Economics

The Benefits to Being a Multinational Firm

Multinational corporations (MNCs) have both mobilities of capital and power, and are, for the most part, privately owned. They can also move capital and work to other locations at will

A global buyer reviews a company's ethical profile and the social responsibility section of its annual report. Understanding that the company's values match the buyer's principles, the buyer purchases the company's products. Which action did the buyer perform regarding the purchase of the company's products?

When a person evaluates a company's values and then makes purchases from the company based on the person and company's matched values, this is ethical consumerism

A farmer sells sweet corn to customers at a local farmers market. Which marketing channel is being used by the farmer?

When a producer sells to customers, it is a direct marketing channel.

An employee who is scheduled to become an expatriate has successfully passed the survival training stage. What type of training is used by the company after passing this stage?

When an employee has been through the other stages of training, field simulation training is next.

What did the Worst Forms of Child Labor Convention, 1999 define?

he age at which a person becomes an adult The Worst Forms of Child Labor Convention defines a child as an individual younger than 18 years old.

Understanding the culture of the people with whom you are dealing is important to successful business interactions and to accomplishing business objectives. For example, you will need to understand the following:

how people communicate how culture affects how people view time and deadlines how people are likely to ask questions or highlight problems how people respond to management and authority how people perceive verbal and physical communications how people make decisions

Once a candidate is selected, the company will need to prepare the employee for the assignment. There are five main components of training someone for an overseas assignment:

language culture goal setting managing family and stress repatriation

Geert Hofstede

sometimes called the father of modern cross-cultural science and thinking, is a social psychologist who focused on a comparison of nations using a statistical analysis of two unique databases. These two databases helped to develop a framework to understand culture. Values, in this case, are broad preferences for one state of affairs over others, and they are mostly unconscious. Hofstede's research into culture centers on six cultural dimensions are based on the values of the people within that culture. Geert Hofstede created a framework for analyzing national culture based on six dimensions: power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence.

Other barriers to trade exist. For convenience, they can be divided into five categories:

specific limitations to trade, customs, administrative procedures, government participation, and technical barriers to trade.

Brownfield FDIs

A brownfield FDI is when a company or government entity purchases or leases existing production facilities to launch a new production activity. One application of this strategy is when a commercial site used for an "unclean" business purpose, such as a steel mill or oil refinery, is cleaned up and used for a less polluting purpose, such as commercial office space or a residential area. Brownfield investment is usually less expensive and can be implemented faster; however, a company may have to deal with many challenges, including existing employees, outdated equipment, entrenched processes, and cultural differences. brownfield refers to modifying or upgrading existing plans or projects.

Customs Union

A customs union offers economic collaboration by removing trade barriers between member countries and establishing a mutual trading policy with nonmembers. A free trade area can increase trade volume among member countries but can cause nonmember countries to lose export business with member countries. This eventually leads to the creation of a customs union in which all members of the economic integration will use the same external tariff with nonmember countries. An example of a customs union is Mercosur, which consists of Argentina, Brazil, Paraguay, Uruguay, and Venezuela.

Overseas Premium

An overseas premium is an additional bonus for agreeing to take an overseas assignment.

The Council of Supply Chain Management Professionals (CSCMP) defines supply chain management as follows:

"Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and logistics. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply-and-demand management within and across companies"

three groups who participate in the market:

(1) firms that are involved in international trade of goods and services; Firms that buy and sell on global markets find that their costs for workers, suppliers, and investors are measured in the currency of the nation where their production occurs, but their revenues from sales are measured in the currency of the country where their sales happened. (2) tourists visiting other countries; International tourists will supply their home currency to receive the currency of the country they are visiting. (3) international investors who invest abroad.Financial investments that cross international boundaries and require exchanging currency are often divided into two categories. Companies which purchase foreign companies will need to supply their home country's currency in exchange for the foreign currency to settle the transaction.Similarly, an international investor can purchase foreign financial assets but will need to exchange currency to do so.

Supply chain management (SCM) has three principal components:

(a) creating the supply chain network structure, (b) developing supply chain business processes, and (c) managing the supply chain activities

the integration of e-commerce has produced

(a) greater cost efficiency; (b) distribution flexibility; (c) better customer service; and (d) the ability to track and monitor shipments.

Bureaucratic delays:

Delays at ports or other country entrances caused by administrative or bureaucratic red tape increase uncertainty and the cost of maintaining inventory.

Three Approaches to HRM

1. Ethnocentric 2. Polycentric 3. Geocentric

Deepwater Horizon oil spill

A 2010 industrial accident that is considered the largest oil spill in history

Exports

A commodity, good, or service sold abroad Exporting is defined as the act of country shipping goods and services out of the port of a country. In international trade, an export refers to the selling of goods and services produced in the home country to other markets. The seller of the goods and services is referred to as the "exporter."

The Clean Water Act

A US federal law governing water pollution

TRIPS (Trade-Related Aspects of Intellectual Property Rights)

A WTO agreement that governs all IP laws and protects intellectual property rights for global businesses.

Stakeholders

All parties who have a stake in the performance and output of the corporation Stakeholders include the company's employees, unions, investors, suppliers, consumers, local and national governments, and communities that may be affected by corporate activities such as construction, manufacturing, and pollution.

Grease Payments

A business practice of paying small inducements in order to expedite decisions and transactions

Which condition is part of a contract between international companies that are based in different nations?

A choice of law clause specifies the laws and the jurisdiction under which international disputes will be settled. International businesses operating in different countries include such clauses in their contractual agreements to clarify ahead of time how disputes will be settled.

What Is GAAP? Generally Accepted Accounting Principles

A collection of generally accepted accounting principles used in the United States The purpose of accounting is to communicate the organization's financial position to company managers, investors, banks, and the government. Accounting standards provide a system of rules and principles that prescribe the format and content of financial statements. Through this consistent reporting, a firm's managers and investors can assess the financial health of the firm. Accounting standards cover topics such as how to account for inventories, depreciation, research and development costs, income taxes, investments, intangible assets, and employee benefits. Investors and banks use these financial statements to determine whether to invest in or loan capital to the firm, while governments use the statements to ensure that the companies are paying their fair share of taxes. Rules and principles exist within financial accounting that must be followed. They provide the standard guidance necessary for achieving effective communication. A significant body of GAAP has been created in the United States over many decades to provide authoritative guidance and standardization for financial accounting. When faced with a reporting issue, such as a lawsuit, the accountant consults GAAP to arrive at an appropriate resolution, one that results in fair presentation. If both the accountant and the decision maker understand GAAP, even the most complex financial information can be communicated successfully. Many countries other than the United States have developed their own individual systems of GAAP. These alternatives are utilized in specific areas of the world. GAAP is constantly evolving as accountants seek better methods of providing financial information in an ever-changing business world. The main authority for the development of GAAP lies with the FASB. At some point, GAAP may be replaced by IFRS to provide consistent accounting and financial reporting around the world.

Lean Manufactoring

A collection of methods or theories for reducing waste in manufacturing Modern global supply chain models are based on lean manufacturing principles and complex networks of partnerships that allow for flexible configurations responding to changing needs. Site selection for production is frequently no longer a matter of picking one place to build a factory; it is a matter of choosing a variety of partners in different countries that align to your manufacturing needs. The manufacturing process may stretch across several countries rather than in one place. Parts of a product may be produced in one country or in several, close to the sources of raw materials, but then shipped to yet another country to be assembled by a workforce with more technical expertise or perhaps in a country with better tax incentives or one closer to the customer.

Which distribution system should be used by a company wanting to maximize its control over the distribution of its products when entering a new country?

A company that wants to control the distribution process should create its own system.

Corporate social responsibility (CSR)

A company's obligations to society, including a wide range of stakeholders: people and places affected by company activities

Supply Chain Networks

A complex, evolved form of a supply chain that includes secondary support and multiple, interrelated supply and distribution lines

A company needs an electronic filing system that collects and organizes information for analysis. Which solution should be used for this purpose?

A database management system (DBMS) allows businesses to store and analyze large amounts of data to identify trends, produce reports, and other analysis.

Forward Contract - derivative currency instrument used to hedge exchange rate risk.

A contract in which the firm agrees to pay a set rate at the beginning of a contract. In the forward contract, a firm agrees to pay a specific rate at the beginning of the contract for delivery at a future date. Specifically, a firm can lock in a guaranteed foreign exchange rate through a forward contract. In the forward contract, the firm agrees to pay a specific rate at the beginning of the contract for delivery at a future date. Thus, the firm will pay the agreed-on rate regardless of what the current exchange rate is on the date of the final settlement. This is a less traditional contract and is used for less popular currencies. For example, a South Korean company sells a product to a Brazilian company and expects to receive the final payment of 10 million South Korean Won from that Brazilian company 3 months later. The Brazilian company will need to purchase this amount of South Korean Won from the foreign exchange market to settle the transaction 3 months later. The fluctuation of the exchange rate between Brazilian Real and South Korean Won could lead to a loss to the Brazilian company if the value of South Korean Won appreciates. It could buy a forward contract from a bank with a fixed exchange rate between the two currencies in the contract. The company can use this contract as a way to reduce exchange rate risk if the value of South Korean Won increases substantially relative to the Brazilian Real in 3 months.

Currency Swap Contracts - derivative currency instrument used to hedge exchange rate risk.

A contract where 2 firms agree to swap currencies in the future at a previously agreed exchange rate. Swap contracts are agreements to trade currencies on different dates. Currency swap contracts are coordinated transactions where 2 firms agree to swap currencies in the future at a previously agreed exchange rate. Consider a German company that has US-based operations and needs dollars for investment and a US company that has German-based operations that needs euros for investment. At the beginning of the contract, the US company will give dollars to the German company for investment, and the German company will give euros to the US company for investment. At the end of contract, they will swap again at a previously agreed rate, giving back any investment revenue in the home country's currency.

Tax Haven

A country that has very low corporate taxes A tax haven is a country that has very advantageous (low) corporate income taxes. Bermuda is a well-known tax haven. The bank pays interest to the tax haven subsidiary. The subsidiary does not pay taxes on that interest because of the tax haven laws. At the same time, the interest paid by the subsidiary receiving the loan is tax deductible. The Cayman Islands is another country that is often a tax haven destination because it does not have income tax and provides quite liberal protection for companies that shelter their money there

Pegged Exchange Rate

A currency system that fixes an exchange rate around a certain value, but still allows fluctuations, usually within certain values, to occur. In a pegged economy, the country's central bank maintains a fixed amount of gold or reserves relative to its currency.

Which economic integration stage offers economic collaboration by removing trade barriers between member countries and establishing a mutual trading policy with nonmembers?

A customs union offers economic collaboration by removing trade barriers between member countries and establishing a mutual trading policy with nonmembers.

Sweatshop

A factory that is guilty of some sort of labor abuse or violation such as unsafe working conditions, employment of children, mandatory overtime, unsafe working conditions, and so on

Training

A focused educational program with a specific goal

Which economic actor benefits as the U.S. dollar strengthens?

A foreign firm exporting to the US: The firm earns U.S. dollars through export sales, then converts it back into their home currency. A stronger U.S. dollar would mean they can buy more of the home currency.

Strategic plan

A formal agreement on priorities, focus, and goals

Cultural Dimensions

A framework for cross-cultural communication, developed by Geert Hofstede that shows the effects of a society's culture on the values of its members, and how these values relate to behavior. Most people understand that values are a culture or society's ideas about what is good, bad, acceptable, or unacceptable. Hofstede developed a framework for understanding how these values underlie organizational behavior. Through his database research, he identified six key value dimensions that analyze and interpret the behaviors, values, and attitudes of a national culture Geert Hofstede created a framework for analyzing national culture based on six dimensions: power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence.

A company would like to use a human resource approach that leads to more fluid movement among employees and creates diversity in the workforce. Assignment decisions are made jointly by the headquarters and the field offices. Which human resource approach should be used by this company?

A geocentric approach coordinates the best employees worldwide, leading to diversity and employee movement.

How is contract law structured as it applies to global business among nations?

A horizontal business structure means that no nation is in a legally dominant position over another.

Joint Venture

A joint venture is a business agreement in which parties agree to develop a new entity and new assets by contributing equally. They exercise control over the enterprise and consequently share revenues, expenses, and assets. Shared costs reduce investment needed, reduced risk, seen as local entity. Higher cost than exporting, licensing, or franchising; integration problems between two corporate cultures. While joint ventures are generally small projects, major corporations use this method to diversify. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project as well as the resulting profits. Since money is involved in a joint venture, it is necessary to have a strategic plan in place. In short, both parties must be committed to focusing on the future of the partnership rather than just the immediate returns. Ultimately, short-term and long-term successes are both important. To achieve this success, honesty, integrity, and communication within the joint venture are necessary.3 First and foremost is the challenge of finding the right local partner—not just in terms of business focus but also in terms of compatible cultural perspectives and management practices. Second, the local partner may gain the know-how to produce its own competitive product or service to rival the multinational firm. This is what is currently happening in China. To manufacture cars in China, non-Chinese companies must set up joint ventures with Chinese automakers and share technology with them. Once the contract ends, however, the local company may take the knowledge it gained from the joint venture to compete with its former partner.2

Production Cycle

All the activities involved in creating a product

Contracts

A legally enforceable promise In the United States, two primary sources of law govern contracts: the common law and the Uniform Commercial Code (UCC).

Which exchange rate regime allows a currency's value to fluctuate according to the foreign exchange market?

Floating: This regime automatically adjusts to economic circumstances.

Fronting Loan

A loan made between a parent company and its subsidiary through a financial intermediary such as a bank. A fronting loan is a loan made between a parent company and its subsidiary through a financial intermediary such as a bank. The advantage of using fronting loans as a way to lend money, rather than the parent lending the money directly to the subsidiary, is that the parent can gain some tax benefits and bypass local laws that restrict the amount of funds that can be transferred abroad. With a fronting loan, the parent deposits the total amount of the loan in the bank. The bank then lends the money to the subsidiary. For the bank, the loan is risk free because the parent has provided the money to the bank. The bank charges the subsidiary a slightly higher interest rate on the loan than it pays to the parent, thus making a profit. The tax advantages of fronting loans come into play if the loan is made by a subsidiary located in a tax haven.

Perfectly Competitive Market

A market in which no individual economic actor can affect the price of a good. In a perfectly competitive market, there are no barriers to enter or exit the market. Producers compete with each other and consumers can buy from any producer.

Return Volatility

A measure of the variation in returns on an investment

Ethical Consumerism

A movement in which consumers make purchasing decisions based on a company's ethical profile

Greenfield Ventures

A new business built where no prior business existed, either physically or metaphorically or both

National Labor Committee

A nongovernmental organization involved in anti-sweatshop activities and the implementation of labor laws

Which intellectual property right describes a chemical company's filing on their innovative industrial process invention?

A patent is filed to protect the right to an innovative invention, which must be a manufactured product, an apparatus, chemical composition, or a manufacturing process.

Licensee

A person or company who has entered into an agreement with someone to use their product or service for a specified period of time

Licensor

A person or company who owns a product but provides it to someone else as part of an agreement

third-country national

A person who is in transit and/or applying for visas in countries that are not their country of origin.

expatriate

A person who lives outside of their own native country.

Autarky

A political or economic system that becomes self-sufficient to survive.

Which level of economic integration presents an alliance of all policies by a common organization?

A political union is defined as when a single nation is formed and a mutual organization confederates all policies.

Political Union

A political union is defined as when a single nation is formed and a mutual organization confederates all policies. Because member countries of an economic union work closely on all major business and economic issues, eventually the urge to create common political and foreign policies may lead to the creation of a political union, i.e., when member countries will behave as a single country. There is a unification of all policies by a common organization. According to Cavusgil, Knight, and Riesenberger (2016), a political union is an ideal that has not yet been achieved. However, Asgary, Samii, and Frutos-Bencze (2016) cite the United Arab Emirates (UAE) as an example of a political union.

Economies of Scale

A proportionate savings in costs gained by an increased level of production The existence of economies of scale in production is sufficient to generate profitable trade between the two countries. Economies of scale refer to a production process in which production costs fall as the scale of production rises.

A Tariff-rate Quota

A quota that permits a specified quantity of imported goods to enter a country at a reduced rate during the quota period. a two-tier quota system that combines characteristics of tariffs and quotas. Under a tariff-rate quota system, an initial quota of a good is allowed to enter the country at a lower duty rate. Once the initial quota is surpassed, imports are not stopped; instead, more of the good may be imported, but at a higher tariff rate. For example, under a tariff-rate quota system, a country may allow 50 million pens to be imported at the low tariff rate of $1 each. Any pen that is imported after this first-tier quota has been reached would be charged a higher tariff, say, $3 each.

An Absolute Quota

A quota that strictly limits the quantity of goods that may enter a country. As an example, suppose an absolute, global quota for pens is set at 50 million. The government is setting a limit that, in total, only 50 million pens can be imported.

Social Media

A relatively new marketing channel that includes platforms such as Facebook, Twitter, LinkedIn, Pinterest, and Instagram

International Telecommunications Union

A specialized agency of the United Nations responsible for communication and information issues A representative from the International Telecommunication Union (ITU) reported that more than 3.5 billion people are still offline, with the majority being women. Across regions, 82% of developed countries are connected to the information superhighway, whereas only 40% were connected in developing countries and 15% in the least developed countries ("Information and Communications," 2016).

Long Position

A strategy used in investing of a trader who buys an asset with expectation that it will increase in value. Essentially, taking a long position is purchasing an asset and forecasting that the value is going to increase.

Short Position

A strategy used in investing of a trader who sells someone else's asset with the expectation of buying it back later when it decreases in value. Whereas taking a short position is looking for the value of an asset to go down.

Verticle Structure of Law

A structure of law where those at the top govern those at the bottom

Deep Learning

A subset of machine learning in which computers learn unsupervised from data that are unstructured

Franchising

A system where a business grants an entrepreneur the right to use their products, names, and processes in exchange for a percentage of the profits In this arrangement, the franchisee will take the majority of the risk in opening a new location (e.g., capital investments) while gaining the advantage of an already established brand name and operational process. In exchange, the franchisee will pay a certain percentage of the profits of the venture back to the franchiser. The franchiser will also often provide training, advertising, and assistance with products. Franchising has some weaknesses from a strategic point of view. Most importantly, organizations (the franchisers) lose a great deal of control. Quality assurance and protection of the brand is much more difficult when ownership of the franchise is external to the organization itself. Choosing partners wisely and equipping them with the tools necessary for high levels of quality and alignment with the brand values is critical (e.g., training, equipment, quality control, adequate resources).

The Fixed Exchange Rate

A system where a currency's value is tied to the value of another single currency, to a basket of other currencies, or to another measure of value, such as gold. In general, fixed-rates are not established by law but are instead maintained through government intervention in the market. The government does this through the buying and selling of its reserves, adjusting its interest rates, and altering its fiscal policies. Because the government must commit its monetary and fiscal tools to maintain the fixed rate of exchange, it cannot use these tools to address other macroeconomics conditions such as price level, employment, and recessions resulting from the business cycle. This is a currency system in which governments try to uphold a currency value that is constant against a specific currency or good.

The Floating Exchange Rate

A system where the value of currency in relation to others is allowed to freely fluctuate subject to market forces is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the supply and demand of this currency in the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency. The dollar is an example of a floating currency. Many economists believe floating exchange rates are the best possible exchange rate regime because they automatically adjust to economic circumstances. These regimes enable a country to dampen the impact of shocks and foreign business cycles and preempt the possibility of having a balance of payments crisis. However, they also engender unpredictability as the result of their dynamism. A free-floating exchange rate increases foreign exchange volatility, which can be a significant issue for developing economies. Developing economies often have the majority of their liabilities denominated in other currencies instead of the local currency. Businesses and banks in these types of economies earn their revenue in the local currency but have to convert it to another currency to pay their debts. If there is an unexpected depreciation in the local currency's value, businesses and banks will find it much more difficult to settle their debts. This puts the entire economy's financial sector stability in danger.4 Flexible exchange rates serve to adjust the balance of trade. When a trade deficit occurs in an economy with a floating exchange rate, there will be increased demand for the foreign (rather than domestic) currency which, will increase the price of the foreign currency in terms of the domestic currency. That, in turn, makes the price of foreign goods less attractive to the domestic market and decreases the trade deficit. Managed float regimes, otherwise known as dirty floats, are where exchange rates fluctuate from day to day, and central banks attempt to influence their countries' exchange rates by buying and selling currencies. Almost all currencies however, are managed to some degree since central banks or governments intervene to influence the value of their currencies. So, when a country claims to have a floating currency, it most likely exists as a managed float.

Preferential Tariff

A tariff that is lower for some nations than others

Voluntary Export Restrictions

A trade restriction on the quantity of a good that an exporting country is allowed to export to another country. Are a form of trade barrier by which foreign firms agree to limit the number of goods exported to a particular country. Although such restrictions are called voluntary, they typically are agreed to only after pressure is applied by the country whose industries they protect. It raises prices for the domestic product and reduces the quantity consumed of the goods or services affected by the quota.

Licensing

A type of contract that allows one party to use another's property as their own without paying royalties for a designated length of time Fast entry, low cost, low risk. Less control, licensee may become a competitor, legal and regulatory environment (IP and contract law) must be sound This agreement will allow the licensor affordable and low-risk entry into a foreign market, while the licensee can gain access to the competitive advantages and unique assets of the licensor. This is potentially a strong win-win arrangement for both parties and is a relatively common practice in international business. Loss of control is a serious disadvantage in a licensing situation in regard to quality control. Particularly relevant is the licensing of a brand name, as any quality control issue on behalf of the licensee will impact the licensor's parent brand Depending on an international partner also creates inherent risks regarding the success of that firm. Just like investing in an organization in the stock market, licensing requires due diligence regarding which organization to partner with. Lower revenues due to relying on an external party is also a key disadvantage to this model. (Lower risk, lower returns.) Licensing and franchising both provide a way for a person or an entity to pay for the right to profit from someone else's idea or business model. Licensing and franchising are low-risk, fast ways to enter a market, but they can mean a loss of control and a lower return on investment.

