BUSA Exam 4- Chapter 3, 4, 6, & 7

balance of trade

a basic measure of the difference in value between a nation's exports and imports, including both goods and services and trade with foreign nations

corporation

a business entity created by filing a form (known in most states as the articles of incorporation) with the appropriate state agency, paying the state's incorporation fees, and meeting other requirement; is considered to be a legal entity that is separate and distinct from its owners; is like an artificial person; can legally engage in virtually any business activity a natural person can pursue; has limited liability as a result; most results in term of economic impact

balance of payments

a measure of the total flow of money into or out of a country; balance of trade plays a central role in determining because it is usually the largest component; includes other financial flows such as foreign borrowing and lending, foreign aid payments and receipts, and foreign investments

consumerism

a social movement that focuses on four key consumer rights: the right to be safe, the right to be informed, the right to choose, and the right to be heard

sustainable development

doing business to meet the needs of the current generation, without harming the ability of future generations to meet their needs; weaving environmentalism throughout the business decision-making process; sustainable development can mean significant long-term cost savings, so economic crisis may push forward environmentally friendly programs

whistle blowers

employees who report their employer's illegal or unethical behavior to either the authorities or the media

universal ethical standards

ethical norms that apply to all people across a broad spectrum of situations; dangerous two-faced thinking can be fixed by identifying these; six principles are trustworthiness, respect, responsibility, fairness, caring, and citizenship

Sarbanes-Oxley act

federal legislation passed in 2002 that sets higher ethical standards for public corporations and accounting firms; key provisions limit conflict-of-interest issues and require financial officers and CEOs to certify the validity of their financial statements

inflow of innovation in international trade

international trade can offer companies an invaluable source of new ideas; companies with a presence in foreign markets experience budding trends firsthand, giving them a jump in other markets around the world

access to factors of production in international trade

international trade offers a valuable opportunity for individual firms to capitalize on factors of production that aren't present in the right amount for the right price in each individual country, helping to even out some of the resource imbalances among nations

tracking emissions in carbon footprint

many large corporations track three different types of emissions; Scope 1 refers to direct emissions produced by corporate operations; Scope 2 refers to emissions that result from purchased electricity, heat, and steam; Scope 3 emissions are more complex to track and are emissions that occur outside a company's boundary, but over which it has some control, including areas such as employee commutes, supplier emissions, and product-use emissions

cause-related marketing

marketing partnerships between businesses and nonprofit organizations, designed to spike sales for the company and raise money for the nonprofit

trade surplus

overage that occurs when the total value of a nation's exports is higher than the total value of its imports

corruption

the solicitation of money for favorable treatment

North American Free Trade Agreement (NAFTA)

the treaty among the United States, Mexico, and Canada that eliminated trade barriers and investment restrictions over a 15-year period starting in 1994

infrastructure

refers to a country's physical facilities that support economic activity, including basic systems in transportation, communication, energy, and finance; varies widely between countries

Ethics Resource Center (ERC)

research from here suggests that organizational culuture has more influence than any other variable on the ethical conduct of employees; key elements of a strong culture include displays of ethics-related actions at all levels of an organization and accountability for actions

balance of payments deficit

shortfall that occurs when more money flows out of a nation than into that nation

mbarriers to trade

sociocultural differences, economic differences, and legal/political differences; often countries with the highest barriers have the least competition, which can be a real opportunity for the first international firms to break through

World Trade Organization (WTO)

a permanent global institution to promote international trade and settle international trade disputes; monitors provisions of the GATT agreements, promotes further reduction of trade barriers, and mediates disputes among members; decisions are binding, which means that all parties involved in disputes must comply to maintain good standing in the organization; ministers of this meet every two years to address current world trade issues; as the world economy has shifted toward services rather than goods, the emphasis of the meetings has followed suit; controlling rampant piracy of intellectual property is a key concern for developed countries, and for less-developed countries, one central issue is U.S. and European agricultural subsidies, which may unfairly distort agricultural prices worldwide

social audit

a systematic evaluation of how well a firm is meeting its ethics and social responsibility goals; a way many firms can monitor themselves; establishing goals is the starting point for a social audit; the next step is to determine how to measure the achievement of those goals, and measurement can be tricky

embargo

a total ban on the international trade of a certain item, or a total halt in trade with a particular nation; intention of most is to pressure the targeted country to change political policies or to protect national security

partnership

a voluntary agreement under which two or more people act as co-owners of a business for profit; a formal, long-term agreement; most common form is general partnership; tend to be both larger and more profitable than sole proprietorships

