Global Business FVC1 Pre-Assessment

caveat emptor

"buyer beware"; involves placing the burden of determining product safety on consumers

caveat venditor

"seller beware"; involves placing on manufacturers or sellers of products the burden of making sure products are safe or at least clearly and explicitly warning consumers about the potential safety risks of said products

Which aspects of economic geography affect international trade?

1. Advantage of location 2. Reduced specialization of products

What are two short term effects of currency movement?

1. Translation risk 2. Transaction risk

attitudes

Feelings or opinions

What is a component of the forward market?

Forward rates

A parent firm provides startup cost, promotional materials, and pricing to its subsidiary firm. Which strategy is this firm using for entering emerging markets?

Franchising

Which source of funds to financing international trade and investment is the international Monetary Fund (IMF) a part of?

Government financing

Bank of International Cooperation (JBIC)

Japanese bank that supports exporters around the world that have at least 30 percent Japanese content

What is one argument against globalization?

Jobs will be lost

Which regional bloc is dedicated to South America?

MERSCOSUR

Which risk occurs with a change in political governance?

Macropolitical

economic and monetary union

a union formed when members of a common market agree to implement common social programs (on education, employee benefits and retraining, health care, etc.) and coordinated macroeconomic policies (such as fiscal and monetary policies) that would lead to the creation of a single regional currency and a regional apex central bank

What is an economic ideology in which the government or state plays a strong role in the economy, may own stakes in certain businesses, but does NOT aspire o be classless?

Socialism

multi-polar world

a world economy in which the engines of growth could comprise several major industrialized and emerging market economies such as the United States, the European Union, China, India, Brazil, Russia, and South Africa rather than the United States alone

mission statement

a written statement of why a company exists and what it plans to accomplish

mark to market accounting

accounting practices that update the value of an asset to its current market levels

integrity

adherence to moral and ethical principles; soundness of moral character; honesty. As a practical matter, a person of integrity knows what is right and has the courage to do it

freight forwarder

agents for companies shipping products overseas who are chiefly involved with physical distribution activities and documentation

countertrade

agreement in which an exporter of goods or services to another country commits to import goods or services of corresponding value from that country

managed trade

agreements, sometimes temporary, between countries (or a group of countries) that aim at achieving certain trade outcomes

supply chain

all activities associated with the flow and transformation of goods and services from the raw material stage to the end user, together with the corresponding flows of monetary funds and information

international business

all commercial transactions, both private and public between nations of the world

trade policy

all government actions that seek to alter the size of merchandise and/or service flows from and to a country

currency swaps

allow firms to exchange currencies at a previously agreed exchange rate as a way to hedge exchange rate movements

import quotas

also known as Quantitative Restrictions (QRs are regulations that limit the amount or number of units of products that can be imported to a country

most favored nation (MFN)

an agreement among WTO countries in which any tariff concession granted by one member to any other country will automatically be extended to all other countries of WTO

strategic alliances

an agreement between two or more firms that do not involve the creation of a separate entity with joint ownership and in which the firms stand to gain revenues and maximize profits through cooperation for a given period of time

generalized system of preferences (GSP)

an agreement where a large number of developed countries permit duty-free imports of a selected list of products that originate from specific countries

arbitration

an alternative dispute resolution process whereby the parties designate a neutral private person or group of persons to hear and decide the case

free-trade area

an area in which two or more countries agree to eliminate all barriers to trade such as tariffs, quotas, and non-tariff barriers like border restrictions, while at the same time keeping their own external tariffs (within WTO guidelines) against nonmembers

international CAPM (ICAPM)

an asset pricing model that includes both domestic and global market factors to estimate the cost of equity or required rate of return on stocks

socialism

an economic ideology in which the government plays a strong role in the economy and may own stakes in certain businesses

capitalism

an economic ideology where businesses are privately owned, strong individual incentives exist, and the government plays very little role in the economy

communism

an economic ideology whereby the government or state owns and controls all major factors of production and is philosophically an economically classless society

preferential duties

an especially advantageous or low import tariff established by a nation for all or some goods of certain countries and not applied to the same goods of other countries

financial statement analysis

an evaluation of a company's financial statements in order to identify significant trends or relationships among the items

sensitivity analysis

an examination of optimistic, expected, and pessimistic scenarios to give a more complete picture of the risks and returns of investments abroad

specific tariff

an import tax that assigns a fixed dollar amount per physical unit

inflation

an increase in the prices of goods and services caused by the supply of money exceeding the demand for goods and services