Venture Capital (VC)

A type of high-risk investing

Graphical User Interface

A type of interface that allows users to interact with electronic devices through graphical icons and visual indicators instead of text

Macro Risk

A type of political risk in which political factors impact the overall stability of a country and can impact any industry regardless of industry type. Examples of macro-political risk are social unrest, change in government leadership, and civil wars. The ongoing civil war in Syria is an example of a macro risk.

Micro Risk

A type of political risk that applies to a specific foreign company or a group of foreign companies in a country. An example of this could be the government's nationalization of assets. In Venezuela, President Chavez has nationalized oil production as well as several other specific industries, including steel and telecommunications.

Brand

A type of product made by a particular company under a particular name

Asset

A useful or valuable thing; something you own such as building, inventory, or cash

Intellectual Property (IP)

A work or invention that is the result of creativity to which one has rights and for which one may apply for a patent, copyright, or trademark

Artificial Intelligence

AI has been made possible by progress in machine learning algorithms and increased computing power. Machine learning allows computers to learn from experience with previous data and patterns. Increased computing power has increased people's ability to gather and analyze vast amounts of data. These data are used to train AI algorithms. Deep learning can be used in a factory assembly line or aircraft engine where large amounts of data and images are analyzed to look for anomalies. AI can also be used to determine the best route for a delivery truck after analyzing traffic to improve both fuel efficiency and delivery time

Asia ASEAN

ASEAN's primary focus is on economic, social, cultural, and technical cooperation as well as on promoting regional peace and stability. Although less emphasized today, one of the early primary missions of ASEAN was to prevent the domination of Southeast Asia by external powers—specifically China, Japan, India, and the United States. Primary focus is on economic, social, cultural, and technical cooperation as well as promoting regional peace and stability The Association of Southeast Asian Nations (ASEAN) was created in 1967 by five founding-member countries: Malaysia, Thailand, Indonesia, Singapore, and the Philippines. Since its inception, Myanmar (Burma), Vietnam, Cambodia, Laos, and Brunei have joined the association.2

What can be done to reduce the digital divide? The National Digital Inclusion Alliance, a U.S. nonprofit organization, suggests that to reduce the digital divide, a population must be provided with the following

Affordable, robust broadband internet service Internet-enabled devices that meet the needs of the user (i.e. cellular devices that can connect to wifi) Access to digital literacy training Quality technical support Applications and online content designed to enable and encourage self-sufficiency, participation, and collaboration.

Cultural Simulation Training

After learning the cultural "dos and don'ts" of a host country, many companies will ask their employees to participate in cultural simulations in which they will role-play various situations and practice responding in culturally sensitive ways. This process is most effective when the training takes place in the host country or when the trainer can include people from the actual host country to help. The goal is to duplicate as closely as possible scenarios that the employees may face, such as having to question or to reprimand a local employee, making a presentation to host country upper-level managers, or how to approach a person of the opposite gender in countries where the sexes do not mix as freely as in the United States.

Internet Access for Agricultural Advancement

Agriculture is considered the most vital area needing ICT intervention. Access to these technologies can help improve production efficiency in agriculture. One way is that farmers can use IT to learn about crop pricing and to connect with other farmers. In addition, smartphone applications can inform farmers about the status of their crops and even allow for remote irrigation.

What is considered the most vital area needing information and communication technology (ICT) intervention?

Agriculture is the most vital area needing ICT intervention. ICT helps farmers learn about crop pricing and informs farmers about the status of their crops as well as information about irrigation of their crops.

Neo-mercantilism

Although mercantilism is one of the oldest trade theories, it remains part of modern thinking. Countries such as Japan, China, Singapore, Taiwan, and even Germany still favor exports and discourage imports through a form of neo-mercantilism in which the countries promote a combination of protectionist policies and restrictions and domestic industry subsidies. Nearly every country at one point or another has implemented some form of protectionist policy to guard critical industries in its economy. While export-oriented companies usually support protectionist policies that favor their industries or firms, other companies and consumers are hurt by protectionism. Taxpayers pay for government subsidies of select exports in the form of higher taxes. Import restrictions lead to higher prices for consumers, who pay more for foreign-made goods or services. Free trade advocates highlight how free trade benefits all members of the global community, while mercantilism's protectionist policies only benefit select industries at the expense of both consumers and other companies inside and outside the industry.1

The Environmental Protection Agency (EPA) American agency established in the 1970s with the goal of monitoring the environmental practices of industry

American agency established in the 1970s with the goal of monitoring the environmental practices of industry

National Environmental Policy Act (NEPA)

American environmental act from the 1970s that requires federal agencies to prepare environmental impact statements for every recommendation or report

Debt

Amount owed to someone Debt financing refers to raising capital by borrowing the money and agreeing to repay the entire amount plus agreed-on interest at a specific date in the future. Firms can borrow money from banks or by selling bonds. The advantage of raising money through debt financing is that company management does not give up any ownership of the firm. Firms can also obtain funding via intra-firm loans or trade credits. A trade credit lets the customer (in this case, the subsidiary buying the goods or services) defer payment on the good or service for a specified period of time, typically 30 or 90 days. By borrowing capital from a parent, both the subsidiary and the parent eliminate paying transaction costs to an outside entity such as a bank, which would charge fees to make the transaction.

Acquisition

An acquisition occurs when one company purchases most or all of another existing company in a specific target market or country. When making an acquisition, due diligence is important—not only on the financial side but also on the side of the country's culture and business practices. Fast entry; known, established operations. High cost, integration issues with home office. An acquisition is when a company purchases all or most of an existing company. Acquisition and wholly owned subsidiaries are the most risky but they also carry the most rewards and they allow you to have total control over the business operations.

Strategic Alliances

An agreement between two companies to cooperate on the mutually beneficial project Shared resources to gain more market share. Very vulnerable relationship - because any one entity could exit at any time This is a collaboration of two or more companies in which they share resources but not assets. The disadvantages of partnering through a strategic alliance, on the other hand, are lack of direct control and the possibility that the partner's goals differ from the firm's goals. Failing to consider the values or reliability of a potential partner can be costly, if not disastrous. International joint ventures and strategic alliances call for working with other people or businesses in the target country for a common goal.

International Trade Agreements

Are trade agreements across national borders intended to reduce or eliminate trade barriers to promote economic exchange.

Databases

An electronic filing system that collects and organizes data and information

host-country national

An employee of an organization who is the citizen of the country in which the foreign subsidiary is located.

Chief Information Officers (CIO)

An executive with responsibility for managing all information resources in an organization. In today's high-tech world, Chief Information Officers (CIOs) must possess not only the technical smarts to implement global IT infrastructures, integrate communications systems with partners, and protect customer data from insidious hackers but also have strong business acumen. Only through well-designed IT systems and the power of computers can managers process these data into meaningful and useful information and use it for specific purposes, such as making business decisions. One such form of business information storage is the database, an electronic filing system that collects and organizes data and information. Using software called a database management system (DBMS), you can quickly and easily enter, store, organize, select, and retrieve data in a database. These data are then turned into information to run the business and perform business analyses. Databases are at the core of business information systems. For example, a customer database containing a name, address, payment method, products ordered, price, order history, and similar data provides information to many departments. Marketing can track new orders and determine what products are selling best; sales can identify high-volume customers or contact customers about new or related products; operations managers can use order information to obtain inventory and schedule production of the ordered products; and finance can use sales data to prepare financial statements.

What Is FASB? Financial Accounting Standards Board

An independent group that oversees the development and revision of the GAAP Since 1973, the primary authoritative body in charge of producing GAAP has been the Financial Accounting Standards Board(frequently referred to as FASB). FASB is an independent group supported by the U.S. government, various accounting organizations, and private businesses. It is charged with establishing and improving the standards by which businesses and not-for-profit organizations (such as charities) produce the financial information that they distribute to decision makers. Typically, accounting problems arise over time within various areas of financial reporting. New types of financial events can be created, for example, that are not covered by GAAP. Or perhaps, weaknesses in earlier rules start to become evident. If such concerns grow to be serious, FASB will step in and study the issues and alternatives and possibly pass new rules or make amendments to previous ones. FASB is methodical in its deliberations, and the entire process can take years. Changes, additions, and deletions to GAAP are not made without proper consideration However, the major authority for the ongoing evolution of GAAP lies with FASB and its seven-member board. It released approximately 170 official statements during its first 36 years of existence. The impact that those rulings and other types of FASB pronouncements have had on GAAP and the financial reporting process is almost impossible to overemphasize. In 2009, FASB combined all authoritative accounting literature into a single source for GAAP, which is known as the Accounting Standards Codification. By bringing together hundreds of official documents, FASB has made GAAP both more understandable and easier to access. Multiple sources have been woven together in a logical fashion so that all rules on each topic are in one location. As just one example, FASB recently made a number of critical changes in the method by which businesses report the costs and obligations that arise from certain types of employee pension plans. Previous rules had been the subject of much criticism by the investing community for failing to properly portray the financial impact of such plans. After much discussion, the members of the board came to believe that new rules were needed to improve the method by which organizations reported these obligations to decision makers trying to predict stock prices, cash dividends, and cash flows.

Indirect Channel

An indirect path between producer and consumer with intermediaries however, contains one or more intermediaries between the consumer and the producer. These intermediaries include distributors, wholesalers, agents, brokers, and retailers. Each type of distribution strategy has its advantages and disadvantages. A company must choose the strategy that best fits its product and business model and then find ways to manage distribution issues in order to be successful. Advantages: 1. There are no up-front costs if you are using an existing channel. 2. Intermediaries may have more knowledge of the markets. 3. Intermediaries can use their expertise to speed up the process. Disadvantages: 1. Must trust intermediaries to represent your brand and interact with customers 2. Intermediaries may develop sense of ownership over your products 3. An existing channel may carry competing products Intermediaries will be in control of the marketing efforts 4. Adds layers of cost and bureaucracy with more intermediaries

Foreign direct investments have many benefits including the following:

An inflow of capital can benefit the global and local economy. Invested capital goes to businesses with the highest potential for growth. The profit motive is color blind, and investments are made regardless of religion or politics. Investors can decrease their risk by diversifying (Amadeo, 2019). Investing in capital for firms can lead to growth and, subsequently, increased jobs in the host country

The European Union

An international organization of European countries formed after World War II to reduce trade barriers and increase cooperation among its members.

World Trade Organization (WTO)

An international organization that works at standardizing competitive market practices in conjunction with the internal laws of individual nations Their actions can be loosely summarized in three ways: they ensure that no agreements in place run counter to a competitive market, they regulate against strategic actions that may result in diminishing the competitive elements of a market., and they oversee mergers, acquisitions, joint ventures, and other strategic alliances to avoid consolidations that may be damaging to competitive markets.

Apple INC. VS Pepper

Antitrust court case in which a group of iPhone users have accused Apple of monopolistic practices via the App store

Foreign Currency

Any form of money in circulation in a different country

Artificial Intelligence (AI)

Any type of computer that engages in humanlike activities

Broadband

Any type of high-speed wired or wireless communication

Risks of Outsourcing and Reasons for Insourcing

As a general principle, functions that have the potential to interrupt the flow of product or service between a company and its customers are the riskiest to outsource. The second riskiest type of activity to outsource is one that affects the relationship between a company and its employees. Insourcing may be a preferred option in order to maintain control over quality and delivery of a product or service. Loss of control: Managers often complain about loss of control over their own process technologies and quality standards when specific processes or services are outsourced. When tasks previously performed by company personnel are given to outsiders over whom the firm has little or no control, quality may suffer, production schedules may be disrupted, or contractual disagreements may develop. If outsourcing contracts inappropriately or incorrectly detail work specifications, outsourcers may be tempted to behave opportunistically—for example, by using subcontractors or by charging unforeseen or unwarranted price increases to exploit the company's dependency. Control issues can also be exacerbated by geographic distance, particularly when the vendor is offshore. Monitoring performance and productivity can be challenging, and coordination and communication maybe difficult with offshore vendors. Companies also deal with loss of control over their intellectual property and patented technology when they outsource. This is a significant risk, and some countries do a better job of protecting a company's assets than others. Finding supply chain partners who are trustworthy is key to avoiding a product's sales being subverted by knockoffs (Bureau of International Information Programs, 2005). Losing control of information is especially risky in sensitive fields such as banking, data collection, and information management that deals with private information such as health and financial records. Information leaks in companies that handle government contracts and data can create serious national security risks and raise concerns over the control of national intelligence. Loss of innovation: Companies pursuing innovation strategies recognize the need to recruit and hire highly qualified individuals, provide them with a long-term focus and minimal control, and appraise their performance for positive long-run impact. When certain support services—such as information technology (IT), software development, or materials management—are outsourced, innovation may be impaired. Moreover, when external providers are hired for the purposes of cutting costs, gaining labor pool flexibility, or adjusting to market fluctuations, long-standing cooperative work patterns are interrupted, which may adversely affect the company's corporate culture. Loss of organizational trust: For many firms, a significant nonquantifiable risk occurs because outsourcing, especially of services, can be perceived as a breach in the employer-employee relationship. Employees may wonder which group or what function will be the next to be outsourced. Workers displaced into an outsourced organization often feel conflicted as to who their "real" boss is: the new external service contractor or the client company by which they were previously employed. Higher than expected transaction costs: Some outsourcing costs and benefits are easily identified and quantified because they are captured by the accounting system. Other costs and benefits are decision relevant but not part of the accounting system. Such factors cannot be ignored simply because they are difficult to obtain or because they require the use of estimates. One of the most important and least understood considerations in the make-or-buy decision is the cost of outsourcing risk.3 There are many other factors to consider in selecting the right level of participation in the value chain and the location for key value-added activities. Factor conditions, the presence of supporting industrial activity, the nature and location of the demand for the product, and industry rivalry should all be considered. In addition, such issues as tax consequences, the ability to repatriate profits, currency and political risk, the ability to manage and coordinate in different locations, and synergies with other elements of the company's overall strategy should be factored in.1 When firms cannot resolve their supplier problems, they find other suppliers to work with or they move the activities back in-house, which is a process called insourcing.2 The risk is that efficiency gains lead to lower quality or reliability.

Augmented and Virtual Reality

Augmented and virtual reality allows users to be placed inside a virtual world. Currently, the technology is mostly used by the creative industries, but it has value for other applications as well by decreasing production time and decreasing the cost of making reiterations of a prototype. The technology is available to make 360-degree imagery, a feat that would have taken days in the past, allowing smaller companies to produce higher quality content. Virtual reality is a solitary experience that requires the user to enter a virtual world. Augmented reality has a plethora of uses in the gaming, entertainment, and business worlds. The narrator cites one of the drawbacks as a person's unwillingness to remove the augmented or virtual reality glasses.

Which technique allows customers to store personal information such as credit card data in one list of records and maintain total ownership and control over such information?

Blockchain technology allows customers to save information in a continuous block or record for security purposes.

Some of the items listed in an AUP are obvious to most, others are not so obvious. Some examples are as follows:

Borrowing someone else's login ID and password is prohibited. Using the provided access for commercial purposes, such as hosting your business website, is not allowed. Sending an unsolicited email to a large group of people is prohibited. As with codes of ethics, violations of these policies have various consequences. In most cases, such as with a hosted Wi-Fi, violating the AUP will mean that you will lose your access to the resource. While losing access to Wi-Fi at Starbucks may not have a lasting impact, a university student getting banned from the university's Wi-Fi (or possibly all network resources) could have a large impact.

Why are bots on customer-facing websites and apps valuable for global companies?

Bots can perform simple data collection from customers and can even handle simple customer needs. The capabilities of bots is expanding all of the time, and their functionality can vary from business to business.

United Nations Environment Programme (UNEP)

Branch of the United Nations that deals specifically with worldwide environmental problems

Imports

Bringing goods or services into the country from abroad for the purpose of selling. Imports are defined as purchases of goods or services by a domestic economy from a foreign economy. The domestic purchaser of the good or service is called an importer.

Larger organizations tend to pursue traditional forms of funding in international business. This includes the following:

Cash—Companies use internally generated cash flows from retained earnings. With internal financing, companies use profits as a source of financing rather than distributing the profits to the owners or shareholders Loans—Bank loans are a form of debt, often with a relatively low cost of capital. Loans are granted over a given lending period and paid back in installments. In the case of bankruptcy, these debts are among the first repaid upon liquidation of assets (hence the lower risk and lower cost of capital). Bonds—Organizations can also issue bonds, which are another form of debt. Bonds are debt securities investors can purchase which will mature over time. The rate of return and time to maturity can vary. These are also lower costs of capital as they are paid out before equity in the case of a bankruptcy. Equity (shares)—Issuing shares (stocks) is another funding source, particularly for larger and publicly traded organizations. By issuing equity, organizations can essentially sell small fractions of organizational ownership as an asset for investors, who are betting on the success of the organization. These are riskier, most costly, and less reliable sources of income compared to debt. Although global equity and debt markets offer firms a new way to get funding—often at lower cost than U.S. markets—they are also complicated by foreign currency and exchange rates.

open government information regulations

Chinese regulation (2008) that establishes limited rules for government information disclosure and public participation

Integrated software suites

Combine several popular types of programs, such as word processing, spreadsheet, database, graphics presentation, and communications programs. Component programs are designed to work together.

Desktop publishing software

Combines word processing, graphics, and page layout software to create documents. It allows companies to design and produce sales brochures, catalogs, advertisements, and newsletters in-house. Desktop publishing software allows businesses to create their advertising materials and other materials and have them display exactly as they will be produced.

Wireless

Communication using radio frequencies

subsidiaries

Companies completely owned or controlled by a parent company

A company is reviewing how ethical consumerism is being addressed in the organization. It is hoping to improve its awareness of this factor and how it will influence future business decisions. How does this factor affect business decisions?

Companies must remember that their consumers may care about more than just the final product. Nearly half of North American consumers report punishing a company by not purchasing a product if they disagree with its manufacturing or other business practices.

Which globalization risk involves governments and the relationships between countries?

Political risk involves governments and the relationships betwee

Machine Learning Algorithms

Computer systems that automatically learn from experience instead of being explicitly programmed

Exascale

Computing system capable of at least one exaflop or a billion billion (i.e., a quintillion) calculations per second

guanxi (pronounced guan-shi)

Concept in China that describes a connection based on reciprocity which is loosely defined as a connection between two or more unequal parties that includes an exchange of favors. China is a relationship-based society, where relationships extend well beyond the personal side, also driving business. With guanxi, a person invests in relationships much like one would invest in capital. In a sense, it is akin to the Western phrase "You owe me one." When conducting business in China, businesses might need to seek out a relationship in order to gain access to more influential decision-makers. At its best, guanxi can help foster strong, harmonious relationships with corporate and government contacts. On the other hand, it can encourage bribery and corruption. Whatever the case, companies without guanxi will not accomplish much in the Chinese market. Many companies address this need by entering the Chinese market in a collaborative arrangement with a local Chinese company.

Antitrust Laws

Consumer protection policy used to limit unfair business practices related to competition and control of prices. These policies are known as antitrust laws and are based on one basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up. It is important to note that antitrust laws are also often referred to as competition laws or antimonopoly laws. Antitrust laws exist to safeguard the market from anticompetitive practices. Approximately 120 countries have antitrust policies, although the application of such laws differs significantly around the world.

A company sells products that many have reported on social media to be culturally insensitive, and sales have decreased significantly since the negative publicity began. How are consumers responding to the publicity?

Consumers who do not believe the product is made in alignment with their values may not buy the product. Not buying the product is considered voting with one's wallet.

Currency Futures Contracts - derivative currency instrument used to hedge exchange rate risk.

Contracts that require the exchange of a specific amount of currency at a specific future date and at a specific exchange rate. A futures contract establishes a binding agreement between a buyer and seller to purchase or sell a certain amount of currency at a later date based on an agreed upon currency value. Currency futures contracts are contracts that require the exchange of a specific amount of currency at a specific future date and at a specific exchange rate. Futures contracts are similar but not identical to forward contracts.1 A futures contract is a standardized form that is traded on the exchange market, whereas a forward contract includes custom agreements between parties. For example, an Italian vineyard sells its grapes to the US and is afraid of the potential appreciation of the euro. In this case, they can lock the exchange rate for Euro/Dollar through a futures contract, mitigating risks from real-time fluctuations of the exchange rate.

Worst Forms of Child Labour Convention, 1999

Convention (1999) that aimed to eliminate all practices of child slavery or those similar to slavery

The Maritime Labour Convention (MLC) 2006

Convention (2006) that set out a bill of rights for all seafarers

Domestic Workers Convention, 2011

Convention (2011) aimed at protecting domestic workers from abuse and exploitation

Multinational Corporations

Corporations that move resources, goods, services, and skills across national boundaries without regard to the country in which their headquarters are located are multinational corporations.

Company A is located outside the home country of Company B. Company B has acquired Company A with the intent of controlling and managing Company A's assets. Which practice is being used by Company B?

Correct! Investments made by international companies with the intention of controlling those assets in a foreign market represents foreign direct investment.

Which globalization risk involves the societal expectations and standards of an organization operating in a foreign environment?

Cultural risk is related to companies' operating in a different sociocultural environment.

There are three types of pegged float regimes:

Crawling Bands, Crawling Pegs, and Pegged with Horizontal Bands

Crawling Bands

Crawling bands: The market value of a national currency is permitted to fluctuate within a range specified by a band of fluctuation. This band is determined by international agreements or by a unilateral decision by a central bank. The bands are adjusted periodically by the country's central bank, generally in response to economic circumstances and indicators.4

Crawling Pegs

Crawling pegs: A crawling peg is an exchange rate regime, usually seen as a part of fixed exchange rate regimes, that allows gradual depreciation or appreciation in an exchange rate. The system is a method to fully utilize the peg under a fixed exchange regime and the flexibility under a floating exchange rate regime. The system is designed to peg at a specific value but, at the same time, to "glide" in response to external market uncertainties. In dealing with external pressure to appreciate or depreciate the exchange rate (such as interest rate differentials or changes in foreign exchange reserves), the system can meet frequent but moderate exchange rate changes to ensure that the economic dislocation is minimized.

Graphics and presentation programs

Create tables, graphs, and slides for customer presentations and reports. They can add images, video, animation, and sound effects.