key reasons for international trade

access to factors of production, reduced risk, and inflow of innovation

corporate philanthropy

all business donations to nonprofit groups, including money, products, and employee time

a complete evaluation of global trade must

also consider exchanges that don't actually involve money because a surprisingly large chunk of international commerce involves countertrade

strategic alliance

an agreement between two or more firms to jointly pursue a specific opportunity without actually merging their businesses; typically involve less formal, less encompassing agreements than partnerships

emerging in today's marketplace

Southeast Asia and Africa. Vietnam, the Philippines, and Bangladesh are all benefitting from the migration of labor-intensive, low-wage manufacturing jobs away from China; as more jobs are created, these locations will likely begin to develop sturdy middle classes and stabilized economies; a number of sub-Saharan African nations, such as Nigeria, Kenya, and Angola, also represent an enormous opportunity for economic growth

social responsibility to customers

a core responsibility of business is to deliver consumer value by providing quality products at fair prices; honesty and communication are critical components of this equation

legality in ethics

a country's legal system creates an excellent starting point for developing ethics; function of laws in the U.S. and elsewhere is to establish and enforce ethical norms that apply to everyone within our society; laws provide basic standards of behavio, but truly ethical behavior goes beyond the basics; your actions can be completely legal, yet still unethical, and in rare instances your actions can be illegal, yet still ethical; legal and ethical actions should be your goal; legality should be the floor, not the ceiling, for how to behave in business and elsewhere.

ethical dilemmas

a decision that involves a conflict of values; every potential course of action has some significant negative consequences

franchisor

a firm that expands through foreign markets

code of ethics

a formal, written document that defines the ethical standards of an organization and gives employees the information they need to make ethical decisions across a range of situations; cornerstone of any formal ethics program; becomes even more important for multinational companies; useless if it doesn't reflect living principles; an effective code flows directly from ethical corporate values and leads directly to ongoing communication, training, and action; experts advocate a forceful, integrated approach to bring this to right, which involves integration into mandatory staff training

common market

a group of countries that have eliminated tariffs and harmonized trading rules to facilitate the free flow of goods among the member nations

trading blocs

a group of countries that have reduced or even eliminated tariffs, allowing for the free flow of goods among the member nations

World Bank

an international cooperative of 188 member countries, working together to reduce poverty in the developing world; influences the global economy by providing financial and technical advice to the governments of developing countries for projects in a range of areas, including infrastructure, communications, health, and education; financial assistance usually comes in the form of low-interest loans, but to secure a loan, the borrowing nation must often agree to conditions that can involve rather arduous economic reform

BRIC countries

Brazil, Russia, India, China; experts have looked to for the last two decades as the engines of future economic growth; with their large populations, rapid development, and robust middle-class growth rates, they doubtless deserve the attention; appeared to hit a wall in early 2016

free trade

perhaps the most dramatic change in the world economy has been the global move toward this; the unrestricted movement of goods and services across international borders; complete ___ is not a reality, but the emergence of regional trading blocks, common markets, and international trade agreements has moved the world economy much closer to that goal

poliical and legal differences in global markets

political regimes differ around the world, and their policies have a dramatic impact on business.; specific laws and regulations that governments create around business are often less obvious, yet they can still represent a significant barrier to international trade; to compete effectively and reduce risk, managers must carefully evaluate these factors and make plans to respond to them both now and as they change

social responsibility to investors

primary responsibility of business to investors is clearly to create an ongoing stream of profits; but companies achieve and maintain long-term earnings in the context of responsibility to all stakeholders, which may mean trading short-term profits for long-term success; responsibility to investors starts by meeting legal requirements, and in the wake of recent corporate scandals, the bar is higher

General Agreement on Tariffs and Trade (GATT)

an international trade accord designed to encourage worldwide trade among its members; established in 1948 by 23 nations; has undergone a number of revisions; most significant changes stemmed from the 1986-1994 Uruguay Round of negotiations, which took bold steps to slash average tariffs by about 30% and to reduce other trade barriers among the 125 nations that signed, also created the World Trade Organization (WTO)

stakeholders

any groups that have a stake or a personal interest in the performance and actions of an organization; different ones have different needs, expectations, and levels of interest

protectionism

ational policies designed to restrict international trade, usually with the goal of protecting domestic businesses; most economists find the reasons to eliminate these much more compelling than the reasons to create them; can take a number of different forms, the most common are tariffs, quotas, voluntary export restraints, and embargoes