International Accounting Standards Board (IASB)

an independent, privately funded accounting standard-setter based in London, U.K., that issues International Financial Reporting Standards

plain vanilla currency swap

an interest rate swap, often combined with a currency swap, if the interest being swapped is in different currencies

call option

an investor's right (but not obligation) to buy an asset (e.g., a currency) at a pre-determined price

put option

an investor's right (but not obligation) to sell an asset (e.g., a currency) at a pre-determined price

divisional structure

an organizational structure in which functions are grouped together to serve the needs of products, markets, or geographical regions

matrix structure

an organizational structure in which people are grouped simultaneously by function and by division

functional structure

an organizational structure that groups people together because they hold similar positions in a company, perform similar tasks, or use the same kinds of skills

empowerment

aspect of customer service that allows employees to take care of customer problems immediately, without having to consult superiors

speculators

attempts in currencies and currency derivatives to earn profits from trading them and help to make prices efficient

term financing

bank and government loans to importers to cover the cost of major purchases

trade finance

bank and government loans used by exporters to finance working capital (i.e., labor, materials, inventory, and accounts receivables)

values

basic beliefs or philosophies that are pervasive in a society

foreign bonds

bonds that are issued by foreign firms in another country in the home currency of that country

eurobonds

bonds that are sold in any country outside the home country, but in the home country's currency

Which of the following best illustrates a function of generally accepted accounting principles?

Supplying domestic, publicly traded Company B with guidance in preparing financial statements

Which example is considered a primary source that can be used to learn about foreign countries' cultures?

Talking to employees who have lived or abroad

What is the goal of the International Accounting Standards Board? (IASB)

To achieve globally recognized or harmonized standards of accounting and reporting

Why is intellectual property protection critical in today's global business environment?

To continue encouraging innovation, creativity and investment

What is the goal of corporate social responsibility?

To create a balance between private profits and public goods

What is the primary intention when multinational enterprises (MNEs) invest internationally?

To diversify their workplace

What might government entities use tax revenue generated by foreign direct investment IFDIs) for?

To reduce poverty

Why may companies outsource?

To take advantage of lower wages

What is needed when a U.S. company sends an employee to work in a foreign country for several years?

Training i the foreign language

What helps make globalization sustainable?

Transparency in government policy

Mr. Chavez banned U.S oil company operations in Venezuela. Which cost of foreign direct investment (FDI) is this an example of?

Unfair political interference

Which issues are associated with expatriate compensation?

Variability in taxes between countries

What is NOT an issue for a business considering outsourcing and offshoring?

Wage equality concerns

What should a smart company do regarding customer complaints to improve the company's customer service in the future?

Welcome customer complaint to use as feedback

private corruption

business corruption involving other private businesses, individuals, or groups

long position

buying a currency in a currency futures contract and profiting on an increase in the value of the currency over time

arbitrage

buying goods in a lower priced market and selling them in a higher priced market to make profits

special drawing right (SDR)

a basket of currencies consisting of dollars, euros, pounds, and yen created by the International Monetary Fund (IMF) for use as a benchmark to value the currencies of different countries

division

a business subunit that consists of a collection of functions or departments that share responsibility for producing a particular product or service

diversification

buying securities in a portfolio with price patterns over time that are different from one another, which reduces the volatility of the portfolio

direct strategy

bypassing channels of distribution by using marketing and sales offices located in foreign countries

big mac index

calculation using the cost of a McDonald's restaurant sandwich to assess the relative values of currencies

guanxi

chinese philosophy denoting friendships among unequals and unlimited exchanges of favors; it is not based on sentiment, emotions, or a group orientation

telecommunication networks

collections of computer hardware and software arranged to transmit information from one place to another

financial account

consists of domestic-country-owned assets abroad, foreign-owned assets in the domestic country, and net financial derivatives

international joint venture

a business that is jointly owned and operated by two or more firms (usually one from the host country and the other from another country) that pool their resources (labor, capital, technology, and management) to penetrate host country markets, generate and split profits, and share commercial risk

distributor

a channel of distribution that purchases products from a company doing business in a foreign market and then resells them to other buyers

agent

a channel of distribution that represents a company in a foreign market and is paid by commission

hybrid structure

a combination of different organizational structures

hollow corporation

a company that only completes product design and outsources all other production process functions

corporate social responsibility (CSR)

a company's obligations to society, including the welfare of people and places affected by company activities

collective bargaining agreement

a contract comprehensively setting forth employee terms and conditions of employment at a given workplace or group of workplaces

product life cycle (PLC)

a depiction of the sales and profits for a new product over its life time

material culture

a direct result of technology; best demonstrated by economic, social, financial, and marketing infrastructures

trademark

a distinctive phrase, name, word, picture, symbol or design, or combination of these, that identifies a given business' service or product and is owned by said business

labor union

a formal organization representing a group or groups of employees

product elimination

a formal, written procedure to determine which of a company's products should be dropped

decoupling

a fundamental global shift in which industrialized country-dependent developing economies begin to grow based on their own underlying economic strengths rather than the ups and downs of the world's richest countries

foreign exchange markets

a global network of international banks and currency traders that trade different countries' currencies

syndicate

a group of banks that collectively make a loan to a firm

export cartel

a group of countries that could effectively control export volume to keep their export prices, revenues, and economic growth stable or high

customs union

a group of free trade member countries that have adopted a common external tariff with nonmember countries

civil law legal system

a legal system based on a comprehensive listing of legal rules in sets of written codes of law

theocratic law legal system

a legal system based on a religious document and religious teachings

common law legal system

a legal system where legislative bodies generally enact less specific legal rules giving judges or courts considerable authority in interpreting these rules based on precedent and other factors

emerging market economies

countries that are implementing more open trade and free-market policies

tax haven countries

countries with little or no tax transparency

What is one factor that distinguishes market intelligence systems from marketing research?

