MGT 450 Midterm

Direct Finance

A company borrows directly by issuing securities to investors in the capital markets.

BRIC

Brazil, Russia, India and China

CIVETS

Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa

FDI Types

Greenfield FDI Brownfield FDI

Gift Giving

In Asia, gift giving is so ingrained in the culture, particularly in Japan and China, that it is formalized and structured. In other cultures, gift giving is viewed as a bribe and a corrupt act

Free Trade Area

This is the most basic form of economic cooperation. Member countries remove all barriers to trade between themselves but are free to independently determine trade policies with nonmember nations. An example is the North American Free Trade Agreement (NAFTA).

Mercantilism

This theory stated that a country's wealth was determined by the amount of its gold and silver holdings. In it's simplest sense, mercantilists believed that a country should increase its holdings of gold and silver by promoting exports and discouraging imports.

Common Market

This type allows for the creation of economically integrated markets between member countries. Trade barriers are removed, as are any restrictions on the movement of labor and capital between member countries.

Human poverty index (HPI)

a composite index that uses indicators of the most basic dimensions of deprivation: a short life (longevity), a lack of basic education (knowledge), and a lack of access to public and private resources (decent standard of living)

Currency Option

a contract that grants the buyer the right, but not the obligation, to buy or sell a specified currency at a specified exchange rate on or before a specified date.

Time Orientation in Business

a cultural or national preference toward past, present, or future thinking. The time orientation of a culture affects how it values time, and the extent to which it believes it can control time

Non-Tariff Barriers

a form of restrictive trade where barriers to trade are set up and take a form other than a tariff. Include quotas, embargoes, sanctions, levies and other restrictions and are frequently used by large and developed economies.

Reserve Currency

a main currency that many countries and institutions hold as part of their foreign exchange reserves. often international pricing currencies for world products and services

Uncertainty Avoidance

a society's tolerance for uncertainty and ambiguity. It reflects the extent to which members of a society attempt to cope with anxiety by minimizing uncertainty.

Intellectual Property

a work or invention that is the result of creativity, such as a manuscript or a design, to which one has rights and for which one may apply for a patent, copyright, trademark, etc.

Trade Diversion

an economic term related to international economics in which trade is diverted from a more efficient exporter towards a less efficient one by the formation of a free trade agreement or a customs union.

Purchasing Power Parity (PPP)

an economic theory that adjusts the exchange rate between countries to ensure that a good is purchased for the same price in the same currency

Totalitarianism

an extreme type of government in which contends that every aspect of an individual's life should be controlled and dictated by a strong central government

Current Account

an important indicator about an economy's health. It is defined as the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers.

Stakeholder

an individual or organization whose interests may be affected as the result of what another individual or organization does

Gold Standard

ancient societies started using gold as a means of economic exchange. Gradually more countries adopted gold, usually in the form of coins or bullion

International Business

any situation where the production or distribution of goods or services crosses country borders

Civil Law

based on a detailed set of laws that constitute a code and focus on how the law is applied to the facts. It's the most widespread legal system in the world.

Religious or Theocratic Law

based on religious guidelines. The most commonly known example of religious law is Islamic law, also known as Sharia.

Common Law

based on traditions and precedence. In common law systems, judges interpret the law and judicial rulings can set precedent.

Special Drawing Right (SDR)

basically an international monetary reserve asset

Legal Systems

common law civil law religious or theocratic law

Trade

concept of this exchange between people or entities in two different countries

Bretton Wood

created a new dollar-based monetary system, which incorporated some of the disciplinary advantages of the gold system while giving countries the flexibility they needed to manage temporary economic setbacks, which had led to the fall of the gold standard.

Currency Devaluation

deliberate downward adjustment to the value of a country's currency relative to another currency, group of currencies or standard.

The World Trade Organization (WTO)

developed as a result of the Uruguay Round of GATT was designed to be an actual institution charged with the mission of promoting free and fair trade.