the right to choose in consumerism

freedom of choice is a fundamental element of the capitalist U.S. economy; our economic system works largely because consumers freely choose to purchase the products that best meet their needs; as businesses compete, consumer value increases; socially responsible firms support consumer choice by following the laws that prevent anticompetitive behavior such as predatory pricing, collusion, and monopolies

reduced risk in international trade

global trade reduces dependence on one economy, lowering the economic risk for multinational firms; however, a word of caution is key: as national economies continue to integrate, an economic meltdown in one part of the world can have far-reaching impact

corruption wouldn't be possible

if companies didn't offer bribes

sociocultural differences

include differences among countries in language, attitudes, and values; some specific elements that affect business include nonverbal communication, forms of address, attitudes toward punctuality, religious celebrations and customs, business practices, and expectations regarding meals and gifts; understanding and responding to ___ is vital for firms that operate in multiple countries; since the differences often operate at a subtle level, they can undermine relationships before anyone is aware that it's happening; best way to jump over ___ is to conduct thorough consumer research, cultivate firsthand knowledge, and practice extreme sensitivity; the payoff can be a sharp competitive edge

laws and regulations

international businesses must comply with international legal standards, the laws of their own countries, and the laws of their host countries; can be a real challenge since many developing countries change business regulations with little notice and less publicity; the justice system can pose another key challenge, particularly with regard to legal enforcement of ownership and contract rights

countertrade

international trade that involves the barter of products for products rather than for currency

foreign liscencing

involves a domestic firm granting a foreign firm the rights to produce and market its product or to use its trademark/patent rights in a defined geographical area; the licensor receives a fee from the licensee; this approach allows firms to expand into foreign markets with little or no investment, and it also helps circumvent government restrictions on importing in closed markets; is especially common in the food and beverage industry

quotas

limitations on the amount of specific products that may be imported from certain countries during a given time period

International Monetary Fund (IMF)

an international organization accountable to the governments of its 188 member nations; basic mission is to promote international economic cooperation and stable growth; funding comes from the member nations, with the U.S. contributing more than twice as much as any other country; to achieve these goals, it supports stable exchange rates, facilitates a smooth system of international payments, encourages member nations to adopt sound economic policies, promotes international trade, and lends money to member nations to address economic problems; is best known as a lender of last resort to nations in financial trouble

voluntary export restraints (VERs)

limitations on the amount of specific products that one nation will export to another nation; although the government of the exporting country typically imposes these, they usually do so out of fear that the importing country would impose even more onerous restrictions, so these often aren't as "voluntary" as the name suggests

challenges to foreign liscencing

maintaining control of licensees can be a significant challenge; licensors run the risk that unethical licensees may become their competitors, using information that they gained from the licensing agreement

exchange rates

measure the value of one nation's currency relative to the currency of other nations; does not directly measure global commerce, but it certainly has a powerful influence on how global trade affects individual nations and their trading partners; the ___ of a given currency must be expressed in terms of another currency

exporting

most basic level of international market development; producing products domestically and selling them abroad; represents an especially strong opportunity for small and mid-sized companies

ethics vs. social responsibility

not the same, but have a dynamic, interactive relationship that plays a vital role in building both profitable businesses and a vibrant community

liscncing vs. franchising

one key difference is that franchisees assume the identity of the franchisor (eg, a McDonald's franchise in Paris is clearly a McDonald's, not a Pierre's Baguette outlet that also carries McDonald's products)

form of business ownership

one of the most important decisions entrepreneurs make when starting a new business; affects virtually every aspect of establishing and operating their firm, determines the degree to which each owner is personally liable for the firm's debts, the sources of funds available to the firm to finance future expansion, and helps entrepreneurs battle the steep odds against survival; there are four major forms

franchisee

other business who the franchisor engages

balance of payments surplus

overage that occurs when more money flows into a nation than out of that nation

limited liability

owners are not personally liable for claims against their firm and may lose their investment in the company, but their other personal assets are protected

general partnership

partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm; no limit on the number of partners who can participate, but most consist of only a few partners, often just two; formed when the partners enter into a voluntary partnership agreement

social responsibility to the environment

protecting the environment is perhaps the most crucial element of responsibility to the community; business is a huge consumer of the world's limited resources; sometimes the production process decimates the environment and spews pollution into the air, land, and water, sometimes causing irreversible damage; products created by business can cause pollution as well; government sets minimum standards for environmental protection at the federal, state, and local levels; a growing number of companies are going further, developing innovative strategies to build their businesses while protecting the environment