Collecting information regularly over time

common market or single market

a market formed when member countries of a customs union remove all barriers to allow the movement of capital and labor within the customs union

beta risk

a measurement of the general market risk of a stock in the Capital Asset Pricing Model (CAPM)

verbal communication

a message's actual contents (i.e. what the message says)

export subsidy

a negative tariff or tax aimed at boosting exports

stateless corporation

a new phase in the evolution of the multinational corporation, where work is sourced wherever it is most efficient and the corporation transcends nationality altogether

voluntary export restraint (VER)

a non-tariff barrier in which an efficient exporting nation agrees to limit exports of a product to another country for a temporary period

macropolitical risk

a political risk that essentially affects all businesses in a given country

micropolitical risk

a political risk that only affects a certain industry or set of firms in a given country

transfer price

a price a company charges its overseas subsidiaries

dumping

a price in a foreign market that undercuts the prices of companies competing there

arms length price

a price that an overseas market is willing to pay

global product

a product that can be sold in most world markets

manufacturing system

a production system in which goods dominate the value of the product

service system

a production system in which services dominate the value of the product

multi-currency

a property of ERP systems to handle multiple currencies

multi-national

a property of ERP systems to handle the accounting standards of multiple countries

multi-language

a property of ERP systems to simultaneously operate in multiple languages

athenian democracy

a pure form of democracy, in which all adult citizens vote directly on matters affecting the community

export-import business

a relatively low-risk business operation that involves penetrating foreign markets (by exporting) or importing merchandise (of all kinds) at competitive prices for domestic consumption

Corruption Perceptions Index (CPI)

a report published each year by Transparency International, providing metrics to the potential corruption risk for 180 countries

International Financial Reporting Standards (IFRS)

a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements

open account

a simple agreement wherein the exporter sends an invoice with the goods and the exporter pays upon the receipt

corruption

a situation where businesses are able to illegally alter relevant private and/or public decision making by way of bribes, kickbacks, blackmail, extortion, and related activities

market structure

a special case of the divisional structure where products are grouped into separate divisions according to the needs of different customers

geographical region structure,

a special case of the divisional structure where products are grouped into separate divisions according to the needs of the different geographical regions the company serves

product structure

a special case of the divisional structure where products are grouped into separate divisions according to their similarities or differences

balance of payments (BOP)

a statement of account that shows all transactions between the residents of one country and the rest of the world for a given period of time

capital markets

a stock exchange where longterm financial instruments such as stocks and bonds can be bought and sold

exchange rate sensitivity

a stock value measured with the coefficient obtained by regressing the stock's return on a currency's return over time

transparency

a system of full disclosure and openness that aims to avoid any semblance of corruption and cronyism

accountability

a system of responsibility in which an authority, such as the government, is answerable for its actions

internal controls

a system of rules and procedures designed to ensure the accuracy and reliability of financial and accounting information

accounting information system (AIS)

a system which has two principal objectives: (1) to provide all the financial information needed internally by management for business decision making, known as management accounting, and (2) to provide financial information to various external users concerned with the financial activities of the organization, known as financial accounting

ad valorem tariff

a tax on imports levied as a constant percentage of the monetary value of one unit of the imported good

mercantilism

a theory of international trade that supports the premise that a nation could only gain from trade if it had a trade surplus

organization

a tool that people use to coordinate their actions to obtain something they seek or value

genericized trademark

a trademark that has become so well known or colloquial that it now describes a general class of product or service, as opposed to a specific product or service as intended by the trademark's owner

Ponzi scheme

a type of fraud, also called a pyramid scheme, in which money received from later investors is used to provide returns to earlier investors, thus giving an appearance of a profitable investment

democracy

greek for "rule by the people"; form of government in which all citizens have the right to vote

reference groups

groups that are important to individuals

achievement vs. ascription

how rewards in a society are handed out: performance vs. place in society

transactions risk

how short-term changes in exchange rates can affect operating costs and revenues of firms engaged in international business activities

regional integration

implementation of a multitude of economic and/or political steps by member states to increase their global competitiveness, including preferential trade access

discount

in the forward market, the selling of a currency at a spot rate that is less than the forward rate

premium

in the forward market, the selling of a currency at a spot rate that is more than the forward rate

intermodal transport

international shipments using different modes of transportation

home bias

investing most of retirement and other savings in one's home country, which reduces diversification

litigation

involves bringing a dispute to a publicly or governmentally run court of law for resolution

output controls and measurement

involves establishing specific goals on given metrics and then measuring to what extent these goals are being achieved at certain time intervals

interpersonal controls

involves executives engaging in personal contact with subordinates as a way of managing an organization

organizational change

involves implementation of a different business or cultural path for an organization

offshoring

involves the process of transferring an organizational function to another country whether outsourced or not