Which strategy is used by governments to limit the foreign direct investment in a country?

Creating foreign ownership restrictions in the country. Many countries restrict the percentage of ownership by foreign investors.

Which source permits a high number of funders to each participate with a small amount of capital and cumulatively contribute to a new venture?

Crowdsourcing is a model in which finances are gathered from a large group of funders. It divides investments between participants to achieve a cumulative result.

Spot Rate

Currency exchange rates that require immediate settlement with the delivery of the traded currency. which is a real-time exchange rate. However, international transactions cannot be settled immediately. The waiting period before receiving the final payment involves currency exchange rate fluctuations, increasing risk to global business.

The four main effects that the Fourth Industrial Revolution will have on business are the following:

Customer expectations will increase, especially on how their needs will be met. Physical products and services will be enhanced with digital capabilities, increasing their value. Collaboration will be required to analyze the vast amounts of data gathered from customer experiences, data-based services, and asset performance. Global platforms will mean that the form of an organization may need to be reconsidered.

human resources (HR) management (HRM)

Department within an organization responsible for employment issues The strategic approach to HRM—strategic HRM (SHRM)—means going beyond administrative tasks such as payroll processing. Instead, managers need to think more broadly and deeply about how employees will contribute to the company's success.

Which advantage is an outcome of exporting products to a developed country?

Developed countries have better established infrastructures that make it easier to distribute products.

Which action is used by companies wishing to avoid working with vendors who use sweatshops?

Developing and imposing a company internal code of conduct for vendor labor practices A code of conduct for vendors is contractually imposed, and often publicly posted, to ensure the reputation of the company is protected.

Direct Distribution Strategy

Distribution strategy that reaches customer directly without any intermediaries; distribution channel and distribution strategy are often used interchangeably the producer markets the product directly to the consumer and the consumer buys directly from the producer, such as when you buy an apple from a local farmer.

Indirect Distribution Strategy

Distribution strategy that uses intermediaries to reach customers; distribution channel and distribution strategy are often used interchangeably however, contains one or more intermediaries between the consumer and the producer. These intermediaries include distributors, wholesalers, agents, brokers, and retailers. Each type of distribution strategy has its advantages and disadvantages. A company must choose the strategy that best fits its product and business model and then find ways to manage distribution issues in order to be successful.2

Documentary Training

Documentary training is textbook and classroom learning, which focuses on looking at differences between cultures and is a key part of both low-rigor and high-rigor training approaches. Differences are examined because they are potential friction points that create misunderstandings and hurt feelings. You have learned in this course some of the many cultural differences involving common human interactions, such as greetings, gender relations, and the giving of gifts. There are many excellent sources of information on specific cultural traditions and norms of various countries, but multinational businesses often arrange for professional cross-cultural trainers to provide onsite lectures, videos, or workshops on cultural differences.

An employee has assumed an expatriate role and is studying textbooks to learn about cultural differences in order to function smoothly in the new setting. Which helpful secondary source training is the expatriate using?

Documentary training uses traditional methods such as textbooks and the classroom environment to focus on educating expatriates about cultures. The expatriate is studying textbooks to learn about cultural differences in order to function smoothly in the new setting.

Which agreement was formalized in 1993 to create a political and economic union to help a large group of countries cooperate and coordinate key aspects of their economic policy?

EU fits the description and has the goals described.

Free Trade Agreement

Economic agreement between countries to allow free trade between members

Which globalization risk refers to the level of financial stability in a country?

Economic risk involves the level of financial stability in a country.

Embargos

Embargoes are prohibitions on trade that ban imports or exports and may apply to certain categories of products or strictly to goods supplied by certain countries. Embargos, which are similar to economic sanctions, generally involve a direct military or air blockage. It is a complete prohibition of trade with a specific country, state, or region. Embargoes are legal methods to block trade, unlike blockades that are considered acts of war. They can vary in restriction from a limitation in trade, imposition of a tariff, to complete blockage of trade. A country that has its trade embargoed usually needs to be self-sufficient or develop a closed economy, also called autarky.

What does business ethics implicitly regulate?

Employers want employees to self-regulate so that when a stimulus appears they will take proper action in the interest of everyone involved, either directly or indirectly.

Crowdsourcing

Enlisting the help of a large number of people, often via the internet

Enterprise resource planning (ERP)

Enterprise resource planning (ERP) connects departments and ensures that everyone has access to the data necessary to complete their tasks. Enterprise resource planning (ERP) is a type of software solution design to integrate all a company's data. ERP would integrate data from human resources (HR), employee data, sales information, and development figures.

A company is beginning to operate on a more complex global scale and needs a seamless integration of all the data the business uses. This integration must include data from human resources (HR), employee data, sales information, and development figures. Which type of software solution should be used for this purpose?

Enterprise resource planning (ERP) is a type of software solution design to integrate all a company's data. ERP would integrate data from human resources (HR), employee data, sales information, and development figures.

Which governmental entity was created to provide regulatory authority regarding pollution by industry?

Environmental Protection Agency The agency was created in 1970 to monitor industry and industry's environmental practices. The agency is not under any cabinet-level department.

A company that released a new vehicle marketed as being environmentally friendly is found to have cheated when testing the vehicle's total emissions. The company would like to repair damage from the negative publicity by changing its image and catering more to ethical consumers. Which action should the company take to reach this goal?

Establishing a new image and leader can help consumers trust the company again after practices have changed.

Conflict of Interest (COI)

Ethical challenges in which multiple interests are at conflict with one another

A company's chief executive officer (CEO) emphasizes to other executives in the foreign country's joint venture that the CEO's culture should take precedence over other cultural systems since it is superior. Which type of viewpoint is the CEO demonstrating regarding culture?

Ethnocentrism is the viewpoint that one's culture is superior to others and should be used as a measure. The CEO is demonstrating this viewpoint in the scenario.

Sources of Funding: for Exporters

Exporters need funding to make or acquire the products they will export. Export companies use many of the same funding methods as other corporate investments, but exporters have and need additional options. (Commercial banks deem export funding riskier than standard domestic business loans). One method is to finance production by using contracts as collateral. Financing against collateral is called secured financing, and it is the most common method of raising new money. Banks will advance funds against payment obligations, shipment documents, or storage documents.

Groupware

Facilitates collaborative efforts of workgroups so several people in different locations can work on one project. It supports online meetings and project management (scheduling, resource allocation, document, creation, email distribution, etc.).

Ethics

Field of philosophy that deals with the morality of what is considered right and wrong

Financial or Economic Risk - Global Risk Type

Financial or economic risk in a foreign country is analogous to operating and financial risk at home. The volatility of a country's macroeconomic performance and the country's ability to meet its financial obligations directly affect performance and the risk to long-term investments. A nation's currency competitiveness and fluctuation are important indicators of a country's stability—both financial and political—and its willingness to embrace changes and innovations. In addition, financial risk assessment should consider such factors as how well the economy is being managed, the level of the country's economic development, working conditions, infrastructure, technological innovation, and the availability of natural and human resources. International operations also have the additional financial risks of dealing with foreign currencies. A common type of financial risk is currency risk, where there is a change in the exchange rate that will adversely affect the company. Another exchange rate issue for multinational companies is that when they consolidate their subsidiaries' financial statements, they must translate all the currencies into the currency used by the parent company in its home country. There are two methods that a company can use for currency translation —the current-rate method or the temporal method.

Subsidiary

Firms may want to have a direct operating presence in a foreign country, with a company completely under their control. To achieve this, the company can establish a new, wholly-owned subsidiary from scratch (also called a Greenfield Venture). This is also a form of foreign direct investment. For example, Nike has several subsidiaries in India, the Netherlands, Italy, and Japan. Establishing or purchasing a wholly owned subsidiary requires the highest commitment on the part of the international firm, because the firm must assume all of the risk—financial, currency, economic, and political Gain local market knowledge; can be seen as insider who employs locals; maximum control. High cost, high risk due to unknowns, slow entry due to setup time. The subsidiary is a company owned or controlled by a parent company.

What is an advantage of regional economic integration?

Flexibility on labor movement develops job opportunities. Economic integration often removes labor movement restrictions, which help increase job opportunities.

Collectivist

Focused on the good of the group or society over the individual

Types of Funding for Small International Businesses

For small organizations, debt and equity are often accompanied by investments from venture capital (VC) and crowdsourcing(particularly in the start-up world). While smaller organizations have access to debt as well, they generally have less collateral available and therefore very little financial leverage. In these situations, procuring funding for a global venture is exceptionally difficult.

Foreign Direct Investment

Foreign direct investment (FDI) refers to an investment in or the acquisition of foreign assets with the intent to control and manage them. Companies can make FDIs in several ways. They can purchase the assets of an international company, invest in the company through new capital, or participate in a joint venture with a foreign company, which typically involves an investment of capital or know-how. FDI is primarily a long-term strategy. Companies investing in foreign enterprises usually expect to benefit through access to local markets and resources, often in exchange for expertise, technical know-how, and capital. A country's FDI can be both inward and outward. As the terms would suggest, inward FDI refers to investments coming into the country, and outward FDI are investments made by companies from that country into foreign companies in other countries. The difference between inward and outward FDI is called the net FDI inflow, which can be either positive or negative.1

Which economic actors are suppliers of U.S. dollars?

Foreign firms exporting to the U.S. These firms will earn U.S. dollars but will need their own currency to pay the workers based in their country; thus they are suppliers of U.S. dollars and demanders of their home currency.

Copyright

Form of protection provided by the laws of the United States to the authors of "original works of authorship," including literary, dramatic, musical, artistic, and certain other intellectual works

Performance Evaluation

Formal processes for evaluating an employee

The Fourth Industrial Revolution

Fourth Industrial Revolution has been building on the third and is evolving at an exponential, not linear, pace. Mobile devices could connect billions of people with the capability to provide almost unlimited processing power, storage capabilities, and access to knowledge. The strength of this network of connected human intellect is multiplied by advances in AI, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing

Five Stages of Economic Integration

Free Trade Area, Customs Union. Common Market, Economic Union, and Political Union

Free Trade

Free trade is a policy by which governments do not discriminate against exports and imports. There are few or no restrictions on trade, and markets are open to both foreign and domestic supply and demand. Free trade is beneficial to society because it eliminates import and export tariffs, increasing efficiency. Restricted trade affects the welfare of society because although domestic producers experience increases in surplus and additional revenue, the loss faced by consumers and other producers is greater than any benefit obtained. When a country trades freely with the rest of the world, it should theoretically produce a net gain for society, increasing social welfare. Free trade policies consist of eliminating export tariffs, import quotas, and export quotas, all of which cause more losses than benefits for a country. With free trade in place, the producers of the exported goods in exporting countries and consumers in importing countries all benefit.2 The promotion of free trade is a key element of the WTO. When a foreign supplier can produce a product, such as steel, at a lower price, domestic suppliers will need to offer the same price to compete in the domestic market as they face global competition due to free trade. At this low price, the quantity produced by the domestic steel producer is very low; however, the quantity demanded by the consumer will be high. The gap will be filled by imported steel. With free trade, the domestic consumer wins because they can buy more steel at a lower price. Foreign producers also win because they can sell more steel. The domestic steel producer sells much less steel at a much lower price. Selling less steel at a lower price decreases revenue for the domestic producers. The effects of decreased revenue will move down to the workers in the steel mills, as their wages and jobs decline. Free trade increases the available variety of goods for consumers to choose from and economies of scale decrease the average cost of these goods through specialization

Which currency contract requires a specific exchange rate and quantity of money on a subsequent date?

Futures contracts oblige an exchange of a certain amount of currency on a defined date and rate.

Which U.S.-based set of accounting principles was created to establish rules and regulations for financial accounting?

Generally Accepted Accounting Principles (GAAP) were created in the United States to deliver financial accounting direction and regulation.

Worldwide Internet Access

Getting the internet to the people who need it the most in remote areas of developing countries is still a challenge, but companies such as Google and Facebook are working on it. Google is developing a balloon, called Loon, to offer cheaper cell coverage from the stratosphere. These balloons carry communications equipment, solar panels, and batteries. Google has worked with the National Oceanic and Atmospheric Administration (NOAA) to map winds and forecasts to carry the balloons. The inner envelope of the Loon is filled with helium, and the outer ingests or expels air to help with navigation. The initiative started in 2008, and its goal is to try to keep the balloons aloft for over 100 days. Facebook has launched a similar project using stratospheric drones instead of balloons. SpaceX hopes to have 12,000 satellites in place by the year 2025 to provide satellite-based broadband

Challenges of Foreign Direct Investment:

Governments are careful not to allow foreign ownership of strategically important industries as this could lower the competitive advantage of the nation. Foreign investors could also take advantage of the company they are investing in,take away all valuable assets, and then leave the country.

Global Strategic Rivalry Theory

Global strategic rivalry theory emerged in the 1980s and was based on the work of economists Paul Krugman and Kelvin Lancaster. Their theory focused on multinational corporations and their efforts to gain a competitive advantage against other global firms in their industry. Firms will encounter global competition in their industries. To prosper, they must develop competitive advantages. The critical ways that firms can obtain a sustainable competitive advantage are called the barriers to entry for that industry. The barriers to entry refer to the obstacles a new firm may face when trying to enter into an industry or new market. Focuses on multinational; corporations. The global strategic rivalry theory focused on multinational corporations and their efforts to gain a competitive advantage against other global firms in their industry. Global Strategic Rivalry Theory focuses on companies' efforts to gain competitive advantages by setting up barriers to entry to new firms by going global.

Global Risk Types

Globalization risk can be of a political, legal, sociocultural, or financial-economic nature.

Country A has been criticized by other countries for giving generous tax credits to its corn farmers, which enables the country's farmers to sell corn on the international markets for cheaper than all other countries. Which term is used by other countries to describe this practice?

Government Subsidies The farmers are getting payment in the form of tax credits. This creates an unfair advantage to the farmers of Country A.

Government participation represents direct governmental involvement in international trade or trade impediments that stem from governmental procedures and controls. Some examples include the following:

Government procurement programs & Bureaucratic delays

A company's chief executive officer (CEO) wants to expand the company into China and is reviewing the Chinese word guanxi, the basis of all business in that country. Which English meaning must the CEO understand in regards to this Chinese concept?

Guanxi is based on relationship building, which can be good or bad. The Western equivalent is "You owe me one."

Ethnocentric:

HR strategy of hiring only people from the home country for key positions in foreign subsidiaries The company uses the same HR policies and practices in its subsidiaries as in the parent company. Leadership roles and key positions are filled by expatriates from the home country. The focus is on top-down decisions from the home office. This approach is used when the company does not trust the abilities or training of the local employees or has a biased view of foreign workers. Historically, the Toyota company of Japan was known for its ethnocentric approach to management, but the company has adapted in recent years to become more polycentric. Decisions are made at the home office. Expatriates hold key positions in the field. The company has a traditional top-down culture; the company does not trust the abilities or training of the foreign workers. The company maintains control and consistency of product quality and messaging; it simplifies processes. The decisions may not reflect the needs of the foreign market or workplace; lack of diversity may discourage employee motivation; a colonial mentality can develop. In the ethnocentric approach, leadership positions are filled by expatriates from the home country. There is little diversity and movement among employees.

Polycentric:

HR strategy that gives local hiring control to foreign subsidiaries Each subsidiary controls its own HR policies and practices. The focus is on each subsidiary as an autonomous business. Leadership roles and key positions are staffed by local professionals who can be immediately effective without the adjustment period needed for by someone new to the culture. This approach is used when the company values efficiency and respects the talents and education of the host country's workforce. The Siemens company embodies the polycentric approach with its attitude about hiring local talent. Barbara Kux, chief sustainability officer at Siemens, has said, "I have never been disappointed by hiring local, but I have been more disappointed with expats" Decisions are made at the local level. Locals hold key positions in the field. The company does not believe a one-size-fits-all approach will succeed; the company trusts the skills and training of the foreign workers. The local employees are more engaged; the needs of the local office are addressed; there is more flexibility to adjust to changing local conditions. There is the potential for overlapping efforts or dual demands for shared resources. In the polycentric approach, subsidiaries in each country control their own HR policies and practices. There is little diversity and movement among employees.

Geocentric

HR strategy that takes a whole-world view of the company, hiring the best people for positions regardless of location. Parent company and subsidiaries work together to create an integrated worldwide HR system that allows for differences but shares resources across the organization. Leadership positions are filled by the best employees worldwide based on a meritocracy rather than on nationality. There is more fluid movement among employees, which creates diversity in the workforce. This approach is used when the company prioritizes quality and talent regardless of its origin (Deters, 2017). The global banking corporations, such as HSBC, often use this model, particularly in the financial capitals of the world. Decisions are made at the home office but with input from the field. Mix of expatriates and locals holds key positions throughout the company. The company has a global perspective and tries to integrate people and divisions from around the world in order to work with the best talent. The company and its subsidiaries coordinate and cooperate as an integrated organization. Higher travel costs and investment in skills training as executives travel more.

A coffee company received international criticism for an employee negatively responding towards a customer. The response was said to be racially motivated. The company needs to take swift action to improve how all employees in the organization are viewed by ethical consumers. Which course of action should the company take to meet this goal?

Have employees attend sensitivity training This is a solution that addresses the entire company and does not cause harm to any employees for any mistakes.

Cybersecurity

Having remote workers access company data from across the country brings up concerns about cybersecurity. Companies are providing restrictions on how data can be accessed and are exploring next-generation security tools such as blockchain technology Blockchains provide an opportunity for customers to store their information such as credit card data in one block and maintain total ownership and control over it. The person could then use biometrics such as a fingerprint to authorize payment from their credit card (Johnson, 2018). These advances in security are required as the boundaries between technology and biology begin to blur even more, and maintaining privacy becomes an even more significant concern than it is today.

Outsourcing

Hiring staff or business outside the company to complete business activities Outsourcing can offer compelling strategic and financial advantages including lower costs, greater flexibility, enhanced expertise, greater discipline, and the freedom to focus on core business activities. Outsourcing is the practice of one company hiring another company to handle business activities that typically would have been completed by in-house staff. By outsourcing, companies can turn over business activities to those who have more expertise or shift production to areas that have lower costs. Outsourcing has risks and does not always work out. Outsourcing may not be effective with some business activities, such as human resources or customer relations, so businesses turn to insourcing, which is keeping or returning responsibility for those activities to in-house staff.

The US and EU follow which accounting standard?

Historically, countries have followed different accounting standards. If different accounting standards are used, however, it is difficult for investors or lenders to compare two companies or determine their financial condition. U.S. firms and any listed on a U.S. stock exchange must prepare financial statements in accordance with U.S. GAAP standards. Firms based in the European Union (EU) follow standards adopted by the IASB known as International Financial Reporting Standards (IFRS).

Organizational ethics

How an organization ethically responds to an internal or external stimulus

International Accounting Standards Board (IASB), known formally as International Financial Reporting Standards(IFRS)

IASB: The International Accounting Standards Board (IASB) is the major body responsible for creating international standards of accounting. An independent group that oversees the development and revision of the IFRS A collection of accounting principles used through much of the world outside the United States. known formally as International Financial Reporting Standards(IFRS), also exist and are now used in numerous countries. The IASB is the major entity proposing international standards of accounting. Originally formed in 1973 as the IASC and renamed the International Accounting Standards Board in 2001, the IASB is an independent agency that develops accounting standards known as international financial reporting standards (IFRS). Adherence to the IASB's standards is voluntary, but many countries have mandated the use of IFRS. The IASB is composed of 15 representatives from professional accounting firms from many countries. These board members formulate the international reporting standards. For a standard to be approved, 75% of the board members must agree. Often, getting agreement is difficult given the social, economic, legal, and cultural differences among countries. As a result, most IASB statements provide two acceptable alternatives. Two alternatives are not as solid or straightforward as one, but it is better than having a dozen different options. The primary reason for adopting one standard internationally is that if different accounting standards are used, it is difficult for investors or lenders to compare the financial health of companies located in different countries. In addition, if a single international standard is used, multinational firms will not have to prepare different reports for the different countries in which they operate. Accounting standards can be complex, and this makes modification of standards difficult. In addition, differing practices among various nations add to the complications of a unified accounting format. For example, in the United States and Great Britain, individual investors provide a substantial source of capital to companies, so accounting rules are designed to help individual investors. In contrast, the tradition in Switzerland, Germany, and Japan is for companies to rely more on banks for funding. Companies in these countries have a tighter relationship with banks. This means that less information is disclosed to the public. It also results in accounting rules that value assets conservatively to protect a bank's investment. In other countries, the government steps in to make loans or invest in companies whose activities are in the "national interest." Finally, accounting rules in China follow neither IFRS nor GAAP, which makes it hard for investors to gauge the true value of a company (McIntyre, 2007). To address this issue, some large Chinese companies report results in both Chinese accounting standards and the IASB's standards. The two accounting standards can show quite different results for the same company, which is why convergence proponents advocate using one global accounting standard. On the one hand, having to adhere to GAAP rules as well as IFRS rules creates extra labor and paperwork for multinational firms. For example, a U.S. company seeking to raise funds in Germany has to prepare a financial report according to IFRS accounting rules as well as GAAP rules. Further problems arise when different country accounting rules make the financial statements look different. If the same transaction is accounted for in different ways based on different country accounting rules, the comparability of financial reports is undermined.2

ICT in Health and Education

ICT is used in the education sector to improve access to education and provide quality teaching and learning and for educational planning and management. Using technology in education fosters a student-centered instead of a teacher-centered environment. It is also used to promote online learning and the sharing of ideas. Mobile phones can be used to teach English and literacy.3 Massive online open courses (MOOCs) provide a world-class education to anyone with an internet browser. According to the World Health Organization, 15% of the world's population has a disability. Out of these 600 million people, 25% are in developing countries. ICT can improve the lives of people with disabilities.3 It can also bring healthcare in the form of online medical care to regions that do not have ready access to healthcare professionals. Cellular phone applications and sensors can be used to monitor parameters of health and disease.

