Chapter 5

Trading Company

Acquires goods in one country and sells them to buyers in another country

Multinational Corporation (MNC)

A corporation, such as IBM, Exxonmobil, an Nestle, that operates on a worldwide scale, without significant ties to any other nation or region

Franchising

A form of licensing in which a company -the franchiser-agrees to provide a franchise a name, logo, methods of operation, and advertising, products, and other elements associated with the franchiser's business, in return for a financial commitment and the agreement to conduct business in accordance with the franchiser's standards of operations

World Trade Organization (WTO)

A global association of member countries that promote free trade

Cartel

A group of firms or nations that agree to act as a monopoly and not compete with each other

Strategic Alliance

A partnership formed to create competitive advantage on a worldwide basis

Southern Common Market (Mercosur)

A political and economic agreement among the countries of Bolivia, Argentina, Brazil, Venezuela, Uruguay, and Paraguay

Import Tariff

A tax levied by a nation on goods bought outside its borders and imported into the country

UK Bribery Act

All organizations with business operations in the United Kingdom can be held liable for bribery, even if the bribery did not occur in the UK

Webb-Pomerene Export Trade Act

Allows selected American firms desiring international trade to form monopolies in order to compete with foreign cartels

European Union (EU)

An economic and political union of 28 member nations that are located primarily in Europe

Organization of Economic Cooperation and Development (OECD)

An international economic organization comprised of 30 countries that accept the basic principles of free-market economies and representative democracy; recommends and promotes policies to improve the well-being of consumers and societies across the world

Self-Reference Criterion

An unconscious referencing to the way things are done in one's own culture and experiences in making global business decisions

International Monetary Fund (IMF)

Basic mission is to oversee the international monetary system and help ensure stable currencies and exchange rates throughout the world

Association of Southeast Asian Nation (ASEAN)

Comprised of ten Southeast Asian countries with the goal to promote economic growth and overall progress in the area via trade and security

Countertrade Agreements

Exporting that involves bartering products for other products instead of for currency

World Bank

Formally known as the international bank for reconstruction and development, it was established and supported by the industrialized nations in 1946 to loan money to underdeveloped and developing countries

Outsourcing

Involves transferring manufacturing or other functions (such as data processing) to countries where labor and supplies are less expensive

Contract Manufacturing

Occurs when a company hires a foreign company to produce a specified volume of the firm's product to specification; the final product carries the domestic firm's name

Dumping

Occurs when a country or business firm sells its products at less than what it costs to produce them

Foreign Corrupt Practices Act (FCPA)

Outlaws direct payoffs to and bribes of foreign governments or business officials by American companies

Gross Domestic Product (GDP)

The market value of a nation's total output of goods and services for a given period

Quota

The maximum number of units of a particular product that may be imported into a country

Infrastructure

The physical facilities that support its economic activities, such as railroads, highways, ports, airfields, utilities, and power plants, schools, hospitals, communication systems, and commercial distribution systems

Importing

The purchase of goods and services from a foreign source

Direct Investment

The purchase of overseas production and marketing facilities; a company may control the facilities outright, or it may be the majority stockholder in the company that controls the facilities

Exchange Rate

The ratio at which one nation's currency can be exchanged for another nation's currency or for gold

Exporting

The sale of goods and services to foreign markets

Embargo

The suspension of trade in a particular product by the government

North American Free Trade Agreement (NAFTA)

Went into effect on January 1, 1994 and effectively merged Canada, the US, and Mexico into one market of about 400 million consumers by eliminating most tariffs and trade restrictions on agricultural and manufactured products among the three countries

Joint Venture

When a company that wants to do business in another country finds a local partner (occasionally, the host nation itself) to share the costs and operation of the business