trade, identical products sold in diff countries must sell of the same price
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| Efficient Market | Market in which prices reflect all avail info & trade is not restricted.
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| Relatively Efficent Market | Market in which few impediments to intl trade & investment exists.
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| PPP theory predicts | that changes in relative prices will result in change in exchange rates
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| PPP theory predits | that exchange rates are determined by relative pricesm & changes in relative prices will result in a change in exchange rates.
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| Govt policy determines | whether the rate of growth in a country's money suppky is grater then the rate of growth in output.
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| Purchasing Power Parity Puzzle | failure of a strong link betwn relative inflation rates & exchange rate movements pg 309
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| Fisher effect | Theory that nominal interest rates in 4ach country equal the required real rate of interest & expected rate of inflation.
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| Mercantilism | Economic philosophy advocating that countries should simultaneously encourage exports and discourage imports.
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| Zero sum game | A situation in which a gain by one country results in a loss by another.
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| Absolute Advantage | When 1 county is more efficient than another country in producing a particular product. pg 161
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| PPF Production Possibility Frontier | Various output possiblities a country can produce from its resource pool. pg 161
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| Factor Endowments | Extent to which a country is endowed with such resources as land, labor, and capital.
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