risks of foregin outsourcing

quality control-typically requires very detailed specifications to ensure that a company gets what it actually needs; social responsibility-a firm that contracts with foreign producers has an obligation to ensure that those factories adhere to ethical standards, and deciding what those standards should be is often quite tricky, given different cultures, expectations, and laws in different countries; policing the factories on an ongoing basis can be even harder than determining the standards; companies that don't get it right face the threat of significant consumer backlash in the United States and Europe, which has been a particular issue with products produced in China

cell phones and GDP

recent studies have found that if a country increases cell phone penetration by 10 percentage points, GDP will likely increase by anywhere from 10.5% to 11.2%; cell phone penetration is skyrocketing worldwide as a result

ethics

refers to sets of beliefs about right and wrong, good and bad; business ___ involve the application of these issues in the workplace; relates to individuals and their day-to-day decision making, and the decisions of each individual can affect the entire organization; your individual ___ stem from who you are as a human being, but your family, social group, and culture also play a significant role in shaping your ___; ____ choices begin with ___ individuals

carbon footprin

refers to the amount of harmful greenhouse gases that a firm emits throughout its operations, both directly and indirectly; ultimate goal is to become carbon neutral, either to emit zero harmful gases or to counteract the impact of emissions by removing a comparable amount from the atmosphere through projects such as planting trees

trade deficit

shortfall that occurs when the total value of a nation's imports is higher than the total value of its exports; signals the wealth of an economy that can afford to buy huge amounts of foreign products, but a large ___ can be destabilizing because it indicates that as goods and services flow into a nation, money flows out, which is a challenge with regard to long-term economic health

the right to be heard in consumerism

socially responsible companies make it easy for consumers to express legitimate complaints and develop highly trained customer service people to respond to complaints; smart businesses view customer complaints as an opportunity to create better products and stronger relationships; statistics suggest that 1/50 dissatisfied customers takes the time to complain, and the other 49 quietly switch brand; you're not only being responsible but also building your business by soliciting feedback

as tariffs decrease

some nations are seeking to control imports through nontariff barriers, such as requiring red-tape-intensive import licenses for certain categories, establishing nonstandard packaging requirements for certain products, offering less-favorable exchange rates to certain importers, establishing standards on how certain products are produced or grown, or promoting a "buy national" consumer attitude among local people; nontariff barriers tend to be fairly effective because complaints about them can be hard to prove and easy to counter

socially responsible employers

starting point is to meet legal standards; create a workplace environment that respects the dignity and value of each employee, ensure that hard work, commitment, and talent pay off, move beyond minimal safety requirements to establish proactive protections, and the best respond to the ongoing employee search for a balance between work and personal life

planed obscolecence

strategy of deliberately designing products to fail in order to shorten the time between purchases; represents a clear violation of social responsibility; market itself weeds out offenders in the long term, but in the short term, planned obsolescence thins consumer wallets and abuses consumer trust

tariffs

taxes levied against imports; governments tend to use protective ___ either to shelter fledgling industries that couldn't compete without help, or to shelter industries that are crucial to the domestic economy

business ethics

the application of right and wrong, good and bad in a business setting; isn't as straightforward as it may initially seem; the most challenging business decisions arise in ethical dilemmas

comparative advantage

the benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries; seldom remains static, because as technology changes and the workforce evolves through factors such as education and experience, nations may gain or lose ___ in various industries

absolute advantage

the benefit a country has in a given industry when it can produce more of a product than other nations using the same amount of resources

the right to be informed in consumerism

the law requires firms in a range of industries to provide the public with extensive information; for instance, the FDA mandates that most grocery foods feature a very specific Nutrition Facts label; Beyond legal requirements, many firms use the Web to provide a wealth of extra information about their products

social responsibility

the obligation of a business to contribute to society; the most ___ firms feature proactive policies that focus on meeting the needs of all their stakeholders; stance of a company regarding this sets the tone for the organization and clearly influences the decisions of individual employees

bribery

the payment of money for favorable treatment; U.S. corporations and American citizens are subject to prosecution by U.S. authorities for offering ___ in any nation

political climate

the political climate of any country deeply influences whether that nation is attractive to foreign business; stability is crucial; a country subject to strife from civil war, riots, or other violence creates huge additional risk for foreign business, but figuring out how to operate in an unstable environment can give early movers a real advantage