Tariffs can be classified based on what is being taxed:

Import Tariffs & Export Tariffs

A company is in a geographic area with low literacy levels, and the surrounding population does not understand the benefits of a computer and the internet. Due to this lack of information, the individuals are not able to use the digital technology to its full potential, and this is negatively impacting the company's business plan. Which type of divide must this company manage?

If an individual does not know how to fully access the internet and the economic benefits it can bring, then a usability divide occurs.

What is a benefit of creating a regional economic integration agreement?

Improved financial growth Trade agreements create more growth opportunities for countries to trade among themselves as barriers to trade and investment are removed.

What is a potential influence of the existence of multinational corporations (MNCs) on international relations?

Improves relations between countries where the MNC operates An MNC improves relations between countries since they need to cooperate to trade.

Absolute Advantage

In 1776, Adam Smith questioned the leading mercantile theory of the time in The Wealth of Nations. Smith offered a new trade theory called absolute advantage, which focused on the ability of a country to produce a good more efficiently than another nation. Smith reasoned that trade between countries should not be regulated or restricted by government policy or intervention. He stated that trade should flow naturally according to market forces. In a hypothetical two-country world, if country A could produce a good cheaper or faster (or both) than country B, then country A had the advantage and could focus on specializing in the production of that good. Smith's theory reasoned that with increased efficiencies, people in both countries would benefit and trade should be encouraged. His theory stated that a nation's wealth should not be judged by how much gold and silver it had but rather by the living standards of its people. A country has an absolute advantage in producing a good over another country if it uses fewer resources to create that good. Absolute advantage can be the result of a country's natural endowment. For example, Saudi Arabia is endowed with underground oil supply. Producing oil in other countries can require considerable exploration and costly technologies for drilling and extraction—if indeed they have any oil at all. Then Adam Smith's absolute advantage in which a country exports the goods it can make more efficiently or more cheaply. A country has an absolute advantage if it can produce a good more efficiently or cheaper than another country. Everyone benefits from more affordable production costs and specialization.

The digital divide in three stages:

In 2006, web usability consultant Jakob Nielsen wrote an article that got to the heart of understanding the digital divide. In his article, he breaks the digital divide up into three stages: the economic divide, the usability divide, and the empowerment divide. The economic divide is what many call the digital divide. The economic divide is the idea that some people can afford to have a computer and internet access while others cannot. The price of hardware has continued to drop, and, at this point, access to digital technologies, such as smartphones, is much less expensive than in the past.1 For example, the price of personal computers has fallen by 99.9% since January 1980, and computer software is 0.7% of its price in 1980 (Dunne, 2017). Nielsen asserts that for all intents and purposes, the economic divide is a debatable point, and resources should not be used to solve it. An economic divide is the fact that the computer hardware may cost more than a person can afford. This problem is not mentioned in this scenario. Usability is concerned with the fact that technology remains so complicated that many people could not use a computer, even if they were given one. Moreover, for those who can use a computer, accessing all the benefits of having one may be beyond their understanding. Included in this group are those with low literacy and seniors. According to Nielsen, even though resources are available to help people understand how to use technology, there is little profit in doing so. If an individual does not know how to fully access the internet and the economic benefits it can bring, then a usability divide occurs. Empowerment is the most difficult to solve. It is concerned with how people use technology to empower themselves. Very few users genuinely understand the power that digital technologies can give them. In his article, Nielsen explains that his and others' research has shown that very few users contribute content to the internet, use advanced search, or can even distinguish paid search ads from organic search results. Many people often limit what they can do online by accepting the basic, default settings of their computer and not work to understand how they can truly be empowered. This type of divide is an increased power one receives when fully accessing the internet. Empowerment occurs when people contribute via the internet content.

A chief executive officer (CEO) of a Scandinavian company sought to expand operations in Japan through a joint venture. When the CEO asked the Japanese business owner whether she was committed to the venture, the business owner responded with a flat-toned "yes." The outcome the CEO expected did not happen, and the joint venture failed. What was the CEO's misinterpretation in this communication?

In Japan, the word "yes" can mean things other than agreement, including "maybe" or "I understand you."

A company has decided that a foreign direct investment should be made during the next quarter to strengthen the organization. Which method should be used for this purpose?

In a greenfield venture, a company creates a subsidiary in another nation from the beginning. International markets are commonly entered through this means, and subsidiaries are considered foreign direct investment strategies.

Country Similarity Theory

In contrast to classical, country-based trade theories, the category of modern, firm-based theories emerged after World War II and was developed in large part by business school professors, not economists. The firm-based theories evolved with the growth of the multinational company (MNC). The country-based theories could not adequately address the expansion of either MNCs or intra-industry trade, which refers to trade between two countries of goods produced in the same industry. For example, Japan exports Toyota vehicles to Germany and imports Mercedes-Benz automobiles from Germany.1 Unlike the country-based theories, firm-based theories incorporate other product and service factors, including brand and customer loyalty, technology, and quality, into the understanding of trade flows. Swedish economist Steffan Linder developed the country similarity theory in 1961. He tried to explain the concept of intra-industry trade. Linder's theory proposed that consumers in countries that are in the same or similar stage of development would have similar preferences. In this firm-based theory, Linder suggested that companies first produce for domestic consumption. When they explore exporting, companies often find that markets that look similar to their domestic one, in terms of customer preferences, offer the most potential for success. Linder's country similarity theory then states that most trade in manufactured goods will be between countries with similar per capita incomes, and intra-industry trade will be standard. This theory is often most useful in understanding trade in goods where brand names and product reputations are important factors in the buyers' decision-making and purchasing processes.1 *** Proposes intra-industry trade will be started. The country similarity theory states that intra-industry trade will be standard and that most trade in manufactured goods will be between countries with similar per capita incomes. Country similarity theory is a firm-based theory used to explain intra-industry trade. It states consumers in countries with similar stage of development would have similar preferences on goods. Companies are more likely to succeed if they export products to a similar country.

Facebook and Privacy

In early 2018, Facebook acknowledged a data breach affecting 87 million users. The app "thisisyourdigitallife," created by Global Science Research, informed users that they could participate in a psychological research study. About 270,000 people decided to participate in the research, but the app failed to tell users that the data of all their friends on Facebook would be automatically captured as well. All this data theft took place prior to 2014, but it did not become public until four years later.1 In 2015, Facebook learned about Global Science Research's collection of data on millions of friends of the users in the research. Global Science Research agreed to delete the data, but they had already been sold to Cambridge Analytica, who used them in the 2016 U.S. presidential campaign, the United Kingdom's Brexit vote, and other elections around the world. The ensuing firestorm resulted in Mark Zuckerberg, CEO of Facebook, testifying before the U.S. Congress in 2018 on what happened and what Facebook would do in the future to protect users' data. Congress is working on legislation to protect user data in the future, a prime example of technology advancing faster than the laws needed to protect users.1

Employees will also need training in all the nonverbal aspects of language. Consider the following additional examples:

In the United States, people place their palm upward and use one finger to call someone over. In Malaysia, this is only used for calling animals. In much of Europe, calling someone over is done with palm down, making a scratching motion with the fingers (as opposed to the one finger in the United States). In Columbia, soft handclaps are used. In many business situations in the United States, it is common to cross your legs, pointing the soles of your shoes to someone. In Southeast Asia, this is an insult since the feet are the dirtiest and lowest part of the body. Spatial differences are an aspect of nonverbal language as well. In the United States, people tend to stand 36 inches (an arm length) from people, but in Chile, for example, the space is much smaller. Proper greetings of business colleagues differ from country to country. The amount of eye contact varies. For example, in the United States, it is normal to make constant eye contact with the person you are speaking with. But in Japan, it would be rude to make constant eye contact with someone with more age or seniority.

Heckscher-Ohlin Theory (Factor Endowment Theory)

In the early 1900s, two Swedish economists, Eli Heckscher and Bertil Ohlin, focused their attention on how a country could gain a comparative advantage by producing products that used factors that were in abundance in the country. Their theory is based on a country's natural resources and technology—land, labor, and capital, which provide the funds for investment in plants and equipment. They determined that the cost of any factor or resource was a function of supply and demand. Factors that were in abundant supply relative to demand would be cheaper; factors in high demand relative to supply would be more expensive. Their theory, also called the factor endowment theory, stated that countries would produce and export goods that required resources or factors that were in abundant supply and therefore cheaper. In contrast, countries would import goods that required resources that were in short supply but higher in demand. For example, China and India are home to cheap, large pools of labor. Hence, these countries have become the optimal locations for labor-intensive industries such as textiles and garments. Is based on a country's natural resources. The factor endowment theory stated that countries would produce and export goods that required resources or factors that were in abundant supply. Heckscher-Ohlin which states that competitive advantage comes from differences in natural resources. Heckscher-Ohlin theory states that comparative advantage arises from having a relative excess of the factors of production such as labor, land, or capital.

Which currency contract establishes a specific rate at the beginning of the contract for delivery at a future date?

In the forward contract, a firm agrees to pay a specific rate at the beginning of the contract for delivery at a future date.

A company wants to move production offshore to a low-skilled labor company because the company's machines will make the product and it only needs these low-skilled operators to work the machines. Which advantage of outsourcing does the company seek to take?

In this advantage, the company seeks another to produce the products in a place of lower labor cost. The company in the scenario is seeking these low-skilled operators to reduce costs.

A country that values spontaneity and freedom to satisfy human desires provides its citizens business opportunities to prosper in these areas. Which of Hofstede's cultural dimensions is the country exhibiting?

Indulgence This dimension seeks to emphasize pleasure and spontaneity. Because the culture focuses on self-enjoyment, people become entrepreneurial in how to achieve pleasure. The United States rates high on this dimension.

Secondary sources

Information that has been passed on from an original source or interpreted offer explanations and interpretations of information, which is useful for learning about new topics.2 https://travel.state.gov/content/travel/en/international-travel/while-abroad.html https://www.trade.gov/export-solutions https://www.hofstede-insights.com/product/compare-countries/ https://www.international.gc.ca/global-affairs-affaires-mondiales/home-accueil.aspx?lang=eng https://www.internationalcitizens.com/living-abroad/

Trade Secret

Intellectual property that is kept private

Which set of standards establish international accounting regulations and reporting expectations?

International Financial Reporting Standards (IFRS) is a set of standards by the International Accounting Standards Board (IASB) that establishes international accounting standards and reporting expectations.

Types of Funding for Large International Businesses

International businesses have the same funding sources as most organizations. For larger organizations this primarily revolves around debt and equity.

Several strategies are available to companies considering foreign investment as a way of growing their business:

International expansion is achieved through exporting, licensing, franchising, strategic alliances, international joint ventures, acquisitions, and establishing new, wholly owned subsidiaries, also known as greenfield ventures.

What Is Privacy?

Just as there are AUPs for individual users, companies have responsibilities to protect the users of their site on a local, national, and global scale. The term privacy has many definitions, but for purposes here, privacy will mean the ability to control information about oneself. The ability to maintain user privacy has eroded substantially in the past few decades due to information systems.1

The Miniwatts Marketing Group, the host of Internet World Stats, sought in 2018 to further clarify the meaning of the digital divide by acknowledging that the divide is more than just who does or does not have access to the internet. In addition to Nielsen's economic, usability, and empowerment divides, this group sees the following concerns:

Lack of computer education works to the disadvantage of children with lower socioeconomic status. Greater use of the internet can lead to healthier democracies, especially for participation in elections. Greater use of the internet in developing countries could provide a shortcut to economic advancement. Using the latest technology could give companies in these countries a competitive advantage.

Sarbanes-Oxley Act of 2002

Law aimed at increasing the level of ethical transparency within corporate America

Horizontal Laws

Laws that govern disputes in a horizontal structure

Which globalization risk refers to the adherence to laws of countries in which an organization may operate?

Legal risk involves adherence to the laws of countries in which an organization may operate.

Legal Risk - Global Risk Type

Legal risk is risk that multinational companies encounter in the legal arena in a country. It is often closely tied to political risk. An assessment of legal risk requires analyzing the foundations of a country's legal system and determining whether the laws are properly enforced. Legal risk analysis, therefore, involves becoming familiar with a country's enforcement agencies and their scope of operation. As many companies have learned, numerous countries have written laws protecting a multinational's rights, but these laws are rarely enforced. Entering such countries can expose a company to a host of risks, including the loss of intellectual property, technology, and trademarks.

government subsidies

Money paid by the government to help an organization or industry reduce its costs

An individual is considering entering the global market via a franchise. Which outcome should be expected by the individual if this approach is used?

Majority of financial risk. In opening a new location, the franchisee typically takes most of the financial risk.

The ideal candidate for an overseas assignment normally has the following characteristics:

Managerial competence: technical skills, leadership skills, and knowledge specific to the company operations Training: Training or willingness to be trained on the language and culture of the host country Adaptability: The ability to deal with new, uncomfortable, or unfamiliar situations and the ability to adjust to the culture in which the candidate will be assigned

A company decides to focus on economies of scale to decrease production costs and increase revenues. Why is this strategy effective?

Manufacturing in large quantities means more work can be done efficiently and at a savings. This reduces productions costs and increasing revenues.

Multinational Production

Manufacturing process that spans multiple countries outside a firm's country of origin, usually in a coordinated multistage system Multinational production maximizes the production potential of multiple regions simultaneously to increase efficiency and mitigate production risks. Say, for example, a computer company manufactures computer casings in three locations around the world: China, Indonesia, and Brazil. What happens if there is a major earthquake in Brazil that disrupts production for several weeks? If the only source of the casings were the plant in Brazil, there would be a halt in the supply chain, but because the casings are also made in China and Indonesia, manufacturing continues. The other sites can increase production to compensate for at least some of the loss from the shutdown in Brazil. This networked approach also allows for more customization for customers. If the computer company needs a limited number of casings in neon green for a special Earth Day edition, then one of the plants can be configured to make the green casings while the other plants continue making the standard black and white. Creating an effective global supply chain is an extremely complex task. Companies must simultaneously source raw materials and components, locate and manage manufacturing (which may be multistaged), and oversee distribution of products to customers. This process would be daunting in a stable environment, but today's global business environment shifts rapidly. Shorter production cycles, fluctuating resources, changing demographics, and rapid technological advances make supply chain management a difficult and critical aspect of operating a global business (Wagner, Bolton, & Nuthall, 2016).

3-D Printing

Many businesses need to provide a prototype for clients before development. With 3-D printing, that process is faster and cheaper. Printing speed has increased, and a variety of sizes of 3-D printers are available to provide opportunities to create prototypes for students and large industries. 3-D printers can print with a variety of substances, usually plastic polymers and metals, by printing a layer of substance on top of another layer and can make objects with complex geometries. 3-D printers are expected to get faster, more automated, and easier to use in the future In addition to providing prototypes, the medical industry is using 3-D printers to produce finished products such as hearing aids and joint replacements. Prosthetics in the past have been mass-produced, resulting in a universal approach that was uncomfortable for patients. Now with 3-D printing, prosthetics can be made to uniquely fit each wearer. A patient in need of an organ transplant frequently needs to go without due to a shortage of suitable organs that are a tissue match. Using 3-D printers, medical technologists are using stem cells to build tiny organs that may one day be implanted inside people where they can grow and take over for failing organs. Researchers in Spain have developed a 3-D bioprinter prototype that can produce human skin for burn victims. The pharmaceutical industry expects to be using 3-D printers to make a 3-D printed pill that can house multiple medications that are all released into the body at the appropriate time. This pill has been tested in patients with diabetes and is showing great promise

acceptable use policy (AUP)

Many organizations that provide technology services to a group of constituents or to the public require their agreement to an acceptable use policy (AUP) before those services can be accessed. This policy outlines what is allowed and what is not allowed while someone is using the organization's services. An everyday example of this is the terms of service that must be agreed to before using the public Wi-Fi at Starbucks, McDonald's, or even a university.

Which convention protects decent working hours for a cruise ship director who travels in international waters?

Maritime Labor Convention, 2006 The Maritime Labour Convention, sometimes called the "Seafarer's Bill of Rights," protects the rights of seafaring workers and is law for multiple countries. This convention protects decent working hours for a cruise ship director that travels in international waters.

Monopoly

Market in which single producer is a price maker that can determine the price level by deciding what quantity of a good to produce. A monopoly, on the other hand, exists when there is only one producer of a good or service. Monopolies are characterized by a lack of economic competition in the production of a good or service and a lack of viable substitutes for that good or service. As a result, the producer determine the price by deciding the quantity of the good or service to produce. Control over natural resources or owning intellectual property rights are often sources of monopoly power in the global economy.

Which drawback is involved when regional agreements are created?

Member countries will trade less with nonmember countries. When a regional agreement is made between countries, those members will trade more with each other and trade less with nonmember countries.

An aircraft manufacturer uses a supply chain management system in which parts of the aircraft are made in different countries and assembled at the company's headquarters. Which type of supply chain is the company using?

Multinational supply chains seek to use production strengths and low costs of different suppliers around the world. Using a multinational supply chain reduces the risk of a catastrophic event, reducing a company's ability to produce a product.

Which agreement was implemented in 1994 and helped form a free-trade zone between Canada, the United States, and Mexico by decreasing tariffs and trade barriers?

NAFTA: This trade agreement was implemented in 1994 and had the described trading goals.

Which type of duty is required to take care of the collective environment across the nation?

Nation states and industry have a shared responsibility to take care of the collective environment of the nation. Collectively, both can accomplish more.

Power Distance

One of Hofstede's six dimensions of national culture. It describes how formal and authority-focused a society is.

Power Distance

One of Hofstede's six dimensions of national culture. It describes how formal and authority-focused a society is. Power distance refers to 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. For example, high power distance cultures openly accept that a boss is "higher" and, as such, deserves more formal respect and authority. Examples of these cultures include Japan, Mexico, and the Philippines. In Japan or Mexico, the senior person is almost a father figure and is automatically given respect and usually loyalty without questions. In Southern Europe, Latin America, and much of Asia, power is an integral part of the social equation. People tend to accept relationships of servitude. An individual's status, age, and seniority command respect—they are what make it all right for the lower ranked person to take orders. Subordinates expect to be told what to do and will not take initiative or speak their minds unless a manager explicitly asks for their opinion. At the other end of the spectrum are low power distance cultures, in which superiors and subordinates are more likely to see each other as equal in power. Countries found at this end of the spectrum include Austria and Denmark. To be sure, not all cultures view power in the same ways. In Sweden, Norway, and Israel, for example, respect for equality is a warranty of freedom. Subordinates and managers alike often have the power to speak their minds.

short-term orientation

One of Hofstede's six dimensions of national culture. It focuses on immediate gratification and fulfilling current social obligations. values tradition only to the extent of fulfilling social obligations or providing gifts or favors. These cultures are more likely to be focused on the immediate or short-term effect of an issue. Not surprisingly, the United Kingdom and the United States rank low on the long-term orientation.

Uncertainty avoidance

One of Hofstede's six dimensions of national culture. It measures how comfortable a society is with uncertainty. refers to how much uncertainty a society or culture is willing to accept. It can also be considered an indication of the risk propensity of people from a specific culture. People who have high uncertainty avoidance generally prefer to avoid conflict and competition. They tend to appreciate very clear instructions. At the office, sharply defined rules and rituals are used to get tasks completed. Stability and what is known are preferred to instability and the unknown. Company cultures in these countries may show a preference for low-risk decisions, and employees in these companies are less willing to exhibit aggressiveness. Japan and France are often considered clear examples of such societies. In countries with low uncertainty avoidance, people are more willing to take on risks, companies may appear less formal and structured, and "thinking outside the box" is valued. Examples of these cultures are Denmark, Singapore, Australia, and, to a slightly lesser extent, the United States. Members of these cultures usually require less formal rules to interact.

Long-term orientation

One of Hofstede's six dimensions of national culture. It measures how focused a society is on traits such as perseverance and shame. refers to whether a culture has a long-term or short-term orientation. It resulted from the effort to understand the difference in thinking between the East and the West. Certain values are associated with each orientation. The long-term orientation values persistence, perseverance, thriftiness, and having a sense of shame. These are evident in traditional Eastern cultures. Based on these values, it is easy to see why a Japanese chief executive officer (CEO) is likely to apologize or take the blame for a faulty product or process.

Individualistic

One of Hofstede's six dimensions of national culture. It measures how focused people are on their immediate circle at the expense of the greater group. refers to people's tendency to take care of themselves and their immediate circle of family and friends, perhaps at the expense of the overall society. In individualistic cultures, what counts most is self-realization. Initiating alone, sweating alone, and achieving alone—not necessarily collective efforts—are what win applause. In individualistic cultures, competition is the fuel of success. The United States and Northern European societies are often labeled as individualistic. In the United States, individualism is valued and promoted—from its political structure (individual rights and democracy) to entrepreneurial zeal (capitalism). Other examples of high-individualism cultures include Australia and the United Kingdom. On the other hand, in collectivist societies, group goals take precedence over individuals' goals. Basically, individual members render loyalty to the group, and the group takes care of its individual members. Rather than giving priority to "me," the "us" identity predominates. Of paramount importance is pursuing the common goals, beliefs, and values of the group as a whole—so much so, in some cases, that it is nearly impossible for outsiders to enter the group. Cultures that prize collectivism and the group over the individual include Japan, Singapore, Korea, Mexico, and Arab nations.

Masculinity versus femininity

One of Hofstede's six dimensions of national culture. It measures how the society views traits that it considers masculine or feminine. s how a society views traits that are considered masculine or feminine, respectively. This value dimension refers to how a culture ranks on traditionally perceived "masculine" values: assertiveness, materialism, and less concern for others. In masculine-oriented cultures, gender roles are usually crisply defined. Men tend to be more focused on performance, ambition, and material success. They are tough and independent personas, whereas women cultivate modesty and quality of life. Cultures in Japan and Latin America are examples of masculine-oriented cultures. In contrast, feminine cultures are thought to emphasize "feminine" values: concern for all, an emphasis on the quality of life, and an emphasis on relationships. In feminine-oriented cultures, both genders swap roles, with the focus on quality of life, service, and independence. The Northern European cultures rank as feminine cultures, as do cultures in Switzerland and New Zealand. The United States is actually more moderate, and its score is ranked in the middle between masculine and feminine classifications. For all these factors, it is important to remember that cultures do not necessarily fit neatly into one camp or the other.