terrorism

involves unlawful arts or violence threatening the physical safety of others

balance sheet approach

keeping an employee on the home country's salary structure and also providing additional allowances

explicit knowledge

knowledge that is codifiable and easy to communicate or write down

tacit knowledge

knowledge that is informal in nature and difficult to communicate

inwa

korean philosophy stressing harmony among unequals, loyalty to parents and authority figures, and superiors being responsible for the well-being of subordinates

money center banks

large global banks

criminal law

law that establishes which violations of a nation's laws are crimes punishable by possible incarceration

antitrust laws

laws to promote "fair competition" among businesses

hard currencies

leading world currencies of developed industrialized countries, including the U.S. dollar, European euro, Japanese yen, and British pound sterling

culture

learned behavior; a way of life for one group of people living in a single, related, and independent community

antitrust laws

national laws aimed at maintaining competition in all sectors of the economy and preventing monopolistic behavior of firms

multi-employer bargaining

negotiations in which a number of employers jointly bargain with a given labor union

subsidiaries

new facilities built and operated overseas that require large investment of capital because these new establishments are tailored to the exact needs of the home country firm

tactical plans

one to three year plans formulated for implementing strategic goals

intellectual property

property that is the product of intellectual rather than physical activity

training

providing employees with skills specific to the job they are going to be doing

acquisition

purchase of established firms abroad with the goal of using the existing production, marketing, and distribution networks and of having instant access to foreign markets that fit the purchasing firm's global strategy

statistical discrepancy

reconciles any imbalance between the current account and financial account to ensure that all debit and credit entries in the balance of payments statement sum to zero

domestic content provisions

regulations requiring that a certain percentage of the value of import be sourced domestically

short position

selling a currency in a currency futures contract and profiting on a decrease in the value of the currency over time

containerization

shipping products to overseas markets in trailer-sized containers

monopoly

situation where there is only a single seller of a product in an industry and there are very high barriers to enter this industry

margin

small commitment fee needed to purchase a futures contract

enterprise resource planning (ERP) systems

software packages designed to integrate the majority of a firm's business processes, execute all transactions related to the firm's business processes being integrated, store each piece of data only once in an enterprise-wide database, allow access to data and information in real time, and operate in a client-server environment, traditional or web-based

currency futures contracts

standardized agreements to buy or sell a specified amount of currency at a date in the future at a pre-determined price

statement of cash flows

statement showing the company's inflows and outflows of cash

balance sheet

statement that lists the balances of the asset, liability, and owners' equity accounts of a business on a specific date

statement of retained earnings

statement that shows the beginning balance for retained earnings, additions and reductions to retained earnings, and the ending balance of retained earnings

income statement

statement that summarizes the revenues earned and the expenses incurred by a business over a period of time

current account

the activities of consumers and businesses in the economy with respect to the trade balance, services balance, income balance, and net transfers

risk premium

the added return required by investors for risk associated with a security or asset

bandwidth

the amount of data and other information that can be transferred in a second via the Internet

tax law

the body of law dealing with governmental levying of taxes on individuals and corporations

contract law

the body of law governing legally enforceable agreements between parties to engage in economic exchange

ethics

the branch of philosophy that addresses the values pertaining to human behavior, with regard to the "rightness" and "wrongness" of actions and to the "goodness" and "badness" of the intent and results of such actions

financial accounting

the component of the accounting information system that provides financial information needed by external users such as investors and lenders

management accounting

the component of the accounting information system that provides the financial information needed internally by business managers for efficient (timely) and effective (correct) decision-making

outsourcing

the corporate practice of acquiring or producing quality goods or services abroad at a lower cost thereby eliminating domestic production

specific vs. diffuse

the degree to which a society compartmentalizes roles

bid-ask spread

the difference between bid and ask prices of a currency; the transaction fee earned by the bank

net present value

the difference between present value of futures profits on an investment project minus the initial investment cost

copyright

the exclusive legal right that authors, playwrights, publishers, artists, and composers have to publish and disseminate their work as they see fit

time orientation

the extent to which a society emphasizes short-run or long-run time horizons

neutral vs. emotional

the extent to which a society expresses itself emotionally

masculine vs. feminine

the extent to which a society minimizes gender inequality

social stratification

the extent to which groups at the top of the social pyramid exert control over others at lower levels of the pyramid

uncertainty avoidance

the extent to which societies tolerate risk or are risk averse

organizational structure

the formal system of task and authority relationships that control how people coordinate their actions and use resources to achieve organizational goals

exchange rate risk

the impact of random change in the value of one currency with respect to other currencies

universalism vs. particularism

the importance of rules versus relationships

consolidated accounting statements

the income statements and balance sheets of multinational corporations and of all subsidiaries abroad due to home country tax requirements

commercialization

the last step in the new-product development process in which the new product is manufactured, the marketing mix is finalized, and the product is introduced to the foreign market

dispute settlement law

the law governing how disputes arising in the conduct of global business are settled

product safety law

the law which establishes the standards of product safety to which the manufacturers and sellers of products are to be held