joint ventures

when two or more companies join forces, sharing resources, risks, and profits, but not actually merging companies in order to pursue specific opportunities; are a popular, but controversial, means of entering foreign markets; often a foreign company connects with a local firm to ease its way into the market, and some countries require that foreign investors have local partners; research finds that joint ventures between multinational firms and domestic partners can be more costly and less rewarding than they initially appear and may make sense only in countries that require local political and cultural knowledge as a core element of doing business

franchising

a specialized type of licensing; a franchisor offers franchisees the right to produce and market its products if the franchisee agrees to specific operating requirements—a complete package of how to do business; franchisors also often offer their franchisees management guidance, marketing support, and even financing; in return, franchisees pay both a start-up fee and an ongoing percentage of sales to the franchisor; has become a very popular way to operate a business and an important source of employment and income; two most popular types of arrangements are distributorships and business format franchises; oe of the biggest trends has been expansion into foreign markets

b-corps

benefit corporation; a new corporate structure that value profits, but not more than other priorities such as employees, suppliers, the community, and the environment; do not receive special tax treatment, but the status can offer a real advantage, especially for firms competing in crowded markets

social responsibility to the community

beyond increasing everyone's standard of living, businesses can contribute to society through philanthropy and responsibility

liscencee

company that buys the rights oin foreign liscencing

direct investment

foreign direct investment; when firms either acquire foreign firms or develop new facilities from the ground up in foreign countries; in foreign production and marketing facilities, represents the deepest level of global involvement; cost is high, but companies with these have more control over how their business operates in a given country; high-dollar commitment represents significant risk if the business doesn't go well; most takes the form of either acquiring foreign firms or developing new facilities from the ground up, but an increasingly popular approach is strategic alliances or partnerships that allow multiple firms to share risks and resources for mutual benefit; enable companies to gain a foothold quickly in new markets

European Union

the world's largest common market, composed of 28 European nations; overarching goal is to bolster Europe's trade position and to increase its international political and economic power; to help make this happen,the ___ has removed all trade restrictions among member nations and unified internal trade rules, allowing goods and people to move freely among the countries and created standardized policies for import and export between ___ countries and the rest of the world, giving the member nations more clout as a bloc than each would have had on its own; perhaps the most economically significant move was the introduction of a single currency, the euro, in 2002; affects the global economy with its leading-edge approach to environmental protection, quality production, and human rights.

opportunity cost

when a country produces more of one good, it must produce less of another good, assuming that resources are finite; the value of the second-best choice, the value of the production that a country gives up in order to produce the first product, represents the ___ of producing the first product

three methods used to prepare workers for international assignments

documentary training, cultural simulations, and field experiences.

key benefit of foreign outsourcing

dramatically lower wages, which drive down the cost of production

economic differences in global markets

before entering a foreign market, it's critical to understand and evaluate the local economic conditions;key factors to consider include population, per capita income, economic growth rate, currency exchange rate, and stage of economic development; keep in mind that low scores for any of these measures don't necessarily equal a lack of opportunity, some of today's biggest opportunities are in countries with low per capita income; effectively serving less developed markets requires innovation and efficiency; forward-thinking companies can make a profit in developing countries if they make advanced technology affordable; many markets are simply so large that high-volume sales can make up for low profit margins; profit potential is clear and growing, and as consumers in developing countries continue to gain income companies that established their brands early will have a critical edge over firms that enter the market after them; infrastructure should be a key consideration

corporate responsibility

business contributions to the community through the actions of the business itself rather than donations of money and time

sole propietorship

business that is owned, and usually managed, by a single individual; is simply an extension of the owner as far as the law is concerned; company earnings are treated like the owner's income and any debts the company incurs are considered to be the owner's personal debts; most common form of ownership in the U.S., but most remain relatively small

right to be safe in consumerism

businesses are legally responsible for injuries and damages caused by their products, even if they have no reason to suspect that their products might cause harm; makes it easy for consumers to file suits; in some cases, the drive to avert lawsuits has led to absurdities

importing

buying products from overseas that have already been produced, rather than contracting with overseas manufacturers to produce special orders; don't carry the brand name of the importer, but they also don't carry as much risk; example is Pier 1

liscencor

company that offers the rights in foreign liscencor

foreign outsourcing

contract manufacturing; contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production

green marketing

developing and promoting environmentally sound products and practices to gain a competitive edge

offshoring

developing new facilities from scratch, most common form of direct investment; involves significant risk, but the benefits include complete control over how the facility develops and the potential for high profits, which makes the approach attractive for corporations that can afford it