Strategic Rivalry Theory

emerged in the 1980s and was based on the work of economists Paul Krugman and Kelvin Lancaster Firms will encounter global competition in their industries and in order to prosper, they must develop competitive advantages

Spot Rate

exchange rates that require immediate settlement with delivery of the traded currency

Green Revolution

focused on improving farming techniques, increasing mechanization, and irrigating as well as introducing high-yielding seeds

United Nations (UN)

formed in 1945 at the end of World War II to replace the League of Nations, which had been formed in 1919. Its original goals remain the same today: to maintain international peace and security; to develop friendly relations between nations; and to foster international cooperation in solving economic, social, humanitarian, and cultural issues

Power Distance in Culture

how openly a society or culture accepts or does not accept differences between people, as in hierarchies in the workplace, in politics, and so on

Culture

manners, mind-set, rituals, laws, ideas, and language, to name a few. You need to understand what makes people tick and how, as a group, they have been influenced over time by historical, political, and social issues.

Human Development Index (HDI)

measures people's satisfaction in three key areas—long and healthy life in terms of life expectancy; access to quality education equally; and a decent, livable standard of living in the form of income.

Foreign Exchange

money denominated in the currency of another country or—now with the euro—a group of countries

Greenfield FDI

occurs when multinational corporations enter into developing countries to build new factories or stores

Maquiladoras

production facilities that employ more than a million Mexicans, mostly unskilled women in their twenties and early thirties who work long hours

Secondary Markets

provide a mechanism for the risk of a security to be spread to more participants by enabling participants to buy and sell a security

Regional Trade Agreement

reciprocal trade agreements between two or more partners. They include free trade agreements and customs unions

Foreign Direct Investment (FDI)

refers to an investment in or the acquisition of foreign assets with the intent to control and manage them primarily a long-term strategy

Currency Speculation

refers to the practice of buying and selling a currency with the expectation that the value will change and result in a profit

Ask

refers to the price at which a bank or financial services firm is willing to sell that currency

Most Favored Nation

required that once a benefit, usually a tariff reduction, was agreed on between two or more countries, it was automatically extended to all other member countries.

Cross-Cultural Challenges

requires that we reorient our mind-set and, most importantly, our expectations, in order to interpret the gestures, attitudes, and statements of the people we encounter. We reorient our mind-set, but we don't necessarily change it.

The General Agreement on Tariffs and Trade (GATT)

series of rules governing trade that were first created in 1947 by twenty-three countries The basic underlying principle was that trade should be free and equal

Values

something that we prefer over something else—whether it's a behavior or a tangible item

European Union (EU)

started after World War II, initially as a series of trade agreements between six European countries geared to avoid yet another war on European soil

Indirect Quote

states the price of the domestic currency in foreign currency terms. the foreign currency is a variable amount and the domestic currency is fixed at one unit.

Multidomestic Strategy

strategy by which companies try to achieve maximum local responsiveness by customizing both their product offering and marketing strategy to match different national conditions

Outsourcing

subcontracting work, sometimes to foreign companies

Per capita GDP

the GDP divided by the population of the country.

Political Environment

the actions taken by the government, which potentially affect the daily business activities of any business or company

Strategic Management

the body of knowledge that answers questions about the development and implementation of good strategies and is mainly concerned with the determinants of firm performance

Neo-Mercantilism

the countries promote a combination of protectionist policies and restrictions and domestic-industry subsidies

Dumping

the export by a country or company of a product at a price that is lower in the foreign market than the price charged in the domestic market

Importer

the person or entity buying or transporting goods from another country into the importer's home country

Bid

the price at which a bank or financial services firm is willing to buy a specific currency

Pluralism in Political Philosophy

the recognition and affirmation of diversity within a political body, which permits the peaceful coexistence of different interests, convictions and lifestyles.

Globalization

the shift toward a more interdependent and integrated global economy creates greater opportunities for international business

Guanxi

the system of social networks and influential relationships that facilitate business and other dealings.

Gross Domestic Product (GDP)

the value of all the goods and services produced by a country in a single year.

World Bank and IMF

twin intergovernmental pillars supporting the structure of the world's economic and financial order.

Hedging

using financial instruments to reduce adverse price movements by taking an offsetting position

Foreign Corrupt Practices Act

was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business

Brownfield FDI

when a company or government entity purchases or leases existing production facilities to launch a new production activity

Exchange Rate Systems

The gold standard, in essence, created a fixed exchange rate system. An exchange rate is the price of one currency in terms of a second currency.