power distance

the level of egalitarianism (equality) in a society

internetworking

the linking of separate networks into an interconnected network, where each network retains its own identity

supply-chain management

the management of all activities in the supply chain, in order to minimize the total cost of the supply chain, and to maximize the value of the product to the end user

operations management

the management of the direct resources that are involved in the production system of a business organization

glocalization

the marketing strategy which involves pursuing a standardization strategy in foreign markets when possible and an adaptation one when necessary

services balance

the net of exports of services and imports of services

income balance

the net of investment income from abroad and investment payments to foreigners

balance of transfers

the net of transfer payments going overseas and inflows from abroad

over-the-counter (OTC) market

derivatives market run by large banks

governance

describes how countries exercise authority and how efficiently they deliver basic infrastructure services like water, sanitation, roads, electricity, security, and the like for public as well as private firms

location decision

determining if products made in-house will be produced in one or more facilities, and if these facilities should be located in one or more countries

make-or-buy decision

determining which components and raw materials should be produced in-house and which components and raw materials should be acquired from suppliers; also called the sourcing decision

reverse strategy

development of a new product first for emerging markets then selling it to developed markets

sustainable development

economic development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs, whether environmentally, socially, or economically

economic reforms

economic policy changes that promote private sector development, competitive markets, market-pricing, freer trade, and deregulation

soft currencies

emerging market countries' currencies that are less stable in value than hard currencies and are sometimes pegged to hard currency values

co-determination

employee representation on corporate boards of directors

third country nationals

employees from a new parent or host country who are being employed in a given foreign country

parent country nationals

employees from the home countries who are sent to work for their companies overseas

expatriates

employees who are working in countries other than their native countries

foreign direct investment (FDI)

encompasses purchases of fixed assets (such as factories and equipment) abroad used in the manufacture and sales of goods and services

factors of production

endowments used to produce goods and services: land (quantity, quality, and mineral resources beneath it), labor (quantity and skills), capital (cost), and technology (quality)

forward market

exchange that enables purchases and sales of currencies in the future with prices (or the forward rate) established at a previous time

spot market

exchange that trades currencies on a real-time basis for immediate delivery

product life cycle theory

explains what happens to a product's revenue and profits at the different stages-introduction, growth, maturity, and decline—before the product is discontinued

Workers from Poland are free to work in the United Kingdom to fill shortages there. What is this scenario an example of?

factor price equalization theory

International Monetary Fund (IMF)

financial authority established under the Bretton Woods Agreement in 1944 to help ensure the stability of the international monetary and financial system

multinational enterprises (MNEs)

firms that are headquartered in one country, but own and control manufacturing, services, R&D (research and development) facilities, or other business entities on foreign soil

representative democracy

form of government in which citizens vote to elect given individuals to serve as their representatives for a certain period of time

currency forward contracts

futures contracts available in currencies of emerging-market countries by large banks in the OTC market

marked-to-market

futures contracts in which gains (losses) are earned (paid) in cash at the end of each trading day

components

goods and services that integrate a product

adaptive institutions

government organizations that create strong incentives for private investment and operate under a system of checks and balances

digital divide

the perceived economic gap between countries or people with easy access to digital and information technology (and its benefits) and those with very limited access, or none at all

sales potential

the percentage of a market potential that a specific company expects to sell in a specific international market

share of wallet

the percentage of purchases in a category a buyer gives to one vendor

digital era

the period of transformation that adjusts lifestyles to make the Internet and wireless technologies a part of everyday life

organizational culture

the personality of a given organization, its shared norms, and values

risk profile

the potential financial loss that entrepreneurs are willing to take in a business

licensing

the practice in which a company or individual provides the foreign partner with the technology (patented technology, copyright, process, trademark, etc.) to manufacture and sell products or services in a target country for an annual license fee

franchising

the practice in which the parent firm is obligated to provide specialized equipment and/or service (e.g., product specification and adaptation, pricing, promotion, and distribution strategies), and sometimes to fund some startup costs, to franchisees in return for an annual fee

public corruption

the practice of making illegal payments to government officials or engaging in blackmail, extortion or other related activities to obtain government contracts or governmental approval for business activities

dollarization

the practice of using the dollar or some other foreign currency together with, or instead of, a domestic currency in a country

forward rate

the price at an earlier time of a currency in terms of another currency established for future delivery in the forward market

exchange rate

the price at which one currency can be converted to another currency

premium

the price paid by the buyer to the seller for an option contract

generally accepted accounting principles (GAAP)

the principles by which financial statements are prepared

outsourcing

the process of a company subcontracting a certain production function to a third party

spatial transformations

the process of allowing efficient geographic distribution of business activities within and among countries

performance appraisal

the process of assessing employee performance

indirect quotes

the reciprocal of the direct quote, or the prices of a dollar (for example) in foreign currency terms

accounting

the recording, summarizing, and reporting of the economic activities and events of an organization

financial ratio

the relationship of a number on the financial statements to another number

cost of equity

the required rate of return by stockholders in a firm and is estimated by means of the Capital Asset Pricing Model (CAPM)