Indulgence versus restraint

One of Hofstede's six dimensions of national culture. It measures the degree of freedom and spontaneity that is valued. refers to the degree of freedom that societal norms give to citizens in fulfilling their human desires. Indulgence is defined as "a society that allows relatively free gratification of basic and natural human desires related to enjoying life and having fun." Its counterpart is defined as "a society that controls gratification of needs and regulates it by means of strict social norms."

Mercantilism

One of the earliest economic theories, which stated that a country's wealth was determined by the amount of gold and silver they had in their possession. Developed in the sixteenth century, mercantilism was one of the earliest efforts to develop an economic theory. This theory states that a country's wealth is determined by the amount of its gold and silver holdings. Mercantilists believed that a country should increase its holdings of gold and silver by promoting exports and discouraging imports. The objective of each country was to have a trade surplus.1 Nations promote a trade surplus by imposing restrictions on imports. This strategy is called protectionism and is still used today. Mercantilism and neo-mercantilism state that a country should maintain a trade surplus, and the government should take necessary actions to make that happen. Maintaining a trade surplus results in a zero-sum game in which one country wins at the expense of another.Fabsolute

Which advantage do intermediaries offer when a manufacturer uses an indirect marketing channel to distribute its products?

One of the main reasons to use an indirect channel is that the marketing intermediaries to which the producer sells may know more about the markets.

Which currency contract allows for a trade of specific amount of money and exchange rate on a defined date to hedge risk in the global environment?

Option contracts offer the owner the right to a specified exchange rate for a particular quantity of money on a particular date but do not oblige the owner.

A business has experienced significant internal and external events, and the owner decides to respond effectively while maintaining the rules of behavior the company has always vocalized as being appropriate. Which component has guided this owner's response?

Organizational ethics is how a business responds to stimuli in an ethical manner.

Primary Source

Original information that could be firsthand accounts, raw data, or artifacts are original sources, undiluted by someone else's interpretation. Examples of primary sources would be firsthand accounts by people who have lived in the culture; raw data about everything from health statistics to business data to weather information; and newspapers, diaries, travel journals, blogs, photographs, and videos. https://www.commerce.gov/data-and-reports https://www.trade.gov https://www.census.gov http://data.un.org https://databank.worldbank.org/home.aspx https://www.statcan.gc.ca/en/start https://european-union.europa.eu/live-work-study_en https://globaledge.msu.edu/global-insights https://www.expatexchange.com

Advantages of Outsourcing

Outsourcing is when a company hires a company outside the company to produce goods or provide services that had originally been performed in-house, often to cut costs. Lower costs: Savings may result from lower inherent, structural, systemic, or realized costs. A detailed analysis of each of these cost categories can identify the potential sources of advantage. For example, larger suppliers may capture greater scale benefits than the internal organization. Offshoring typically offers significant infrastructure and labor cost advantages over traditional outsourcing. In addition, many outsourcing providers have established very large-scale operations that are not economically possible for domestic providers. Greater flexibility: Using an outside supplier can sometimes add flexibility to a company in that it can rapidly adjust the scale and scope of production at a low cost. The Japanese keiretsu and Korean chaebol conglomerates show that networks of organizations can often adjust to demand more easily than fully integrated organizations. Enhanced expertise: Some suppliers may have proprietary access to technology or other intellectual property (IP) advantages that a firm cannot access by itself. This technology may improve operational reliability, productivity, efficiency, or long-term total costs and production. The significant scale of today's offshore manufacturers allows them to invest in technology that may be cost prohibitive for domestic providers. Greater discipline: Separation of purchasers and providers can assist with transparency and accountability in identifying true costs and benefits of certain activities. This can enable transactions under market-based contracts in which the focus is on output rather than input. At the same time, competition among suppliers creates choice for purchasers and encourages the adoption of innovative work practices. Focus on core activities: The ability to focus makes resources available internally so the company can concentrate on those activities for which they have distinctive capability and scale, experience, or differentiation to yield economic benefits. In other words, focus allows a company to concentrate on creating relative advantage to maximize total value and allows others to produce supportive goods and services. While outsourcing is largely about scale and the ability to provide services at a more competitive cost, outsourcing is primarily driven by the dramatic wage-cost differentials that exist between developed and developing nations. However, cost should not be the only consideration in making outsourcing decisions. Other relevant factors include the quality and reliability of labor, continuous process improvements, environment, and infrastructure. Political stability and broad economic and legal frameworks should also be taken into account. In reality, even very significant labor cost differentials between countries cannot be the sole driver of outsourcing decisions. Companies need to be assured of quality and reliability in the services they are outsourcing. This is the same whether services are outsourced domestically or offshore.

Which company relationship is negatively affected if the company uses outsourcing to reduce costs?

Outsourcing will cause some employees to lose their jobs. Fear can grip the company if outsourcing of production or another major element of the company is outsourced or moved offshore.

Which of these agreements or treaties was to combat increased temperatures of global climate change?

Paris This agreement was completed in 2016 to stop or at least slow global warming. Not all countries agreed to these goals.

The Pegged Float Exchange Rate

Pegged floating currencies are pegged to some band or value, which is either fixed or periodically adjusted. They are a hybrid of fixed and floating regimes.

Pegged with Horizontal Bands

Pegged with horizontal bands: This system is similar to crawling bands, but the currency is allowed to fluctuate within a larger band of greater than 1% of the currency's value.4

A farmers market has many vendors and consumers who all sell and buy the same produce at the same price. Which type of market is represented?

Perfect competition Since vendors can enter and exit the market freely with no barriers and the products are homogenous, it is a pure competition.

Which financing source provides funding for capital through private connections with help limited to monetary contributions?

Personal contacts can provide funding, which is usually only for capital, and do not include help beyond monetary contribution.

There are two main categories of international investment:

Portfolio Investment & Foreign Direct Investment

Political Risk - Global Risk Type

Possible political changes or instability in a country that could hurt a company's financial return on a foreign investment. Political risk relates to politically induced actions and policies initiated by a foreign government. The effect of these events and the associated political decisions on energy, transportation, tourism, insurance, and other sectors demonstrates the massive consequences that crises, wars, and economic meltdowns, wherever and however they may take place, can have on business. Political risk assessment involves an evaluation of the stability of a country's current government and of its relationships with other countries. A high level of risk affects the ownership of physical assets and intellectual property and the security of personnel, increasing the potential for trouble. Political risks can be further divided into "macro" and "micro" risks. Macro risk is concerned with political factors that can impact the overall political stability of that country and, therefore, can impact any industry regardless of the industry type. Examples of macro-political risk are social unrest, change in government leadership, and civil wars. The ongoing civil war in Syria is an example of a macro risk. At the micro risk level, risk analysis is focused on a particular company or group of companies. An example of this could be the government's nationalization of assets. In Venezuela, President Chavez has nationalized oil production as well as several other specific industries, including steel and telecommunications.

A country's corporate culture requires that most of the decisions be made by senior management, and entry-level positions are viewed as having much less status and respect. Which of Hofstede's cultural dimensions is being used by this country?

Power distance is high in the country described above, in which most of the authority and respect are at the upper ranks.

Which organization formed in 1970 supplements the funding available from commercial banks and other lenders to support U.S. exports?

Private Export Funding Corporation (PEFCO) This is a private-sector organization formed in 1970. It aims to support the funding of U.S. exports by supplementing the funding available from commercial banks and other lenders.

When expanding internationally to a country with a lower average income, a company made efforts to reduce the price of its product, even though it eliminated some of the benefits the product has in other markets. This allowed for greater sales in the new market. Which strategy is being used by this company?

Product adaptation is when a product is changed to be more appealing in a specific market.

What is a benefit of implementing a system of free trade?

Reduced tariffs would result in lower costs of imported raw materials. In a free trade system, tariffs are reduced or eliminated to increase the ease and efficiency with which trade can be accomplished.

General Data Protection Regulation (GDPR)

Proposed set of regulations adopted by the European Union to protect Internet users from clandestine tracking and unauthorized personal data usage. The European Union, to help people take control over their data, passed the General Data Protection Regulation (GDPR) in May 2016. The regulation went into effect on May 25, 2018.1 Personal data include a wide range of personal identifiers, including name, identification number, location data, or an online identifier. For sensitive data, users are required to opt-in explicitly to grant permission for its use

Pros and Cons of a Direct Strategy:

Pros and Cons of a Direct Strategy Many small businesses use the direct channel. The direct channel involves selling directly to the final consumer with no intermediaries (retailers and wholesalers, also known as middlemen) in the process. The direct channel provides close contact with the customer and full control of all aspects related to the marketing of a company's products A direct channel is no longer the province of small business either. The local farmer may sell directly to consumers at a weekend farmer's market, but the food replacement company Soylent also sells directly to consumers, albeit with a high-tech twist. Soylent, valued at $1.6 billion, uses a software-inspired approach to marketing with frequent, hyped launches and updates to its product lines (CB Insights, 2019). The growth of the internet and e-commerce has made it possible for start-ups to build up their businesses quickly without the costs and risks of a brick-and-mortar storefront. The popularity of e-commerce has created a boom in direct channel distribution. Many traditional, indirect channel businesses are adding direct channels to customers in order to stay relevant in an era of declining face-to-face sales. Direct-to-consumer (D2C) businesses can be quite lucrative. Companies such as BarkBox and Dollar Shave Club have all found success by catering to a niche market, capitalizing on the convenience of online shopping, and promoting the concept of accessible luxury Service businesses also use the direct channel because there is no way to do otherwise. Services are performed and consumed at the same time, so there is no role for intermediaries. Tanning salons, home repair services, legal services, real estate services, and medical services all deliver directly to the consumer. Online services are also delivered directly to the final consumer, such as Carbonite data recovery and Legal Zoom do-it-yourself legal documents.

Trademark

Protection for any word, name, symbol, device, or any combination used in commerce to identify and distinguish the goods of one manufacturer or seller from goods manufactured or sold by others

Tariffs may also be classified by their purpose:

Protective Tariffs & Revenue Tariffs

Patents

Protects inventions and improvements to existing inventions for a limited period of time in exchange for detailed public disclosure of those inventions The most common way to protect an industrial discovery or invention is to patent it. A patent is an inventor's exclusive right granted by the government for an invention, whether a product or a process, that is industrially applicable (i.e., useful) or new (i.e., novel) or exhibits a sufficient "inventive step" (i.e., be nonobvious). To get a patent, the company must reveal the details of the invention. The rationale for revealing the invention details is that others can build on the invention and thus promote further innovation. By revealing the invention, companies obtain legal protection and the right to exclusive sales of the invention (or the right to license or sell its use to others). The patent gives the patent owner a monopoly on the invention for a specific number of years.

Import

Purchasings goods or services from a foreign economy by a domestic economy.

Which model of supply chain management focuses on the product and its production?

Push: In this model of supply chain management, all parts of the production process focus on how to produce the product and then move it through the distribution channel to the customer. The marketing process focuses on pushing the product on the consumer.

Quotas

Quotas are limitations on imported goods. They come in an absolute or tariff-rate variety and affect supply in the domestic economy. A quota can be a limit on the number of items that can be imported, or it can be a limit on the value of items that can be imported.

Damages

Recompense for the injured party by the party that breached the contract

A sole, national telephone company was found violating antitrust laws and was forced to separate into regional companies. What caused the violation of the antitrust laws?

Reduced Competition: Antitrust laws are enacted to protect consumer's rights to competition in the marketplace. The sole, national company was a monopoly, and no competition occurred.

Supply chain management improves customer value in the following ways:

Reduced inventory: A well-executed supply chain management system means that customers receive orders when they need them. Further, this does not necessarily imply that the supplier will be holding the inventory for the customer—although that might occur. It refers to the fact that better communication and better scheduling may enable the supplier to produce the item exactly when it is needed. Improvement in the order accuracy: Supply chain management should guarantee that when orders are shipped, the right items are shipped in the right quantity. This does not disrupt the production for the customer and eliminates product returns, which results in economic benefits for both the customer and the supplier. Reduced cycle time for product development: To ensure success, the customer and the supplier must develop new levels of trust. This trust will evolve into a long-term relationship. Both parties begin to know each other better, including each other's needs and capabilities. As this evolves, the supplier is in a better position to help the customer develop new products far more rapidly. It greatly reduces the product cycle time. Financial benefits: These value improvements all translate into significant cost savings. Cost savings experienced by the supplier can be transferred into cost savings for the customer. Relatively modest improvements in inventory reduction, reduced safety stock size, reduced stockouts, improved order fill rates, and reduced transit time can yield surprisingly large financial benefits to both parties. Peace of mind: Having a supplier whom one can trust to accurately deliver items in a timely, low-cost fashion, and who has also developed contingency plans to cope with potential problems, is relatively unique and provides the customer with a high level of comfort. One may be unable to place an economic price on such peace of mind.2

Regional Economic Integration

Regional economic integration includes a multitude of economic steps that can be made by member nations to increase their competitive advantage. Regional economic integrations generally come into being more often for economic rather than political reasons. Integrating into a regional economic integration is expected to increase intraregional trade and lead to a more competitive trade position and more efficient resource allocation Regional economic integration among nations in a geographic region, helps all nations in the group attain a higher living standard by encouraging specialization, lowering prices, providing more choices on goods and services, increasing productivity, and allowing for more efficient use of natural resources Regional economic integration has enabled countries to focus on issues that are relevant to their stage of development as well as encourage trade between neighbors.

Domestic

Related to home or place of origin

What is the term for the services a company provides when it helps an employee who has worked in a host country make the transition back to the home country?

Repatriation is the process of helping employees who have worked in a host country make the transition back into their home country.

A major footwear brand company is contracting the manufacturing of its products to a contractor's manufacturing plant overseas. The footwear company has been accused of turning a blind eye to sweatshop practices at other overseas contract locations before. How should the footwear company ensure that the contractor will comply with the standards set forth in the code of conduct that explicitly prohibit this practice?

Require that the factories be available for inspections Making the factories available for inspections and audits, sometimes unannounced, is a best practice to ensure compliance with the code of conduct.

The barriers to entry that corporations may seek to optimize include the following:

Research and development The ownership of intellectual property rights Economies of scale Unique business processes or methods as well as extensive experience in the industry The control of resources or favorable access to raw materials1

John is the president of a company that is based in Atlanta. This company, which manufactures office items that stick to walls, furniture, and other items, has been very successful in its first five years, so John decides that he would like to expand the business globally and has chosen to start in the Philippines. What is one of the first things he should do?

Research the history and politics of the Philippines It is critical to understand the culture, history, and politics of the Philippines before opening a business there.

Which areas traditionally suffer from the digital divide?

Rural areas are less likely to have high speed internet causing them to be unable to access information on the internet.

Sanctions

Sanctions are laws passed that restrict or abolish trade with certain countries. Trade sanctions are often imposed as a tactic in foreign and economic policy and can be implemented as a way of addressing the behavior or policy of another nation. It can also play a dramatic role as an offensive militaristic maneuver. Iran and North Korea are modern examples, as is the recent history of the U.S.-Iraq war. In each of these circumstances, either the United States alone or along with several allies actively limited the ability of these countries to trade and generate economic value for their nations and subsequently, their people. While this looks purely economic, it has important social and humanitarian implications as well.1

Some examples of technical barriers include the following:

Sanitary and phytosanitary measures: These are health standards for plants, animals, and other products, and are designed to protect humans, animals, and plants from pests or diseases Rules for product weights, sizes, or packaging Standards for labeling and testing products Ingredient or identity standards

Which technology is instrumental in the development of self-driving cars?

Self-driving cars are being operated by artificial intelligence.

International Distribution Management

Selling internationally means considering how your company will distribute its goods in the market. Developed countries have good infrastructure—passable roads that can accommodate trucks, retailers who display and sell products, and reliable communications infrastructure and media choices. Emerging markets, on the other hand, often have very fragmented distribution networks, limited logistics, and much smaller retailer outlets. Small shops, door-to-door peddlers, and street vendors play a much larger role in emerging-market countries. In the emerging countries of Africa, for example, books might be sold from the back of a moped. In addition, the standards of living in emerging countries vary widely. Most of the middle class lives in cities, but the percentage of the population that lives in rural areas varies by country. In India, 70% of the population lives in rural areas, whereas in Latin America only 30% does. Rural logistics are especially problematic. Narrow dirt roads, weight-limited bridges, and mud during the rainy season hamper the movement of goods. An executive at computer storage device manufacturer EMC noted that sometimes the company's refrigerator-sized, data storage systems have had to be transported on horse-drawn wagons. These issues and many more can create barriers to distribution that a company will have to overcome to reach customers.5

Exporting

Sending goods to another country to sell Fast entry, low risk. Low control, low local knowledge, potential negative environmental impact of transportation Export of commercial quantities of goods normally requires the involvement of customs authorities in both the country of export and the country of import. The advent of small trades over the internet, such as through Amazon and eBay, has largely bypassed the involvement of customs in many countries because of the low individual values of these trades An export partner in the form of either a distributor or an export management company can facilitate this process. If you merely export to a country, the distributor or buyer might switch to or at least threaten to switch to a cheaper supplier in order to get a better price. Or someone might start making the product locally and take the market from you. Also, local buyers sometimes believe that a company that only exports to them is not very committed to providing long-term service and support once a sale is complete. Among the disadvantages of exporting are the costs of transporting goods to the country, which can be high and can have a negative impact on the environment. In addition, some countries impose tariffs on incoming goods, which will impact the firm's profits. Moreover, firms that market and distribute products through a contractual agreement have less control over those operations and, naturally, must pay their distribution partner a fee for those services. Because the cost of exporting is lower than that of the other entry modes, entrepreneurs and small businesses are most likely to use exporting as a way to get their products into markets around the globe. Even with exporting, firms still face the challenges of currency exchange rates. While larger firms have specialists that manage the exchange rates, small businesses rarely have this expertise. Exporting is often the way companies first move into international commerce. You work with a distributor or an export management company to handle much of the bureaucracy, but it still carries the risk that someone will start making a similar product locally and price you out of the market.

Database management programs

Serve as electronic filing cabinets for records such as customer lists, employee data, and inventory information. They can sort data based on various criteria to create different reports.

Which activity is considered a foreign direct investment (FDI) by a multinational corporation?

Setting up manufacturing plants in the host country. FDI is when a company invests in manufacturing or some other major asset in another (host) country.

Cultural Norms

Shared, sanctioned, and integrated systems of beliefs and practices that are passed down through generations and characterize a cultural group

Uniform Commercial Code UCC

Source of contract law in the United States

Societal or Cultural Risk - Global Risk Type

Societal or cultural risk is associated with operating in a different sociocultural environment. For example, it might be advisable to analyze specific ideologies; the relative importance of ethnic, religious, and nationalistic movements; and the country's ability to cope with changes that will, sooner or later, be induced by foreign investment. Thus, elements such as the standard of living, patriotism, religious factors, or the presence of charismatic leaders can play a huge role in the evaluation of these risks.

Comparative Advantage

Some countries, especially developing countries with little technology and capital, may not have an absolute advantage in producing any goods or services. David Ricardo, a great British political economist, developed the concept of comparative advantage in the early nineteenth century (Torelli, 2013). Ricardo reasoned that even if Country A had the absolute advantage in the production of both products, specialization and trade could still occur between two countries. Comparative advantage is defined as having the ability to produce a good or service at the lowest opportunity cost. Opportunity cost is the sacrifice of the next best alternative - when you produce more of one good or service, you give up production of another good or service. Comparative advantage occurs when a country might not be able to produce a product more efficiently than the other country, but it can produce that product better and more efficiently than it does for other goods. The difference between these two theories is subtle. Comparative advantage focuses on relative productivity differences - the country gives up less than the other country, whereas absolute advantage looks at absolute productivity - a country can produce more.1 Here is a simplified hypothetical example to illustrate the subtle difference between these principles. Sophia is a Wall Street lawyer who charges $500 per hour for her legal services. Sophia can also type faster than the administrative assistants in her office, who are paid $40 per hour. Even though Sophia has the absolute advantage in both skill sets, should she do both jobs? No. For every hour Sophia decides to type instead of doing legal work, she would be giving up $500 in income. Her opportunity cost of typing is high. Her productivity and income will be highest if she specializes in the higher paid legal services and hires the most qualified administrative assistant, who can type fast, although a little slower than Sophia. By having both Sophia and her assistant concentrate on their respective tasks, their overall productivity as a team is higher. This scenario illustrates a comparative advantage. People or countries will specialize in doing what they do relatively better. In reality, the world economy is more complex and consists of more than two countries and products. Barriers to trade may exist, and goods must be transported, stored, and distributed. However, this simple example demonstrates the basics of the comparative advantage theory. If each country specializes in the good or services for which it has a comparative advantage, it will benefit from trade and total global output will increase. Comparative advantage and specialization lead to gains from trade when each country specializes in the good or service for which it has a comparative advantage and produces no other good or 100 percent specialization. Specialization leads to an increase in total world production. Ricardo's comparative advantage which extends the theory to show benefits as long as each country exports the product it is comparatively more efficient at or can produce more cheaply and imports the others. Comparative advantage states that a country should specialize in the production of goods it can produce relatively more efficient than another country. This allows countries to focus on the products for which they have the lowest opportunity costs. However, many assumptions are made in this theory.

Of course, there are also some potential downsides to specialization:

Some parts of the economy may not be able to compete with cheaper or better imports. For example, firms in the United States may see demand for their products fall due to cheaper imports from China. These threats to noncompetitive sectors may lead to structural unemployment. Global demand may shift so that there is no longer a demand for the goods or services produced by a country. For example, the global demand for rubber has fallen due to the availability of synthetic substitutes. Countries may experience high levels of persistent structural unemployment and low GDP because the demand for their products has fallen. Relying on another country for vital resources makes a country dependent on that country. Political or economic changes in the second country may impact the supply of goods or services available to the first.

