International Business

macropolitical risk

A macropolitical risk affects all firms in a country; examples are the civil wars that tore apart Sierra Leone, Zaire, Bosnia, and Rwanda in the 1990s or the recent conflicts in Afghanistan, Iraq, Libya, and Syria.

micropolitical risk

A micropolitical risk affects only a specific firm or firms within a specific industry. Saudi Arabia's nationalization of its oil industry in the 1970s is an example of a governmentally imposed micropolitical risk, as is the Venezuelan government's recent requirements that foreign oil companies renegotiate their contracts with the government.

After World War I, international business was primarily restricted by

After World War I, many countries, including the United States, France, the United Kingdom, and Germany, imposed tariffs and quotas on imported goods and favored local firms on government supply contracts.

BRIC nation

BRIC countries—Brazil, Russia, India, and China

social structure

Basic to every society is its social structure, the overall framework that determines the roles of individuals within the society, the stratification of the society, and individuals' mobility within the society.

Big Ten

Big Ten—Argentina, Brazil, China, India, Indonesia, Mexico, Poland, South Africa, South Korea, and Turkey.

Political risks

Experienced interna- tional businesses engage in political risk assessment, a systematic analysis of the political risks they face in foreign countries. Political risks are any changes in the political environment that may adversely affect the value of a firm's business activities. Most political risks can be divided into three categories:

Foreign direct in- vestments (FDI)

Foreign direct in- vestments (FDI) are investments made for the purpose of actively controlling property, assets, or companies located in host countries.

Foreign portfolio investments (FPI)

Foreign portfolio investments (FPI) are purchases of foreign financial assets (stocks, bonds, and certificates of deposit) for a purpose other than control.

Globalization

Globalization can be defined as "the inexorable integra- tion of markets, nation-states, and technologies...in a way that is enabling individuals, cor- porations and nation-states to reach around the world farther, faster, deeper, and cheaper than ever before."6

forum shopping

If a contract does not contain answers to the first two questions, each party to the transaction may seek to have the case heard in the court system most favorable to its own interests, a process known as forum shopping.

Interindustry trade

Interindustry trade is the exchange of goods produced by one industry in country A for goods produced by a different industry in country B

International business

International business consists of business transactions between parties from more than one country.

International franchising

International franchising, a specialized form of international licensing, occurs when a firm in one country (the franchisor) authorizes a firm in a second country (the franchisee) to use its oper- ating systems as well as its brand names, trademarks, and logos in return for a royalty payment.

just-in-time (JIT) systems

Japanese firms pioneered inventory management techniques such as just-in-time (JIT) systems. Under JIT, sup- pliers are expected to deliver necessary inputs just as they are needed.

major motive for globalization

One major motive for globalization is the opportunity to leverage a core competency that a firm has developed in its home market. A core competency is a distinctive strength or advantage that is central to a firm's operations.

Operating risk

Operating risk, in which the ongoing operations of a firm or the safety of its employees are threatened through changes in laws, environmental standards, tax codes, terrorism, armed insurrection, and so forth

Ownership risk

Ownership risk, in which the property of a firm is threatened through confiscation or expropriation

Social mobility

Social mobility is the ability of individuals to move from one stratum of society to another. Social mobility tends to be higher in less stratified society

multinational corporation (MNC)

The term multinational corporation (MNC) is used to identify firms that have extensive in- volvement in international business. A more precise definition of an MNC is a firm "that engages in FDI and owns or controls value-adding activities in more than one country."5 In addition to owning and controlling foreign assets, MNCs typically buy resources in a variety of countries, create goods or services in a variety of countries, and then sell those goods and services in a variety of countries.

Transfer risk

Transfer risk, in which the government interferes with a firm's ability to shift funds into and out of the country

self-reference criterion

When dealing with a new culture, many inter- national businesspeople make the mistake of relying on the self-reference criterion, the unconscious use of one's own culture to help assess new surroundings.

CAGE model

a useful framework for understanding the operating challenges facing international businesses because of these national differences: A) cultural distance B) administrative distance C) geographic distance D) economic distance

international management contract

an international management contract is an arrangement wherein a firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed- on fee. A management contract can involve a wide range of functions, such as technical operation and of a production facility, management of personnel, accounting, marketing services and training.

international business

define an international business as any organization that en- gages in cross-border commercial transactions with individuals, private firms, or public sector organizations.But note that we have also used the term international business to mean cross- border commercial transactions.

Foreign Sovereign Immunities Act

the U.S. Foreign Sovereign Immunities Act of 1976 provides that the actions of foreign governments against U.S. firms are generally beyond the jurisdiction of U.S. courts. However, the Foreign Sovereign Immunities Act does not grant immunity for the commercial activities of a sovereign state.

multinational organization (MNO)

the term multinational organization (MNO) can be used when one wants to refer to both not-for-profit and profit-seeking organizations.