cost of capital

the required rate of return demanded by stock and bond investors and is used in net present value capital budgeting analyses as the discount rate

patent

the right granted to the inventor of a product or process that excludes others from selling, making, or using the invention for a certain period of time

economic risks

the risks that economic problems or mismanagement in a given country will have a meaningful negative impact upon the conduct of business in that country

political risks

the risks that political forces or problems in a given country will have a meaningful negative impact upon the conduct of business in that country

institutions

the rules, enforcement mechanisms, and organizations that support market transactions

payment in advance

the safest method available to an exporter, but that which exposes the importer to some risk related to delivery of goods

exchange risk beta

the sensitivity of a stock to market risk affected by currency movements

translation risk

the short-term effects of currency movements on the consolidated accounting statements of a firm

production facility

the site where production takes place

globalization

the socio-economic reform process of eliminating trade, investment, cultural, information technology, and political barriers across countries, which in turn can lead to increased economic growth and geo-political integration and interdependence among nations of the world

business analysis

the step in the new product development process in which projections of potential revenues and profits for a potential new product are made

market testing

the step in the new-product development process in which a company will develop the marketing mix for a new product

concept testing

the step in the new-product development process in which the new product idea is presented to a small sample of the international market to gauge its reaction

economic geography

the study of principles that govern the efficient spatial allocation of economic resources and the resulting consequences

weighted average cost of capital

the sum of the costs of equity and debt weighted by the amount of financing from these two capital sources

international monetary system

the system of exchange rates and international payments that enables countries and their citizens to purchase goods and services from one other

production system

the system that businesses use to produce products

market potential

the total number of units of a product that could possibly be sold by all companies doing business in a specific international market

organized exchanges

the trading of futures contracts in major currencies and offering price transparency and efficiency in addition to elimination of counterparty risk due to guaranteed payments on contacts

trade

the two-way flow of exports and imports of goods (merchandise trade) and services (service trade)

country risk

the uncertainty in predicting how a variety of different factors will affect an investment in a country, including political risk, economic risk, inflation risk, tax risk, etc

political union

the union created when member countries of an economic and monetary union work closely with one another to arrive at common defense and foreign policies and behave as a single country

indirect strategy

the use of channels of distribution to market products and services to international markets

manners and customs

the way a society does things

social institutions

the way people in a society relate to one another within group settings

economic risk

the ways in which long-term exchange rate movements affect firms

cost of debt

the weighted average of different interest rates paid on long-term borrowings

the web

the world wide web, abbreviated as "www" and commonly known as the web; a system of interlinked documents contained and accessed via the Internet

individualism vs. collectivism

the worth of an individual versus the worth of a group

purchasing power parity (PPP)

theory stating that a basket of goods should have approximately the same prices across different countries

interest rate parity (IRP)

theory stating that interest rates on bonds in different countries should be the same, as investors would buy and sell these bonds to make arbitrage profits until this condition holds

maximizing shareholder wealth

to maximize the net present value of future cash flows of foreign investment adjusted for exchange rate movements or to maximize profits so that shareholders could receive larger dividends and see their share prices rise over time

non-verbal communication

tone of voice, gestures, eye contact, body positions, facial grimaces, and other body language that accompanies verbal communication

embargoes

trade sanctions which are imposed upon a nation to restrict trade with that country

backward translation

translating a message from English into a foreign language, then translating it back into English to check for accuracy

gray marketing

unauthorized importers reselling a manufacturer's product in the manufacturer's domestic market at a price less than what the manufacturer charges in that domestic market

hedging

using currency derivatives to reduce potential transaction, translation, and economic risks of currency movements that could lead to losses for a firm or investor

operational plans

very short-term (less than one year) plans formulated for implementing strategic goals

aesthetics

what is perceived as taste and beauty in a society

banker's acceptance

when a bank sells a LC into the financial marketplace as a money market instrument

offshoring

when a firm and the supplier are located in different countries

global procurement

when a firm buys components and raw materials globally

global production

when a firm globally produces goods and services

outsourcing

when a firm has been making goods and services in-house, and then decides to buy these goods and services from suppliers

expatriate failure

when an expatriate does not complete his or her full expatriate assignment

dual sourcing

when components and raw materials are produced in-house and purchased from suppliers

trade deficit

when merchandise imports exceed merchandise exports for a country

contagion

when stock markets in many countries move down in concert with one another and thereby reduce international diversification benefits

global outsourcing

when the firm doing the outsourcing and the supplier that will provide the outsourced goods and services are located in different countries; also called offshoring

domestic outsourcing

when the firm doing the outsourcing and the supplier that will provide the outsourced goods and services are located in the same country

insourcing

when the firm has been buying goods and services from suppliers, and then decides to make these goods and services in-house

trade surplus

when the value of exports exceeds the value of imports; the opposite of a trade deficit

value factor

whether a firm has growth or value and how this firm characteristic provides an estimate of the cost of equity

size factor

whether a firm is small or large and how this size provides an estimate of the cost of equity

host country nationals

workers already living in the foreign or host country where the parent company is opening operation