Children's Online Privacy Protection Act (COPPA)

Some users require additional protection due to their age or the type of information shared. Websites that collect information from children under the age of 13 are required to comply with the Children's Online Privacy Protection Act (COPPA), which is enforced by the Federal Trade Commission. To comply with COPPA, organizations must make a good faith effort to determine the age of those accessing their websites and, if users are under 13 years old, must obtain parental consent before collecting any information.1 TikTok is a social media app that allows users to upload fifteen-second video clips. It has surpassed Snapchat and Twitter in the number of users. TikTok attracts children and, therefore, child predators. It is restricted to users over age 13 though, undoubtedly, many of its users are under age 13. In February 2019, TikTok's parent company ByteDance agreed to pay the FTC a $5.7 million settlement as a result of allegations that it has been collecting private information from children using the app (Leiber, 2019). TikTok is a social media app that allows users to upload fifteen-second video clips. It has surpassed Snapchat and Twitter in the number of users. TikTok attracts children and, therefore, child predators. It is restricted to users over age 13 though, undoubtedly, many of its users are under age 13. In February 2019, TikTok's parent company ByteDance agreed to pay the FTC a $5.7 million settlement as a result of allegations that it has been collecting private information from children using the app

Distributor

Someone who supplies goods to businesses

Derivatives

Special types of financial instruments, the prices of which are ultimately derived from the price or performance of some underlying assets. Although often derided in the press and movies, derivatives are inherently neither good nor bad; they are merely tools used to limit losses (hedge) or to multiply gains and losses (speculate). Speculation has a bad reputation, but, in fact, it makes hedging possible because investors can hedge only if they can find a speculator willing to assume the risks that they wish to avoid. Investors use a variety of financial tools, called derivatives, to hedge or reduce their losses in currency exchange.

Tariffs can also be classified on how the duty amount is valued:

Specific Tariffs, Ad Valorem Tariffs, & Compound Tariffs

A company owner is considering manufacturing using a global standardization strategy to achieve economies of scale. Why is this strategy effective?

Standardizing products globally means that regardless of the place of manufacture, the product can be sold in any market.

Horizontal Structure

Structure of law where neither party is in a legally dominant position over the other. Some laws, such as international law or law between sovereign states, are best thought of in a horizontal structure. An obvious challenge to laws created in horizontal power structures that are without any legitimate lawmaking authority governing the parties is that enforcement of violations can be difficult. For this reason, many horizontal laws, like treaties, contain provisions that require the parties to the treaty to submit to a treaty-created dispute resolution panel or other neutral tribunal.2

Which currency contracts are two-way agreements to trade currency on different dates?

Swap contracts are two-way agreements to exchange currency on different dates.

Tariff

Tariffs are taxes imposed by a government on imported or exported goods to limit trade. They are also known as customs duties.

Revenue Tariffs

Tariffs levied to raise revenue for the government.

Protective Tariffs

Tariffs that protect a domestic industry by making imported goods more expensive than equivalent goods produced domestically. are tariffs levied to reduce imports of a product and protect domestic industries.

Export Tariffs

Taxes on goods leaving a country. Taxing exports may be implemented to raise tariff revenue or restrict the world supply of a good.

Import Tariffs

Taxes on goods that are imported into a country. They are more common than export tariffs.

Technical barriers to trade:

Technical barriers to trade are non-tariff barriers to trade that refer to standards implemented by countries. Because these standards must be met before goods are allowed to enter or leave a country, they represent international trade barriers. Some examples include the following: Sanitary and phytosanitary measures: These are health standards for plants, animals, and other products, and are designed to protect humans, animals, and plants from pests or diseases Rules for product weights, sizes, or packaging Standards for labeling and testing products Ingredient or identity standards4

When examining internet speeds, there are a few essential terms to identify:

The "G" in 2G, 3G, 4G, or 5G stands for a generation of mobile data technology as defined by the radio sector of the ITU (ITU-R). LTE stands for "Long-Term Evolution" and applies more generally to the idea of improving wireless broadband speeds to meet increasing demand. Globally, internet speeds are steadily on the rise as LTE continues to displace 3G, and fast 4G connections have become the norm in dozens of countries. Creating 4G connectivity requires both a network that can support the necessary speeds and a device that can connect to that network and download information at a high enough speed. Next-generation internet service is expanding throughout the world, and 5G is coming, although it will be a while before it is widely and reliably available.2 Solutions to the digital divide have had mixed success over the years. Many times, just providing internet access and computing devices is not enough to bring actual internet access to a country, region, or neighborhood.1

European Union Current Challenges and Opportunities

The EU was initially established to prevent any future wars. The EU faces many challenges but has its long history and shared governance to help the EU countries overcome their differences. The most significant advantage of EU membership is the monetary union.It is important to remember several distinctions: First, the EU does not include the same countries as the continent of Europe. Second, there are more EU member countries than countries using the euro.2 An entirely different type of problem facing global businesses is the possibility of a protectionist movement by the EU against outsiders.

The Export-Import Bank of the United States (Ex-Im Bank):

The Export-Import Bank of the United States (Ex-Im Bank) helps exporters who have found a buyer, but the buyer is unable to get financing for the purchase in his or her own country. Ex-Im Bank can provide credit support (loans, guarantees, and insurance for small businesses) that covers up to 85% of the transaction's export value.

Which are working on harmonizing the two accounting standards?

The FASB and IASB are working on harmonizing the two accounting standards.2

Which self-governing group is supported by the U.S. government, various accounting establishments, and privately owned companies to establish accounting standards?

The Financial Accounting Standards Board (FASB) is self-governing and supported by the U.S. government, various accounting establishments, and privately owned companies.

Which term refers to the indistinguishable combination of what is human and what is technology?

The Fourth Industrial Revolution refers to the indistinguishable combination of what is human and what is technology such that it is difficult to tell where human ends and technology begins.

What is the purpose of the IASB?

The IASB is responsible for creating international standards of accounting

The Japan External Trade Organization (JETRO):

The Japan External Trade Organization (JETRO) was originally established in the 1950s to help the war-torn Japanese economy by promoting export of Japanese products to other countries. By the 1980s, Japan had massive export surpluses and began to feel the need to promote imports. So JETRO's mission reversed. Its focus became to assist foreign companies in exporting their products into Japan. JETRO now offers such free services such as: market entry information business partner matching expert business consulting (through bilingual business consultants who are experts in various industries) access to a global network of executives and advisors On the financing side, JETRO offers subsidies to potential companies, makes offices available for up to four months while the foreign firm researches the Japanese market, and provides exhibition space when the company is ready to display its products to prospective Japanese importers.

NAFTA

The North American Free Trade Agreement (NAFTA) NAFTA includes Canada, the United States, and Mexico 1988 United States and Canada Signed in 1992 abd Implemented in 1994 The goal of NAFTA has been to encourage trade between Canada, the United States, and Mexico. By reducing tariffs and trade barriers, the countries hope to create a free-trade zone where companies can benefit from the transfer of goods.

The Organisation for Economic Co-operation and Development (OECD)

The Organisation for Economic Co-operation and Development (OECD) also recognizes the need for greater international cooperation and coordination in order to reduce tax avoidance. The OECD estimates that up to $240 billion is lost in tax revenue each year due to MNCs using tax avoidance strategies. The organization created the Base Erosion and Profit Sharing (BEPS) project at the 2015 G20 summit to foster cooperation between 125 jurisdictions on multilateral measures such as stopping unwarranted transfers of profits between countries, helping countries collect VAT, and eliminating tax treaty shopping.

The Overseas Private Investment Corporation (OPIC):

The Overseas Private Investment Corporation (OPIC) was established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, particularly in developing countries. It provides debt financing, political risk insurance, and support for private equity funds

USMCA

The United States, Mexico, and Canada updated the 24-year-old NAFTA Agreement and renamed it the United States-Mexico-Canada Agreement or USMCA. It is an agreement to provide protection and enforcement of intellectual property rights. The new intellectual property agreement will provide ten years of data protection for biological drugs. U.S. creators are given the same intellectual protection rights in domestic markets as they are given in foreign markets. The agreement will continue to provide strong patent protection. The agreement requires a minimum copyright term of the life of the author plus 70 years. The country of origin rule that states that automobiles must have 75% of their components manufactured in the United States, Canada, or Mexico to qualify for a zero-tariff rate. Labor provisions for wages state that 40-45% of automobile parts must be made by workers earning a minimum of $16 per hour by 2023. The Canadian dairy market is more accessible to U.S. farmers. A sunset clause that states the agreement expires in 16 years and is subject to review every six years.

Many countries from several geographic regions are accused of dumping steel into the U.S. market at unfairly low prices. Which entity can the United States appeal to in order to correct this apparent market manipulation?

The World Trade Organization is designed to judge potential market manipulations of its members. The United States has accused several countries around the world of dumping steel.

Currency Translations

The act of translating currencies on a financial statement to another currency. The current-rate method or the temporal method.

Production Planning

The allocation of resources in the production process

Ethnocentrism

The belief that one's own culture is most important

Culture

The beliefs, values, mind-sets, and practices of a group of people "Culture is the collective programming of the mind that distinguishes the members of one group or category of people from others"

Specific Limitations to Trade

The category of specific limitations to trade stems from regulations on international trade. Some examples include local content requirements, or domestic content requirements, are rules that mandate how much of a product must be produced domestically to qualify for lowered tariffs or other preferential treatment.

The Effect of a Quota

The domestic producer sells more steel than if there was free trade, so its revenues will go up. The increased revenue may trickle down to the workers in the steel industry in the form of increased wages and jobs. The government earns additional income if it sells quota licenses or with a tariff-rate quota. The foreign producer sells less under a quota than they would have had under free trade. Since the quota decreases the foreign supply which increases the price, the domestic consumer also loses.

The Advantages and Disadvantages of Direct and Indirect Strategies:

The choice between direct and indirect depends on balancing the need for control over the product with the need for support and expertise from intermediaries to deliver the product to market

Harmonized Tariff Schedule (HTS)

The commodity classifications are based on the International Harmonized Commodity Coding and Classification System (or the harmonized system) established by the World Customs Organization.

Which two primary sources of law govern contracts in the United States?

The common law and the Uniform Commercial Code Common law comes from custom and from precedents set by other court decisions. The Uniform Commercial Code provides some a standardized laws and regulations for commercial transactions such as sales. They are the two primary sources of law that govern contracts in the United States.

Which level of economic integration permits the free movement of capital, labor and technology from member countries?

The common market permits the formation of economically integrated markets between member countries, removing trade barriers and any restrictions on the movement of labor, technology, and capital.

Why does a company engage in foreign direct investment?

The company wants to control organizational assets in another country.Foreign direct investment is when a company acquires a foreign firm or asset with the intent to control and manage it to strengthen its economic and financial market position.

Business Ethics

The contemporary standards or sets of values that govern the actions and behavior of individuals in the business organization and the actions of the business itself

Other compensation issues, which will vary greatly from country to country, might include the following:

The cost of benefits in another country. Many countries offer universal healthcare (offset by higher taxes), and therefore, the employee would have health benefits covered while working and paying taxes in that country. Canada, Finland, and Japan are examples of countries that have this type of coverage. In countries such as Singapore, all residents receive a catastrophic policy from the government, but they need to purchase additional insurance for routine care. A number of organizations offer healthcare for expatriates relocating to another country in which healthcare is not already provided. Legally mandated (or culturally accepted) number of vacation days. For example, 20 paid vacation days are required in Australia, 10 in Canada, 30 in Finland, and 5 in the Philippines. The average number of vacation days for a U.S. worker is 15, although the number of days is not federally mandated by the government, as with the other examples. Legal requirements of profit sharing. For example, in France, the government heavily regulates profit-sharing programs. Pay system that works with the country's culture, such as pay systems based on seniority. For example, Chinese culture focuses heavily on seniority, and pay scales should be developed according to seniority. Thirteenth-month (bonus) structures and expected (sometimes mandated) annual lump sum payments. Compensation issues are a major consideration in motivating overseas employees. A systematic system should be in place to ensure fairness in compensation for all expatriates.

Information Technology IT

The equipment and techniques used to manage and process information Information and communications technologies (ICTs) provide access to information and promote the growth and development of fields such as health, education, knowledge sharing, agriculture, peace promotion, and disaster reduction; however, there are still portions of the population that do not have access to the internet.

What is a disadvantage of regional economic integration?

The exclusion of external countries reduces global free trade. Regional agreements may create trade barriers with nonmember countries, which lowers global free trade.

Specialization and Economies of Scale

The existence of economies of scale in production is sufficient to generate profitable trade between two countries. Economies of scale refer to a production process in which production costs fall as the scale of production rises. Economies of scale can result from the ability to divide labor into smaller parts, which allows for increased specialization. If a task is divided into smaller tasks and each of these tasks is assigned to a person who has a comparative advantage in completing this task, then the overall efficiency of production should improve. The division of labor can extend to the inputs of production other than labor and can extend across borders. For example, if a company is producing candy bars, it may import the necessary ingredients from many different countries—each of which should have a comparative advantage for producing that input ("Why Do Countries Trade?" n.d.). Critics may note the transportation costs and any associated tariffs, which would also be considered. The other benefit of the division of labor is the ability to specialize. As an individual specializes in one part of the production, the specialist will become more precise and efficient at production. Specialization will lead to lower production time and cost due to a decrease in defective products

Sherman Antitrust Acts

The first American antitrust policy. Established in 1890, it dealt with limiting the power of price-controlling cartels. This act was expanded upon in 1914 with two more competitive laws: the Clayton Antitrust Act and the Federal Trade Commission Act. Both of these acts sought to organize a governmental body equipped to protect consumers from unfair competitive practices.4

A company wants its expatriates to receive the best training to adapt to the local environment in the host country. What is the goal of this training?

The goal of choosing the correct training is to provide the expatriate with cultural agility to best integrate into the host nation's culture.

Which level of economic integration is formed when trade barriers are removed between member countries but there is no mutual policy on trading with nonmember countries?

The free trade area allows basic economic cooperation so member countries remove barriers to trade among themselves.

The Free Trade Area

The free trade area allows basic economic cooperation so member countries remove barriers to trade between themselves but are free to establish any trade policies with nonmember countries independently. The free trade area is the most basic form of economic cooperation. Member countries remove all barriers to trade such as tariffs, quotas, and nontariff barriers while keeping their own external trade policies with nonmember countries. An example is the North American Free Trade Agreement comprised of Canada, Mexico, and the United States, which came into effect in 1994 (NAFTA).2 NAFTA was revised in 2019 as the United States Mexico Canada Agreement (USMCA).

According to Friedman, the third era of globalization was brought about, in many respects, by IT. Some of the specific technologies he lists include the following:

The graphical user interface for the personal computer popularized in the late 1980s—Before the graphical user interface, using a computer was relatively difficult. By making the personal computer something that anyone could use, it became commonplace very quickly. Friedman points out that this digital storage of content made people much more productive and, as the internet evolved, made it simpler to communicate content worldwide. The build-out of the internet infrastructure during the dot-com boom during the late 1990s—During this period, telecommunications companies laid thousands of miles of fiber-optic cable all over the world, turning network communications into a commodity. At the same time, internet protocols such as SMTP (e-mail), HTML (web pages), and TCP/IP (network communications) became standards that were available for free and used by everyone. The introduction of software to automate and integrate business processes—As the internet continued to grow and become the dominant form of communication, it became essential to build on the standards developed earlier so the websites and applications running on the internet would work well together. Friedman calls this "workflow software," by which he means software that allows people to work together more efficiently and different software packages and databases to integrate more readily. Examples include payment processing systems and shipping calculators.1

Intellectual Property Rights

The legal protections for creations of the mind

Digital Divide

The inequality between groups to access knowledge and use of information in communication technologies. The digital divide is a term used to describe a discrepancy in access to information technology (IT) between populations. Digital literacy extends beyond computer literacy or an understanding of how to use a computing device (Steele, 2018). The digital divide can occur between countries, regions, or even neighborhoods.1 In Latin America and the Caribbean, more than two-thirds of people did not have access to mobile broadband in 2017, while in Japan, 95% did (Dunne, 2017). In many U.S. cities, there are pockets with little or no internet access, while just a few miles away, high-speed broadband is common.

What is a benefit of foreign direct investment?

The inflow of capital benefits global and local economies. The inflow of capital to a country helps both the global and the local economies.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen

Supply Chain Management

The management of the flow of goods or services through the process of moving from production to customer

Foreign Exchange Market

The market in which people use one currency to buy another currency

Foreign Exchange Market (FX Market)

The market in which people use one currency to buy another currency So, who sets exchange rates? The ever-changing rates are determined by the foreign exchange market (or FX market), where currencies can be bought and sold. The FX market is how companies, investors, and governments convert one currency into another. Currency values fluctuate from day to day, even hour to hour, relative to each other, which poses a risk for firms that operate internationally. These fluctuations create uncertainty to international businesses when they try to settle international transactions on a future date. Normally, if individuals want an immediate currency exchange then they will use the spot rate which is a real-time exchange rate. However, international transactions cannot be settled immediately. The waiting period before receiving the final payment involves currency exchange rate fluctuations, increasing risk to global business.

Management Information Systems (MIS)

The methods and equipment that provide information about all aspects of a firm's operations Information systems and the computers that support them are an integral part of business support. These management information systems, methods and equipment that provide information about all aspects of a firm's operations, provide managers with the information they need to make decisions. They help managers properly categorize and identify ideas that result in substantial operational and cost benefits.

Economically Similar

The more similar the economies of the member countries, the more likely the economic bloc will succeed. If there is a significant difference in the wages offered to employees of the same skill and education level, employees will migrate to the country offering the highest wages. If a member country is economically unstable or becomes so, it is easier for the instability to spread throughout the economic bloc. Members of an economic bloc are usually required to meet strict membership conditions such as low inflation, low unemployment, reasonable wages, and a stable economy before they are allowed to join the union (Cavusgil, Knight, & Riesenberger, 2016). Countries in an economic union should have similar political goals and aspirations. Each nation must be willing to give up its autonomy for the goals of the union. A country with a similar culture and language makes it easier to develop a mutual understanding of the goals for the economic union. A close geographic region cuts down on transportation costs and makes shipping of goods between countries both cheaper and easier (Cavusgil, Knight & Riesenberger, 2016).

Barriers to Entry

The obstacles that make it difficult for a new company to enter a given market. These barriers may include technology challenges, high start-up costs, or government regulations Global strategic rivalry theory emerged in the 1980s and was based on the work of economists Paul Krugman and Kelvin Lancaster. Their theory focused on multinational corporations and their efforts to gain a competitive advantage against other global firms in their industry. Firms will encounter global competition in their industries. To prosper, they must develop competitive advantages. The critical ways that firms can obtain a sustainable competitive advantage are called the barriers to entry for that industry. The barriers to entry refer to the obstacles a new firm may face when trying to enter into an industry or new market.

Currency Option Contracts - derivative currency instrument used to hedge exchange rate risk.

The option or the right to exchange a specific amount of currency on a specific future date and at a specific agreed-on rateThe option or the right to exchange a specific amount of currency on a specific future date and at a specific agreed-on rate. An option contract establishes an optional agreement between a buyer and seller to purchase or sell a certain amount of currency at a later date based on an agreed-on currency value. Currency option contracts are the option or the right—but not the obligation—to exchange a specific amount of currency on a specific future date and at a specific agreed-on rate. The option contract could be to buy (call) or to sell (put). Since a currency option is a right but not a requirement, the party holding an option does not have to exchange the currencies if the party chooses not to. This is referred to as not exercising an option. To induce investors to issue an option and thereby obligate themselves to make a disadvantageous trade, option holders must pay a premium to the option issuer.3 For example, the US/Euro exchange rate can be locked, and the person who purchased the right to this option contract gets the option to sell euros for dollars at a pre-determined rate, or the buyer has the right to give up the option contract and lose the premium. There are costs associated with using these instruments, such as premium pricing, bank fees, and interest payments. But companies often prefer to protect themselves against a potential larger downside loss, even if they have to pay extra to avoid that bigger loss.2

The Drawbacks of Regional Economic Integration

The other side to trade creation is trade diversion. Member countries may trade more with each other rather than with nonmember nations. Increased exclusive internal trade may mean increased trade with a less efficient or more expensive producer because it is a member country. In this sense, weaker companies can be protected inadvertently with the bloc agreement acting as a trade barrier. In essence, regional agreements have formed new trade barriers with countries outside of the trading bloc.1 Countries may move production to cheaper labor markets, which might cause job loss in certain member countries. With each new round of discussions and agreements within a trade bloc, nations may find that they must give up more of their political and economic rights. For example, the economic crisis in Greece threatened not only the EU, in general, but also the rights of Greece and other member nations to determine their domestic economic policies.1 Countries may see a sacrifice of their cultural uniqueness. Regional integration may encourage mergers and acquisitions within the bloc to create large rivals. Economic power will tend to go to these large conglomerates in the union. Large external firms can also overwhelm and overshadow small local firms. These small firms no longer enjoy tariff protection and could be eliminated. Power in large firms can lead to more centralized power for the entire regional economic bloc. This centralized power may result in reallocation and reassignment of workers to distant locations (Cavusgil, Knight, & Riesenberger, 2016).

Which result occurs when a legally enforceable contract between two businesses from different countries is broken?

The party who has been affected can seek damages. When a legally enforceable contract is broken, the party who has been affected can seek damages so the business can be made whole as if the breach of contract did not occur.