fixed exchange rate system

system in which the country pegs its currency at a fixed rate to a major currency or basket of currencies, while the exchange rate fluctuates within a narrow margin around a central rate

totalitarian government

system of government in which individuals govern without the support or consent of the citizenry; for example, a military dictatorship

managed floating exchange rate system

system that determines the value of some currencies partly by demand and supply in the foreign exchange market, and partly by active government intervention in the foreign exchange market

independent floating exchange rate system

system that sets the values of major currencies based on their demand and supply in world currency markets

bureaucratic controls

systems of rules and regulations promulgated within a global business

export taxes

taxes meant to raise export cost and divert production for home consumption

custom duties

taxes on imports that are collected by a designated government agency responsible for regulating imports

tariffs

taxes on imports; also known as custom duties in some countries

infant industry argument

temporary provision of protection to nascent industries that have good prospects of becoming globally competitive in the medium term

Bretton Woods Agreement

the 1944 decision to establish a global currency system with the U.S. dollar pegged at a fixed rate of exchange to gold, and the currencies of 43 other countries fixed to the dollar

Smithsonian Agreement

the 1971 decision allowing the United States to devalue the dollar against other countries' currencies, thereby beginning the breakdown of the 1944 Bretton Woods Agreement

Jamaica Agreement

the 1976 international monetary order that allowed countries to adopt different exchange rate systems including floating their currencies in world markets

acculturation

the ability of a firm to adjust to a culture different from its own

comparative advantage

the ability of one country that has an absolute advantage in the production of two or more goods (or services) to produce one of them relatively more efficiently than the other

absolute advantage

the ability of one country to produce a good or service more efficiently than another

absorptive capacity

the ability of organizations to recognize, assimilate, and apply new knowledge

clean float currency

monetary system with minimal government intervention; largely market determined

What do countries with politicians that sustain transparency in global competition tend to have?

A competitive market structure

Which issue was discussed as a concern during the establishment of North American Free Trade Agreement (NAFTA)

A fear that companies would move American manufacturing jobs to Mexico

MAtch physical distribution channel method descriptions with their appropriate one. Answer option may be used more than once or not at all A. Shipments placed in trailer-sized containers which can be moved from one type of transportation to another without unloading and reloading______________ B. Moves large quantities of products to international buyers at low per unit costs________ C. Moving from one transportation to another_____ D. Agents who ship products to international consumer________

A-CONTAINERIZATION B-PHYSICAL DISTRIBUTION C-INTERMODEL TRANSPORT D-FREIGHT FOWARDER

What can internal controls protect honest employees from?

Accidentally making errors

Which arrangement best outlines Miles and Snow;s four basic types of longer-term strategy implementation?

Analyzers, prospectors, defenders, and reactors

How are standardizations strategies defined?

Approaches in which marketing strategies used in international operations will be the same as those being used domestically

Which of the following should take place in an effort to successfully conduct business in China?

Attending to relationships between subordinates and superiors (Guanx)

What statement of account summarizes all transactions between one country and the rest of the world for a given period of time?

Balance of payments

How do knowledge management and systems overcome impediments to strategic implementation of global business?

By allowing for wider dissemination of tacit and explicit knowledge.

How do major international institutions facilitate globalization?

By creating an international monetary system

How does foreign direct (FDI) create jobs and enhance skills of workers?

By creating inflows of capital from abroad

How has technology bridged the global digital divide?

By decreasing communication cost

How do options contract exchange rate risk?

By giving an investor the right to buy or sell a specified amount of currency at a future date at a predetermined price

How do interpersonal control system help manage global business?

By having executives engage in personal contact with subordinates

How does the government of a country with a good investment climate attract foreign direct investment(FDI)?

By implementing transparent governance structures

Economist have argued that national policies should be implemented to help retrain and educate workers. How might these efforts affect the displaced workers?

By increasing productivity

What do property rights enable buyers and sellers to do?

Conduct transactions with the high degree of trust

Which issue can result from creating international divisions in global business?

Conflict between domestic and international operations

A successful shoe manufacturer has long been subcontracting production of their shoes to countries such as Vietnam. Which of the following concepts was likely considered when selecting production in this country?

Contract law

What are stateless corporations?

Corporations that source work wherever it is most efficient and transcend international boundaries

Which of the following is a characteristic of globalization?

Culture

What is NOT a tax issue that multinational corporations (MNC's) face?

Culture tax

What is the result if a large online retailer does NOT secure customer's financial information?

Decrease in public trust

How does regional integration affect countries?

Enhance social welfare

What are international pricing objectives that keep competitors out of a foreign market with low prices?

Gray Marketing

What must countries do to create regional economic integration?

Have spatial transformation

Which appropriate set of steps should companies follow when developing new products for overseas markets?

Identification of sources of new product ideas, evaluation of new product ideas, concept testing, business analysis, development, market testing and commercialization

What is the name for an organizational structure in which people are grouped simultaneously by function and by division?

Matrix

What is not a rationale for managing trade?

Mercantilism

What do companies use as a blueprint in their strategy, formulation and control functions?