Colonialism

The policy or practice of acquiring full or partial political control over another country to exploit it economically

Exchange Rates

The price of one currency expressed in terms of units of another currency

Transfer Pricing

The practice of shifting assets to a subsidiary in a country with a better tax bracket Transfers occur when a company transfers goods or services between its subsidiaries in different countries. For example, a firm might design a product in one country, manufacture it in a second country, assemble it in a third country, and then sell it around the world. Each time the good or service is transferred between subsidiaries, one subsidiary sells it to the other. The question is, what price should be paid? The transfer price is the price that one subsidiary (or subunit of the company) charges another subsidiary for a product or service supplied to that subsidiary. Since the pricing takes place between entities owned by the same parent firm, there is an opportunity for pricing an item or service at significantly above or below cost in order to gain advantages for the firm overall. For example, transfer pricing can be a way to bring profits back to the home country from countries that restrict the amount of earnings that multinational firms can take out of the country. In this case, the firm may charge its foreign subsidiary a high price, thus extracting more money out of the country. The firm would use a cost-plus markup method for arriving at the transfer price, rather than using market prices. Although this practice optimizes results for the company as a whole, it may bring morale problems for the subsidiaries whose profits are impacted negatively from such manipulation. In addition, the pricing makes it harder to determine the actual profit that the favored subsidiary would bring to the company without such favored treatment. Finally, all the price manipulations need to remain compliant with local regulations. In fact, to combat such potential losses of income tax revenue, more than 40 countries have adopted transfer pricing rules and requirements. Generally, compliance with local tax regulations means setting prices such that they satisfy the "arm's length principle." That is, the prices must be consistent with third-party market results. The test of fairness is, "What would an independent company, operating in a competitive market, charge for performing comparable services or selling similar products?" Nonetheless, even within these guidelines, multinational firms can adjust prices to shift income from a higher tax country to a lower tax one. Governments, of course, are instituting or revising legislation to ensure maximum taxes are collected in their own countries. As a result, multinational firms must monitor compliance with local transfer pricing regulations.

US Trade Agreement and Participation from Senate/House:

The president of the United States has the power to negotiate treaties with foreign nations, but the Senate must approve them with a two-thirds vote, according to the Constitution. Under U.S. law, treaties are equivalent to Federal legislation and therefore must be approved by the senate. Agreements made without submission to the Senate are called executive agreements. Under international law, both agreements and treaties are considered binding. Free trade agreements require approval from both houses of Congress since, unlike treaties, they deal with a revenue stream from trade. The process of a trade agreement starts with the president entering into an agreement with trading partners before approval by Congress though the law requires the president to consult Congress 90 days before signing the contract

infant industry argument

The primary purpose of the infant industry argument is as the name implies: protection. Newer industries are inherently competitive and are highly vulnerable to their more developed counterparts in other countries for a variety of reasons. Countries that get a late start in a particular industry need protection for a period of time until they have become efficient enough to compete in the world market. Infant industry allows developing nations to have protection against competitive pressures.

Value Chain

The process by which a company adds value to product, such as production, marketing, and service

Glocalization

The process of adapting to local markets while maintaining a global identity Glocalization is the process of adapting to local markets while maintaining a global identity.

Diversifying

The process of allocating capital in a way that reduces the exposure to any one particular asset or risk

Government Procurement Programs

The process of buying goods and services by a government agency through a specific process of issuing bid proposals and seeking responses from companies. Public authorities, such as government agencies, are much like private interests in that they must also buy goods and services. Unlike private interests, governments are more likely to buy domestically produced goods and services, rather than the lowest cost commodities. Because government procurement often represents a significant portion of a country's GDP, foreign suppliers are at a disadvantage to domestic ones when it comes to these programs.

Product Adaptation

The process of changing a product in some way so it is more acceptable or desirable in a particular marke. Adaptation is any modification of the domestic product for the foreign market. Sometimes changing the packaging or product is a critical step in adaptation.t

Standardization

The process of making everything conform to expectations and guidelines for consistency Standardization is the effort to keep the product the same everywhere and to maintain strict quality control in order to stay true to the brand. Global standardization helps create economies of scale which increases profits.

Push Model

Theory in supply chain management that focuses decisions on the needs of the product Driven by e-commerce's capabilities to empower clients, most companies have moved from the traditional push business model where manufacturers, suppliers, distributors, and marketers have most of the power, to a customer-driven pull model.

Which organization aims to develop a global intellectual property infrastructure?

This stands for World Intellectual Property Organization. Its goal is to develop a global IP infrastructure, build international respect for IP, and implement global policy related to IP.

Distribution

The process of supplying goods to customers

repatriation

The process of transitioning employees back to their home countries Finally, repatriation is the process of helping employees make the transition back into their home country. Many employees experience reverse culture shock upon returning home, which is a psychological phenomenon that can lead to feelings of fear, helplessness, irritability, and disorientation. All these factors can cause employees to leave the organization soon after returning from an assignment and take their knowledge with them. Repatriation planning should happen before the employee leaves on assignment and should be a continual process throughout the assignment and upon return. It is also important to note that offering an employee an international assignment can help develop that person's understanding of the business, management style, and other business-related development. Working overseas can be a crucial component of succession planning. It can also be a morale booster for other employees, who see that the chosen expatriate is further able to develop a career within the organization.5

How do antidumping laws protect a domestic market?

They prevent foreign companies from selling goods and services at or below cost. Antidumping laws prevent foreign companies from selling goods at or below production cost to ensure domestic companies can stay competitive.

Due Diligence

The reasonable steps or research necessary before making an informed decision or evaluation

How does General Data Protection Regulation (GDPR) help protect people's personal data?

The regulation applies to all companies processing data of European citizens, regardless of where the company is located. Users must be notified of data breach within 72 hours of awareness. Companies that breach the policies of the GDPR can be fined up to 4% of their annual global turnover or €20 million, whichever is greater. Users are required to opt in explicitly to grant permission for sensitive personal data.

What is an accurate characterization of the relationships between multinational corporations (MNCs) and the host country governments in which they operate?

The relationships are mixed because MNCs can cause, but also solve, problems for the host country. The relationships between an MNC and the host country can be both good and bad depending on a number of factors including economic development, resource distribution, and employment.

Financial software

Used to compile accounting and financial data and create financial statements and reports.

Dividend Repatration

The return of earnings from foreign subsidiaries to their parent companies back in the home country

Currency Risk

The risk of a change in the exchange rate that will have an adverse effect.

World Intellectual Property Organization (WIPO)

This agency focuses on developing a global IP infrastructure. Established by the United Nations to implement global policy related to intellectual property WIPO's strategic plan is focused on developing a global IP infrastructure, building international respect for IP, and implementing global policy related to IP.

Supply Chain

The sequence of processes involved in the production and distribution of a commodity A supply chain refers to the flow of physical goods and associated information from the source to the consumer. Key supply chain activities include production planning, purchasing, materials management, distribution, customer service, and sales forecasting. These processes are critical to the success of manufacturers, wholesalers, and service providers. In a global supply chain, these processes occur across international borders. In the traditional supply chain model, raw material suppliers define one end of the supply chain. They are connected to manufacturers and distributors, which, in turn, are connected to a retailer and the end customer. Although the customer is the source of the profits, they are only part of the equation in this push model, which focuses on the product. The order and promotion process, which involves customers, retailers, distributors, and manufacturers, follows a narrow path through time-consuming paperwork and layers of corporate bureaucracy. By the time customers' needs are filtered through the agendas of all the members of the supply chain, the production cycle ends up serving suppliers every bit as much as customers. The supply chain network structure consists of all entities involved in moving a product from production to the customer. Business processes are the activities that produce a specific output of value to the customer. The management function integrates the business processes across the supply chain. Traditionally, in many companies, upstream and downstream portions of the supply chain were not effectively integrated. Today, competitive advantage increasingly depends on integrating key supply chain processes into an effective value delivery network

Direct Channel

The shortest path between a producer and a consumer Advantages: 1. You maintain control of the product, marketing, and costs. 2. Shorter channel means the product reaches the consumer faster. 3. It is less costly in the long term. 4. It enables stronger connection to the customer base. Disadvantages: 1. More expensive in beginning because it requires capital investment to set up facilities and hire staff 2. Difficult to manage on a large scale 3. Must deal with issues in areas such as shipping or government restrictions without experience 4. Must have own logistics team and transportation

What makes the enforcement of United Nations Environmental Program regulations difficult?

The sovereign rights of nations preclude the United Nations from enforcing the regulations. United Nations compliance is normally voluntary and agreements tend to be nonbinding.

Market Capitalization

The total dollar value of a company's outstanding shares of stock

Marketing Channel

The way a seller connects with a customer; sometimes called a distribution channel

Distribution Channel

The way a seller makes a product available to a customer to buy; sometimes used interchangeably with marketing channel

Exchange Rate Regime:

The way in which an authority manages its currency in relation to other currencies and the foreign exchange market

Pull Model

Theory in supply chain management that bases decisions and activities on the needs of the customer This business model is less centered around product and more directly focused on the individual consumer. As a result, the new model also indicates a shift in the balance of power from suppliers to customers. Now companies can better serve customer needs, carry less inventory, offer customized products and services, and send products to market more quickly.

Advantages and Disadvantages of an Indirect Strategy:

There are advantages and disadvantages to using an indirect distribution strategy. Companies partner with intermediaries not because they necessarily want to (ideally, they could sell their products straight to users) but because the intermediaries can help them sell the products better than they could alone. In other words, they have some sort of capabilities the producer needs: contact with many customers or the right customers, marketing expertise, shipping and handling capabilities, and the ability to lend the producer credit are among the types of help a firm can get using a channel partner. A strong channel partner like Walmart can promote and sell a lot of a product that might not otherwise turn a profit for its producer. In turn, Walmart wants to work with strong channel partners it can depend on to continuously provide it with great products that sell well. Intermediaries also create efficiencies by streamlining the number of transactions an organization must make, each of which takes time and costs money to conduct. Look at the example of John Deere. By selling tractors through a local dealer rather than to each farmer individually, the company is able to reduce its administrative costs by reducing the number of transactions it must track and the added labor for customer relations. Some of the disadvantages of using the indirect strategy is a loss of or at least reduced amount of control over product marketing and the relationship with the customer. Profits must also be shared with the channel partners. The more partners, the more complex the distribution channel is, which increases the risk for mistakes or problems.

There are two forms of FDI

There are two forms of FDI—horizontal and vertical.

Distribution Management Options

There are typically three distribution strategies for entering a new market. First, companies can do a joint venture or partnership with a local company. This is the strategy Walmart used when entering Mexico. A second strategy is to acquire a local company to have immediate access to large-scale distribution. Home Depot pursued this strategy in China when it acquired a partner with whom it had been working for quite some time. Third, a company can build its own distribution from the beginning. Retailer Carrefour chose this route in China years ago because it knew China would offer a big opportunity, and Carrefour wanted to develop its own local capabilities. Which strategy the company chooses depends on its timetable for volume in the market, local foreign ownership laws, and the availability of suitable partners or acquisition targets. In international business, the number of intermediaries can expand due to the regulations affecting import and export across national boundaries, which increases the number and complexity of issues a company might face. Agents, brokers, international freight forwarders, and trading companies may get involved. Then, once a company's product is in the foreign country, that country may have its own wholesalers who get involved. The firm must pay all these intermediaries for their services, which increases the cost of the product. Firms must raise prices or accept lower margins when confronting these added channel costs.

The U.S. government's Office of the United States Trade Representative (USTR)

This agency monitors intellectual property rights around the world monitors intellectual property rights around the world and fights IP theft. The USTR evaluates countries and rates them according to how those countries enforce IP rights. The Special 301 Report is an annual review of the global state of IP rights protection and enforcement issued by the USTR. The worst offenders are put on a "Priority Watch List." The countries on the 2018 Priority Watch List are Algeria, Argentina, Canada, Chile, China, Colombia, India, Indonesia, Kuwait, Russia, Ukraine, and Venezuela. China, which has been on the Watch List before, continues to be on the list not only because of IP theft and counterfeiting but also because of government practices that severely restrict the market for foreign goods while giving favored treatment to "indigenous innovation" (USTR, 2018). Countries can get off the Watch List by taking measures to reduce IP theft. The Czech Republic, Hungary, and Poland were all once on the Watch List but were removed because they took significant steps to clamp down on piracy and counterfeiting.

Alternative Dispute Resolution (ADR)

This is how the WTO mediates IP disputes.

A company is considering establishing a subsidiary in a new host country and wishes to prepare its expatriates to adapt to the local environment. How should this company prepare its expatriates?

This will help prepare the company and its employees for integrating with new ethnic groups in a new culture.

Which Latin American phrase (translated into English) typifies how time is viewed, which can make conducting business frustrating to Northern European companies seeking to expand in Latin America?

Time is space. Latin America views time as being subordinate to relationships and situations. Individuals in Latin America will be late to a meeting if an earlier meeting requires time for relationship development or connections need to be made.

What is a reason for companies to engage in foreign direct investments?

To take advantage of tax exemptions offered by the host country. Often countries offer tax exemptions to companies that invest in their economies.

The Benefits of Regional Economic Integration

Trade agreements create more opportunities for countries to trade with one another by removing the barriers to trade and investment. Due to a reduction or removal of tariffs, cooperation results in lower prices for consumers in the bloc countries.1 The increase in the amount of trade is due to shifts in resource allocation. Production moves to the members of the trading bloc, which have a comparative advantage and therefore are more efficient in production. Increased efficiency can lead to lower prices and subsequently higher consumer demand, which results in increased production and trade. Studies indicate that regional economic integration significantly contributes to the relatively high growth rates in less-developed countries. By removing restrictions on the labor movement, economic integration can help expand job opportunities.

What is the agreement that the World Trade Organization has between its member nations that governs all intellectual property laws?

Trade-Related Aspects of Intellectual Property Rights (TRIPS) This agreement by the WTO governs all IP laws

A multinational corporation would like to maximize profits by moving products to international subsidiaries to gain tax advantages. Which pricing strategy should this corporation use for this purpose?

Transfer pricing involves conducting business among cross-border subsidiaries, often producing the product in the country with the lowest costs and tax rates.

Communications programs

Translate data into a form for transmission and transfer it across a network to other computers. They are used to send and retrieve data and files. Communications software, such as email, IM, and social media allow companies to communicate internally, as well as with business partners and customers on a global scale.

How are free trade agreements handled differently than treaties in the United States?

Treaties must be approved by the Senate, whereas a free trade agreement must pass both houses of Congress. Since a free trade agreement involves revenue from trade, it must be approved by both houses of Congress, whereas a treaty only needs to be approved by the Senate.

Which economic actor benefits as the U.S. dollar weakens?

U.S. investor abroad invests money in another country by first converting U.S. dollars to a foreign currency, making the investment, then later converting+ it back to U.S. dollars. As the U.S. dollar becomes weaker, the rate of return on the investment is larger as the investor gets more U.S. dollars from converting back from the foreign currency.

Oil Pollution Act of 1990

U.S. law that strengthened the Environmental Protection Agency's ability to prevent and respond to oil spills

The following are some tips on how to negotiate for success and avoid certain communication pitfalls.

Understand the different ways that people communicate. There are differences in how skills or knowledge is taught or transferred. In the United States, we're expected to ask questions—it's a positive and indicates seriousness about wanting to learn. In some cultures, asking questions is seen as reflecting a lack of knowledge and could be considered personally embarrassing. It's important to be able to address these issues without appearing condescending. Notice the word is appearing—the issue is less about whether you think you're being condescending and more about whether the professional of the different culture perceives a statement or action as condescending. Again, culture is based on perceptions and values. Another example is the expansion of the company BusinessObjects from France and the United States into India. Upper managers were used to making direct requests for information and receiving prompt responses, but many communications were ignored or went unanswered by the Indian staff. The issue was a different way of communicating. The Indian staff did not expect to receive questions from upper management and did not know how to respond to. Their expectation was that requests would be funneled down to them through team leaders. The different approaches caused confusion and tension on the teams until it was resolved (Meyer, 2015). Focus on communications of all types and learn to find ways around cultural obstacles. For example, if you're dealing with a culture that shies away from providing bad news or information, such as in Thailand, don't ask yes-or-no questions. Focus on the process and ask questions about the stage or deliverable. Many people get frustrated by a lack of information or clear communications. You certainly don't want to be surprised by a delayed shipment to your key customers. When negotiating with people from a different culture, try to understand your counterpart's position and objectives. This doesn't imply that you should compromise easily or be "soft" in your style. Rather, understand how to craft your argument in a manner that will be more effective with a person of that culture. It is important in hierarchical cultures, such as in China or Latin America, to confirm that the person you are negotiating with has the power to make decisions, and if not, what their objective is. Negotiating a deal in China or other hierarchical cultures may require several information-finding rounds where your counterparts can only agree that they like what you are saying, but their approval does not carry decision-making power.3

Collective Environment

Understanding that the environment not only belongs to everyone to enjoy but is also everyone's shared responsibility

UN Convention on Contracts for the International Sale of Goods (CISG)

United Nations treaty that applies to the international sales of commercial goods

Paris Agreement

Universal global climate deal aimed at keeping long-term global temperature increase at below 2°C

Private Export Funding Corporation (PEFCO):

Unlike JETRO, OPIC, and Ex-Im Bank, the Private Export Funding Corporation (PEFCO) is a private sector organization. According to the PEFCO website, it was formed in 1970 "to assist in the financing of U.S. exports by supplementing the financing available from commercial banks and other lenders." PEFCO provides medium- to long-term loans if they are secured against nonpayment under an appropriate guarantee or insurance policy issued by Ex-Im Bank or certain small business export loans under a guarantee issued by the SBA

Spreadsheet software

Used to prepare and analyze financial statements, sales forecasts, budgets, and similar numerical and statistical data. Once the mathematical formulas are entered into the spreadsheet, the data can be changed, and the solution will be recalculated instantaneously. Spreadsheet software is needed to manage data. In an ever-expanding global market, being able to analyze large amounts of data and present it in multiple ways is valuable for many elements of business.

Word processing software

Used to write, edit, and format documents, such as letters and reports. Spelling and grammar checkers, mail merge, tables, and other tools simplify document preparation. Word processing software allows people on a global scale to work on the same documents, easily share it, and better work in all markets.

Hedging and Its Risks

Using financial instruments to reduce adverse price movements Any company operating globally must deal in foreign currencies. It has to pay suppliers in other countries with a currency different from its home country's currency. (The home country is where a company is headquartered.) The firm is likely to be paid or have profits in a different currency and will want to exchange it for its home currency. Even if a company expects to be paid in its own currency, it must assess the risk that the buyer may not be able to pay the full amount due to currency fluctuations.1 In a simple example, currency fluctuations mean that if a U.S.-based company sold its product in Germany at a 10% profit and the currency value of the dollar dropped 10% relative to the euro, then the profit would be wiped out. Companies can mitigate currency risk by engaging in hedging. Investors use special financial instruments called derivatives to hedge (decrease return volatility) or to speculate (increase the volatility of returns).3 Typically, businesses try to reduce adverse price movements by taking an offsetting position. Swaps, options, and futures are three additional derivative currency instruments used to hedge exchange rate risk. ompanies use additional strategies to make money in the exchange markets by taking either a long position or a short positionon an asset. Essentially, taking a long position is purchasing an asset and forecasting that the value is going to increase, whereas taking a short position is looking for the value of an asset to go down. Whether long or short, the position relates to a perspective on the direction of the value of an asset rather than an amount of time.

Insourcing

Using in-house staff to complete a business task

The start-up world/Small International Businesses is full of interesting options to procure capital, including the following:

VC—Venture capital is a popular term in the Silicon Valley and other technology hubs. Venture capitalists (VCs) accumulate capital from a number of speculative investors and seek strong business opportunities still in the start-up phase. Winning capital from a VC can be quite lucrative, as the amount of capital invested can be high (high enough to justify international operations). VCs would generally be represented by a board that would assess the viability of the business as an investment and determine terms (ownership by investors) and returns. Angel investors—They are similar to VCs but can actually be quite varied in format and motivations. They are more often individuals with capital to spare who have taken an interest in a particular business or product. They may act as advisers or objective investors, they may simply love the product, or they may have investment incentives (most commonly both). FFF—One type of investment comes from personal connections. It is known by the somewhat humorous label "Friends, Family, or Fools" (FFF). Unlike VCs and angel investors, this type of funding is usually only for capital. The FFF does not include help beyond monetary input. Crowdsourcing—Websites such as Kickstarter and Indiegogo are unique and modern formats, where individuals with potential business ideas can raise capital and support prior to producing a given product or service. This interesting model allows a large number of people to invest a small amount of capital, which cumulatively may be enough to 'kick-start' a venture (international or otherwise). Reimbursements in the form of credits, t-shirts, early access to the product, and other incentives are often used to motivate small investments.

Equity

Value of the shares of a company Equity financing refers to raising capital by selling shares of stock. A stock market refers to the organized trading of securities through exchanges. An individual or entity can purchase partial ownership in a corporation by buying shares of stock in the company. The global equity market refers to all stock exchanges worldwide where firms can buy and sell stock for financing an investment. The largest exchanges in the world include the New York Stock Exchange (NYSE), Euronext, the Tokyo Stock Exchange, the NASDAQ (National Association of Securities Dealers Automated Quotations) stock exchange, and the London Stock Exchange. The advantage of raising capital in equity markets is that the firm does not have to repay the money at a specific time or at a specific interest rate, as it does with bank loans or bonds. The disadvantage is that each time a firm offers stock, the firm's management loses some control of the company because shareholders can vote to approve or disallow management actions.

Which type of investor secures funding from a number of speculative financiers and pursues strong global business opportunities still in the start-up phase?

Venture capitalists provide high amount of capital to early-stage, emerging firms that are deemed to have high growth potential.

Vertical FDI

Vertical FDI is when a company invests internationally within the supply chain of the company. The company could invest in the supplier field or distributor field. A firm may invest in establishing production facilities in another country to produce parts for the final production.

Compensation

What an employee is paid in exchange for work The first option is to maintain companywide pay scales and policies, so, for example, all sales staff members are paid the same no matter what country they are in. This can reduce inequalities and simplify record keeping, but it does not address some key issues. First, this compensation policy does not address that it can be much more expensive to live in one place versus another. A salesperson working in Japan has much higher living expenses than a salesperson working in Peru, for example. As a result, most organizations choose to use a pay banding system based on regions, such as South America, Europe, and North America. This is called a localized compensation strategy. Microsoft and Kraft Foods both use this approach. This method provides the best balance of cost-of-living considerations. However, regional pay banding is not necessarily ideal if the goal is to motivate expatriates to move. For example, suppose the employee has been asked to move from Japan to Peru, and the salary is different, by half, for example. In that case, there is little motivation for that employee to want to take an assignment in Peru, thus limiting the potential benefits of mobility for employees and the company. One possible option is to pay a similar base salary companywide or regionwide and offer expatriates an allowance based on specific market conditions in each country (Cartland, 1993). This is called the balance sheet approach. With this compensation approach, the idea is that the expatriate should have the same standard of living that the expat would have had at home. Five groups of expenses are looked at in this approach: income taxes housing goods and services base salary overseas premium

A company operating in a foreign country hires and conducts business according to the cultural practices in its home country. Which approach to human resource management is used by this company?