Mission Statement

bond ratings

Moody's and Standard and Poor's rating services which are important in assuring foreign investors of the credit quality of bond issues

Smalltown Times newspaper has a norm of "highest quality in journalism." In this context, the newspaper's reporters require close supervision to do a great journalistic work.

Organizational culture

What will an organization structure which inhibits people from clearly knowing if they have decision making authority most likely do?

Prohibit employee breaks

Which marketing method uses contests and sweepstakes as the most widely-used promotional technique in foreign markets?

Sales promotion

What is most likely to happen if a computer company decided to own and operate its own fleet of trucks instead of using shipping companies to deliver its computers?

The computer company would be increasing the complexity of its process

Which of the following may lead to an increase in the standard of living, according to free-trade theory?

The right to import and export goods freely

What does trade policy have a direct impact on?

The value of volume of a country's imports and exports

Which entry strategy generally requires a large capital investment and is associated with a high degree of risk?

Wholly-owned foreign subsidiary

Which scandal included improperly adjusting accounting reserves to meet earning?

WorldCom

Foreign Corrupt Practices Act

a U.S. federal law that consists of two parts: an anti-bribery provision and a requirement to maintain an adequate internal control system over financial books and records

Overseas Private Investment Corporation (OPIC)

a U.S. government agency that sells political risk insurance to U.S. businesses operating in countries with which the United States has a bilateral investment treaty

Export-Import (Ex-Im) Bank

a U.S. government export finance agency that supports U.S. firms competing against exports of other countries that are government supported

Terrorism Risk Insurance Act of 2002

a United States law that after a certain deductible provides U.S. businesses government insurance coverage for the risk of terrorism

Foreign Corrupt Practices Act (FCPA)

a United States law that prohibits U.S. companies from bribing or otherwise corrupting foreign government officials to win foreign government contracts or obtain other foreign government assistance for their businesses

Special Drawing Right (SDR)

a basket of currencies consisting of dollars, euros, pounds, and yen created by the International Monetary Fund (IMF)

domestic bonds

debt contracts sold by firms domiciled in a country in the home currency

foreign direct investment

inflows of capital from abroad for investing in domestic plant and equipment for the production of goods and/or services as well as for buying domestic companies

marketing research

information collected at one particular time

marketing intelligence system (MIS)

information collected regularly over time

hedge

insurance that reduces future risk

dirty float currency

monetary system with varying degrees of government intervention to maintain a range of acceptable values against other currencies

margin call

losses that are incurred and that cause the participant's balance to fall below the maintenance margin at the end of the trading day

liberalization of the trading system

lowering and/or removing trade barriers such as tariffs, quotas, and subsidies

horizontal publication

magazine that target a specific job in various industries

vertical publication

magazine that target specific industries

adaptation

marketing strategies used in international markets by a company that are different from those used in its domestic market

standardization

marketing strategies used in international markets by a company that are the same as those used in its domestic market

raw materials

materials used to produce components

gold standard

monetary system that pegs currency values to the market value of gold

CHIPS (Clearing House Interbank Payments System)

organization in New York City that provides large, wholesale dollar payments services for businesses, banks, and governments

SWIFT (Society of Worldwide Interbank Financial Telecommunications)

organization that provides secure communications for contracts, invoices, and other trade documents that normally accompany cash payments

prospectors

organizations that have basic strategic implementations involving extending their success through global expansions, and finding new market opportunities

reactors

organizations that have strategic implementation processes that respond arbitrarily to strategic actions initiated by competitors

defenders

organizations that implement basic market strategies of concentrating upon existing operations and defending their home turfs

analyzers

organizations that take a middle ground between being prospectors and defenders

Statements of Financial Accounting Standards (SFAS)

part of the highest level of generally accepted accounting principles (GAAP), issued by the Financial Accounting Standards Board (FASB)

commercial letter of credit (LC)

payment protection to both exporters and importers, as the importer's bank writes a guarantee of payment

reliability

performance of various aspects of customer service that meets customer expectations

collusion

practice of companies acting in a manner which secretly thwarts competition amongst themselves

development

preparing employees for new future assignments or higher level positions

direct quotes

prices of a foreign currency in dollars, or the number of dollars per one unit of foreign currency)

uncovered interest rate parity

principle implying that expected future spot exchange rates and spot exchange rates set interest rates on bonds in different countries equal to one another

covered interest rate parity

principle implying that forward exchange rates and spot exchange rates set interest rates on bonds in different countries equal to one another

law of one price

principle stating that identical goods should sell for the same price in different countries according to local currencies

repatriation

process that takes place when the expatriate employee returns home

production stages

steps in the production process

physical distribution

storage and transportation operations that are used in moving products to a foreign market

stakeholder model of strategy formulation

strategy formulation model that believes businesses exist to benefit not just their shareholders, but also all the various groups such as employees and customers that have a meaningful stake in their operations

shareholder model of strategy formulation

strategy formulation model that operates from the premise that the key strategic purpose of a business is to maximize financial returns for its owners/shareholders