When a company uses the same human resource policies and practices in the host country as it uses in the home country, it is using an ethnocentric approach.

Forward Vertical FDI

When a firm invests internationally in the distribution field, i.e. sells the goods or distributes goods into a foreign market (i.e., acting as a distributor), this is termed forward vertical FDI as this is one step moving forward in the supply chain after the final production is done.

Free Trade Impacts on Jobs

When considering free trade agreements, countries must find a balance between the potential domestic benefits and the potential consequences of free trade. In theory, imports might injure workers in several different ways: fewer jobs, lower wages, or poor working conditions. For example, in the early 1990s, the United States was negotiating the North American Free Trade Agreement (NAFTA) with Mexico, an agreement that reduced tariffs, import quotas, and nontariff barriers to trade between the United States, Mexico, and Canada. Many initially expressed concern, stating that U.S. employers would relocate their operations to Mexico in order to take advantage of lower wages since, at that time, wages were about one-eighth of those in the United States. NAFTA passed Congress. President Bill Clinton signed it into law, and it took effect in 1995. In addition, there are further job-related impacts to consider - the creation of jobs, the affect on wages, as well as consideration of labor standards and working conditions of other nations. Because trade raises the amount that an economy can produce by letting firms and workers play to their comparative advantage, trade will also cause the average level of wages in an economy to rise. Workers who can produce more will be more desirable to employers, which will shift the demand for their labor out to the right and increase wages in the labor market. By contrast, barriers to trade will reduce the average level of wages in an economy. Workers in many developing countries around the world labor work under conditions that would be illegal for a worker in the United States. Workers in countries such as China, Thailand, Brazil, South Africa, and Poland are often paid less than the United States' minimum wage. For example, in the United States, in 2018, the minimum wage was $7.25 per hour; a typical wage in many low-income countries might be more like $7.25 per day, or often much less. Moreover, working conditions in low-income countries may be extremely unpleasant or even unsafe. As international trade increases, it contributes jobs shifting away from industries where that economy does not have a comparative advantage and toward industries where it does have a comparative advantage. The degree to which trade affects labor markets has a lot to do with the structure of the labor market in that country and the adjustment process in other industries. Global trade should raise the average level of wages by increasing productivity. However, this increase in average wages may include both gains to workers in certain jobs and industries and losses to others.

Field Simulation Training

When the company believes that the employees have successfully passed the "survival training" stage, it is time for field simulation training. The employee (and family) visits a neighborhood of the same ethnic background as the destination, or if the trainees are already in-country, then they move out to the "real world." Depending upon the conditions, an individual may be dropped into a rural area with limited resources and told to get back to the office. Or a family may be moved into temporary housing to meet their neighbors, shop for food, locate transportation, and just explore the area. When the simulation is over, the trainees come back to the center to compare notes and share experiences.

Strengthening Exchange Rate

When the exchange rate for a currency rises so the currency exchanges for more of other currencies, this is referred to as appreciating or strengthening.

Weakening Currency

When the exchange rate for currency falls so a currency trades for less of other currencies, this is referred to as depreciating or weakening.3

Trade Surplus

When the value of a country's exports is greater than the value of goods being imported

Globalization

Worldwide interconnections in virtually every sphere of activity including the spread of products, technology, information, and job opportunities. Globalization can result in blurred boundaries between nations, organizations, and investors

There are several common sources of financing:

a loan from a commercial bank a loan from an intermediary, such as an export management company that provides short-term financing a loan from a supplier, for which the buyer can make a down payment and ask to make further payments incrementally a loan from the corporate parent governmental or other organizational financing More Info: Some companies have mechanisms for providing credit to their business customers. For example, package delivery company United Parcel Service (UPS) also owns warehouses to which its customers can ship their products. Because UPS can see and track the inventory that its business customers send using this service, it can lend those companies money based on their warehouse inventory and goods in transit. Simply put, UPS information systems know that a company's goods are on their way or in the warehouse, so UPS can lend money based on that knowledge. Countries often have government-supported organizations that help businesses with import and export activities to and from their country. These services are, for the most part, free and include providing information, contacts, and even financing options.

Technical barriers to trade:

are non-tariff barriers to trade that refer to standards implemented by countries. Because these standards must be met before goods are allowed to enter or leave a country, they represent international trade barriers.

If a candidate is unsuccessful, then expatriate failure may occur - where the position ends prematurely or is considered ineffective. Some of the costs associated with failure of an expatriate or third-country national might include the following:

damage to host country relationships less motivation in host country staff costs associated with recruitment and relocation possible loss of that employee once returned missed opportunities to further develop the market

Distribution channels fall into two categories:

direct and indirect—but there is still a variety of ways a distribution channel can be set up. Look at the following chart. It shows the typical channels in business-to-consumer (B2C) markets.3 (In general, business-to-business (B2B) distribution channels parallel those of business-to-consumer (B2C) businesses.)4 As explained in the lesson introduction, the shortest channel consists of just two parties—a producer and a consumer. This is a direct channel. By contrast, a channel that includes one or more intermediaries—like a wholesaler, distributor, or broker or agent—is an indirect channel. Using an indirect channel does not mean the producer will not market directly to consumers. Levi's runs ads on TV designed to appeal directly to consumers. The makers of food products run coupon ads. Car companies run targeted ads on social media. However, the producer also relies on the intermediaries for help with the selling effort. Not everyone wants to buy their jeans or their next car online.3

The reasons investors invest in foreign portfolios are usually tied to the macroeconomic indicators of the country, including overall market capitalization, which can be sensitive to trends in some of the following:

economic growth rates (i.e., evidence of high product demand, and positive economic trends) exchange rate stability (i.e., ease of converting foreign revenue to home country dollars) health of the foreign banking system and interest rates (i.e., ease of loan approval) liquidity of the stock and bond market

How Governments Discourage or Restrict FDI

governments seek to limit or control FDI to protect local industries and critical resources (oil, minerals, etc.), preserve the national and local culture, protect segments of the domestic population, maintain political and economic independence, and manage or control economic growth. Tax rates and sanctions: A company's home government usually imposes these restrictions to persuade companies to invest in the domestic rather than foreign market.

There are different kinds of FDI, two of which—

greenfield and brownfield—are increasingly applicable to global firms. Many of the FDIs in developed countries such as in the European Union (EU) and the United States are through mergers and acquisitions between mature companies purposed for restructuring or refocusing on a core competency

More formally, risks associated with outsourcing typically fall into some general categories:

loss of control, loss of innovation, loss of organizational trust, and higher than expected transaction costs.

Information about a person that can be used to uniquely establish that person's identity is called personally identifiable information (PII). PII is a broad category that includes the following information:

name Identification number (i.e. Social Security Number in US) date of birth place of birth mother's maiden name biometric records (fingerprint, face) medical records educational records (i.e., official transcripts) financial information employment information Organizations that collect PII are responsible for protecting it. The Department of Commerce recommends that "organizations minimize the use, collection, and retention of PII to what is strictly necessary to accomplish their business purpose and mission." They go on to state that "the likelihood of harm caused by a breach involving PII is greatly reduced if an organization minimizes the amount of PII it uses, collects, and stores" (McCallister, Grance & Scarfone, 2010, p. ES-2). Organizations that do not protect PII can face penalties, lawsuits, and loss of business. In the United States and the EU, most states now have laws in place requiring that organizations that have had security breaches related to PII notify potential victims. While the privacy laws in the United States seek to balance consumer protection with promoting commerce, privacy in the European Union is considered a fundamental right that outweighs the interests of commerce. This regard for personal privacy as a fundamental right has led to much stricter privacy protection in the European Union but also makes commerce more complicated between the United States and the European Union.1 The European Union, to help people take control over their data, passed the General Data Protection Regulation (GDPR) in May 2016. The regulation went into effect on May 25, 2018.1 Personal data include a wide range of personal identifiers, including name, identification number, location data, or an online identifier. For sensitive data, users are required to opt-in explicitly to grant permission for its use The regulation applies to all companies processing data of EU citizens no matter where the company is located. Organizations that breach the policies of the GDPR can be fined up to 4 percent of annual global turnover or €20 million (whichever is greater). Users must be notified of the breach within 72 hours of awareness Just because companies are required to protect your information does not mean that they are restricted from sharing it. In the United States, companies can share your information without your explicit consent though not all do so. Companies that collect PII are urged by the Federal Trade Commission (FTC) to create a privacy policy and post it on their website. The state of Californiarequires a privacy policy for any website that does business with a resident of the state of California.

A U.S. employee believes that each individual is responsible for one's own success and finds it challenging to work in cultures that emphasize collaborative approaches to decision-making. Which aspect of Hofstede's cultural dimensions is exemplified by this employee?

ndividualism describes the extent to which individuals take responsibility for their own destinies and choose their own goals over a company's goals. The U.S. employee believes that each individual is responsible for personal success, which represents individualism.

Country A exports more goods to Country B than it imports from Country B. Country A receives more monetary gain by using this practice. Which relationship does Country A have with Country B?

rade surplus is when a country exports more than it imports from another country. For example, China normally exports more manufactured goods to the United States than it imports from the United States. China has a trade surplus.

cultural agility

the ability to understand multiple local contexts and work within them to obtain consistent business results.

There are two main types of import quotas:

the absolute quota and the tariff-rate quota.

Culture affects many things in business, including the following:

the pace of business business protocol—how to physically and verbally meet and interact decision-making and negotiating managing employees and projects propensity for risk-taking marketing, sales, and distribution

Free Trade Zone

An area where the nations allow free, or almost free, trade among each other while imposing tariffs on goods of nations outside the zone

Economic Union

An economic union is created when countries enter into an economic agreement, removing barriers to trade and adopting common economic policies. The members may use a common currency, harmonized taxes, and monetary and fiscal policies.2 An example is the Eurozone, which is a group of EU members who have adopted the euro as their official currency. The European Central Bank is responsible for setting the monetary policy for the Eurozone (Asgary, Samii, & Frutos-Bencze, 2016). Member countries strive to have a standard product and labeling standard, eliminate border controls, and establish unified policies for energy, agriculture, and social services. A standard set of laws and regulations is instituted regarding competition, mergers, corporate behaviors, and licensing standards for professionals

Antidumping

Dumping is the practice of charging a lower price for a product (perhaps below cost) in foreign markets than in the firm's home market. The company might be trying to win foreign customers, or it might be seeking to get rid of surplus goods.2 Countervailing and anti-dumping duties, or anti-subsidy duties, are extra duties levied on imports to neutralize an export subsidy. If a country discovers that a foreign country subsidizes its exports, and domestic producers are injured as a result, a countervailing duty can be imposed to reduce the export subsidy advantage. In international trade, dumping refers to a form of predatory pricing in which exported products are priced below the cost of production or the price charged in the home market. Antidumping duties are usually extra taxes levied on the product to neutralize the predatory pricing and bring the price closer to the "normal value." Underselling can be a substantial threat, particularly from economies where labor laws are lax and workers are exploited to create extremely low-cost goods. It is also a risk when governments get too involved in business. Dumping is when a country, industry, or person tries to sell goods at below production cost to undercut its competitors or get rid of excess inventory.

What is the result of the existence of multinational businesses?

Economic integration among countries One of the results of the existence of multinational businesses is economic integration among countries. This works to promote economic development and trade between home and host countries of multinational businesses.

Some examples of Government Participation include the following:

Government Procurement Programs: The process of buying goods and services by a government agency through a specific process of issuing bid proposals and seeking responses from companies.Unlike private interests, governments are more likely to buy domestically produced goods and services, rather than the lowest cost commodities. Because government procurement often represents a significant portion of a country's GDP, foreign suppliers are at a disadvantage to domestic ones when it comes to these programs. Bureaucratic delays: Delays at ports or other country entrances caused by administrative or bureaucratic red tape increase uncertainty and the cost of maintaining inventory.

Government Participation

Government participation represents direct governmental involvement in international trade or trade impediments that stem from governmental procedures and controls.

How Governments Encourage FDI:

Governments seek to promote FDI when they are eager to expand their domestic economy and attract new technologies, business knowledge, and capital to their country. In these instances, many governments still try to manage and control the type, quantity, and even nationality of the FDI to achieve their domestic, economic, political, and social goals.

Greenfield FDIs

Greenfield FDIs occur when multinational corporations enter into developing countries to build new factories or stores. These new facilities are built new—usually in an area where no previous facilities existed. The name originates from the idea of building a facility on a green field, such as farmland or a forested area. In addition to building new facilities that best meet their needs, the firms also create new long-term jobs in a foreign country by hiring new employees. Countries often offer prospective companies tax breaks, subsidies, and other incentives to set up greenfield investments. In general, greenfield refers to starting from the beginning

Horizontal FDI

Horizontal FDI occurs when a company is trying to open a new market and establishes the same type of business operation in that foreign market—a retailer, for example, that builds a store in a new country to sell to the local market.

A government uses various policies and rules to encourage FDI:

Host countries offer businesses a combination of tax incentives and loans to invest. Home-country governments may also provide a combination of insurance, loans, and tax breaks to promote their companies' overseas investments.1International investment agreements ensure that foreign investors are treated in a fair, equal manner to their domestic counterparts. Host governments improve or enhance local infrastructure—energy, transportation, and communications—to encourage specific industries to invest. This also serves to improve the local conditions for domestic firms. Host-country governments streamline the process of establishing offices or production in their countries. By reducing bureaucracy and regulatory environments, these countries appear more attractive to foreign firms. They seek to reassure businesses that the local operating conditions are stable, transparent (i.e., policies are clearly stated and in the public domain), and unlikely to change. Countries seek to improve their workforce through education and job training. An educated and skilled workforce is an important investment criterion for many global businesses. Governments can create export processing zones or special economic zones to attract FDI. Export processing zones or special economic zones are usually a distinct geographic area near a port that is ready to promote export industries. There are nearly 5,400 zones across 147 economies. These zones can attract investment, create jobs, and boost exports. Export processing zones frequently have different regulations than the rest of the country which helps encourage investment. In export-processing zones, parts are imported and assembled into a final product by cheap labor and then are exported. Export processing zones frequently have different regulations than the rest of the country, and many are accused of doing so to evade national labor laws. A study by the International Labor Organization reported that hiring laborers at low wages and not allowing them to organize is disturbing, but not a common practice. The International Labor Organization noted that the foreign investors in a country that had the highest number of violations were other developing countries, and, in some cases, workers in these zones had higher wages and benefits than workers outside of the country

A government uses various policies and rules to restrict FDI:

Host governments can specify ownership restrictions if they want to keep control of local markets or industries in their citizens' hands. Ownership restrictions: Host governments can specify ownership restrictions if they want to keep the citizens in control of local markets or industries. A company's home government usually imposes taxes and sanctions to persuade companies to invest in the domestic market rather than a foreign one. Foreign investors may be required to purchase a certain percentage of intermediate goods from the host countries. Changes in governments or changes in policies may lead to governments choosing to expropriate foreign assets to nationalize critical industries such as oil, electric power, mines, and telecommunications. When this occurs, the foreign investor generally receives little to no compensation.

Ad Valorem Tariffs

Import taxes based on a fixed percentage of the assessed commercial value of imported goods. Tariffs based on a percentage of the value of each item.4 The United States currently levies a 2.5% ad valorem tariff on imported automobiles. Thus, if $100,000 worth of automobiles is imported, the U.S. government collects $2,500 in tariff revenue. In this case, $2,500 is collected whether two $50,000 BMWs or ten $10,000 Hyundais are imported.

Specific Tariffs

Import taxes expressed in an amount of money per unit imported. are tariffs that levy a flat rate on each item imported. For example, a specific tariff would be a fixed $1,000 duty on every car imported into a country, regardless of how much the car costs.

Protectionism

Imposing tariffs on goods or services to safeguard industries Protectionism saves jobs in a specific industry by using tariffs and quotas on imported goods in that industry. This can subsequently create new domestic or keep old jobs in that industry. However, there are downsides to protectionism, outweighing the benefits. First, if consumers are paying higher prices to the protected industry, they inevitably have less money to spend on goods from other industries, so jobs are lost in those other industries. Second, if the protected product is sold to other firms, and other firms must now pay a higher price for a key input to their production, then production in those firms will decrease. They may even lose sales to foreign producers who do not need to pay the higher input price. Lost sales translate into lost jobs. The hidden opportunity cost of using protectionism to save jobs in one industry is jobs sacrificed in other industries. This is why the United States International Trade Commission, in its study of barriers to trade, predicts that reducing trade barriers would not lead to an overall loss of jobs. Protectionism reshuffles jobs from industries without import protections to industries that are protected from imports, but it does not create more jobs.

Purchasing goods and services or deciding to invest in a foreign market depends on a business's needs and overall strategy. Many considerations influence its decisions:

Is it cheaper to produce in the foreign market considering all factors such as transportation costs, labor costs, and raw materials costs, etc.? Has the company identified a significant foreign market? Is the company interested in obtaining access to foreign resources or commodities? Does the company want access to local technology or business process knowledge? Does the company's clients or competitors operate in that foreign country? Are there local incentives (cash and noncash) for investing in one country over another? Is it relatively straightforward to invest or establish operations in that country? Is the workforce or labor pool already skilled enough for the company's needs, or will extensive training be required? How will this investment impact the company's revenue and profitability? Can the company easily take profits out of the foreign country, or are there local restrictions? Can the company easily exit from a local investment, or are local laws and regulations cumbersome and expensive?1

Which agreement was established in 1988 and now has both political and economic goals to keep peace and stimulates economic growth in South American countries?

MERCOSUR: This is also named the Common Market of the South, or Mercado Común del Sur, and fits the agreement described.

South America: Mercosur

Mercosur is both an economic and political agreement with the goals of keeping peace in the Southern cone and promoting economic growth in the region. Today Mercosur is comprised of Argentina, Brazil, Paraguay, Uruguay, and Venezuela. Mercosur suspended Paraguay in 2012 due to a lack of commitment to democracy and has suspended Venezuela indefinitely starting in 2016 due to a lack of commitment to democracy and a violation of human rights. Bolivia, Chile, Columbia, Ecuador, Guyana, Peru, and Suriname are associate members. Mercosur recently signed a trade deal with the EU, which could become the largest free trade agreement in the world if it is ratified Mercosur constituents compose nearly half of the wealth created in all of Latin America as well as 40% of the population. Now the world's fourth-largest trading bloc after the EU, NAFTA, and the Association of South East Asian Nations (ASEAN), the group has been strategically oriented to develop the economies of its constituents, helping them become more internationally competitive so they would not have to rely on the closed market arena. Mercosur has brought nations with long-standing rivalries together. Although this is an economic trade initiative, it has also been designed with clear political goals. Mercosur is committed to the consolidation of democracy and the maintenance of peace throughout the southern cone. For example, it has worked to reach agreements between Brazil and Argentina in the nuclear field.2

Free Trade

Occurs when there is little or no government tariffs, quotas, subsidies, or prohibitions to inhibit the exchange

A small clothing company based in California decided that it needed to have an application (app) and an updated website. Because this is a small company, it did not have the technological expertise to handle this improvement. The company hired a company based in Pakistan to handle its technology needs. Which common practice among companies is this an example of?

Outsourcing is an option that can result in cheaper labor in other regions.

Outsourcing

Outsourcing is often a result of cheaper labor and easier systems of governance in those regions. The obvious perspective, from a policy-making context, is that these are jobs lost to overseas competitors.

Which country characteristic is most important to foreign direct investors according to a study by the World Bank?

Political stability and security A recent World Bank study showed political stability and security to be the most important country characteristic when choosing a country to invest in.

Portfolio Investment

Portfolio investment refers to act of investing in a company's stocks, bonds, or assets, but not to control or direct the firm's operations or management. An investment in another country is purely financial and does not involve any management responsibility Typically, investors in this category are looking for a financial rate of return, and to diversifying investment risk through multiple markets.

Export

Shipping goods or services out of the port of a country

Backward Vertical FDI

Since the supply field is one step back in the supply chain of the final production, this is referred to as backward vertical FDI. Many firms engage in backward vertical FDI. The auto, oil, and infrastructure (which includes industries related to enhancing the infrastructure of a country—i.e., energy, communications, and transportation) industries are good examples of this. Firms from these industries invest in production or plant facilities in a country to supply raw materials, parts.

Compound Tariffs

Taxes on imported goods that are a combination of a fixed amount and an amount based on the value of the goods. Are tariffs that are a combination of specific tariffs and ad valorem tariffs. For example, a compound tariff might consist of a fixed $100 duty plus 10% of the value of every imported car.

Central America Free Trade Agreement

a trade agreement instituted in 2005 that includes Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States. Creation of free trade. From the Central American perspective, there are two key benefits to CAFTA-DR: a reduction in barriers to the United States, their largest export market, and an increased attraction for foreign direct investors There are some perceived adverse effects of CAFTA-DR on both sides as well. For the United States, the potential for increasing trade deficits and shifting production overseas may result in more U.S. jobs lost in manufacturing and downward pressure on wages. For Central America, imports of staple crops and falling prices can displace subsistence farmers, the opportunities in new exports are expected to be less than imports and weakened rules on workers' rights might prevent workers from organizing

Common Market

he common market permits the formation of economically integrated markets between member countries, removing trade barriers and any restrictions on the movement of labor, technology, and capital. The customs union might cause business and job opportunities to flow to member countries that have higher labor productiveness and lower labor costs. This creates the need to remove all barriers among member nations to allow free movement of factors of production such as labor, capital, technology, etc. Trade barriers are removed, as are any restrictions on the movement of labor, technology, and capital between member countries. The primary advantage for workers is that they no longer need a visa or work permit to work in another member country of a common market. A common market requires cooperation from all member countries when making policies about economics and labor practices. A potential drawback is that labor may move to the country that offers the highest wages, and investment capital may be transferred to the country that offers the highest return on investment (Cavusgil, Knight, & Riesenberger, 2016). An example is the Common Market for Eastern and Southern Africa (COMESA).