BUSA 3000 Quiz 3

Trade rules

Cross-national customs procedures and regulations have been eliminated, which has streamlined transportation and logistics within Europe.

Currencies and Exchange Rates 2

Currency regimes are simplifying. E.g., The euro in Europe, the dollar in Panama and Belize

Recent Exchange Rates against the Dollar 1

Currency: Australian dollar; Currency per One U.S. Dollar: 1.29; U.S. Dollars per Unit Currency: 0.77

Recent Exchange Rates against the Dollar 2

Currency: Brazilian real; Currency per One U.S. Dollar: 3.25; U.S. Dollars per Unit Currency: 0.31

Recent Exchange Rates against the Dollar 3

Currency: British pound; Currency per One U.S. Dollar: 0.73; U.S. Dollars per Unit Currency: 1.38

Recent Exchange Rates against the Dollar 4

Currency: Canadian dollar; Currency per One U.S. Dollar: 1.28; U.S. Dollars per Unit Currency: 0.78

Recent Exchange Rates against the Dollar 5

Currency: Chinese renminbi (yuan); Currency per One U.S. Dollar: 6.33; U.S. Dollars per Unit Currency: 0.16

Recent Exchange Rates against the Dollar 6

Currency: Euro; Currency per One U.S. Dollar: 0.82; U.S. Dollars per Unit Currency: 1.22

Recent Exchange Rates against the Dollar 7

Currency: Indian rupee; Currency per One U.S. Dollar: 65.23; U.S. Dollars per Unit Currency: 0.02

Recent Exchange Rates against the Dollar 8

Currency: Japanese yen; Currency per One U.S. Dollar: 106.58; U.S. Dollars per Unit Currency: 0.01

Recent Exchange Rates against the Dollar 9

Currency: Mexican peso; Currency per One U.S. Dollar: 18.84; U.S. Dollars per Unit Currency: 0.05

Recent Exchange Rates against the Dollar 10

Currency: New Zealand dollar; Currency per One U.S. Dollar: 1.39; U.S. Dollars per Unit Currency: 0.72

Recent Exchange Rates against the Dollar 11

Currency: Norwegian kroner; Currency per One U.S. Dollar: 7.90; U.S. Dollars per Unit Currency: 0.13

Recent Exchange Rates against the Dollar 12

Currency: Saudi Arabian riyal; Currency per One U.S. Dollar: 3.75; U.S. Dollars per Unit Currency: 0.27

Recent Exchange Rates against the Dollar 13

Currency: Singapore dollar; Currency per One U.S. Dollar: 1.33; U.S. Dollars per Unit Currency: 0.76

Recent Exchange Rates against the Dollar 14

Currency: South Africa; Currency per One U.S. Dollar: 11.79; U.S. Dollars per Unit Currency: 0.09

Recent Exchange Rates against the Dollar 15

Currency: Turkish lira; Currency per One U.S. Dollar: 3.80; U.S. Dollars per Unit Currency: 0.26

Difference in Per Capita GDP, in Conventional and PPP Terms 6

Country: Russia; Per-Capita GDP, Converted Using Market Exchange Rates: $10,630; Per-Capita GDP, Converted Using PPP Exchange Rates: $28,918

Difference in Per Capita GDP, in Conventional and PPP Terms 7

Country: South Africa; Per-Capita GDP, Converted Using Market Exchange Rates: $6,292; Per-Capita GDP, Converted Using PPP Exchange Rates: $13,591

Gross Government Debt as a % of GDP 13

Country: South Korea; %: 38

Difference in Per Capita GDP, in Conventional and PPP Terms 8

Country: South Korea; Per-Capita GDP, Converted Using Market Exchange Rates: $30,919; Per-Capita GDP, Converted Using PPP Exchange Rates: $41,173

Median Household Income for a Sample of Emerging Markets 7

Country: Thailand; Median Income Per Household (U.S. $): 7,113

Emerging Market Global Challengers 6

Country: Turkey; Example Multinational Firms: Koc Holding, Sabanci Holding, Yildiz holding; Representative Industries: Industrial, Industrial and financial, confectionary

Median Household Income for a Sample of Emerging Markets 8

Country: Turkey; Median Income Per Household (U.S. $): 21,966

Difference in Per Capita GDP, in Conventional and PPP Terms 9

Country: Turkey; Per-Capita GDP, Converted Using Market Exchange Rates: $11,125; Per-Capita GDP, Converted Using PPP Exchange Rates: $27,635

Gross Government Debt as a % of GDP 7

Country: United Kingdom; %: 90

Gross Government Debt as a % of GDP 4

Country: United States; %: 108

Sampling of Import Tariffs 9

Country: United States; Agricultural Products: 5.2%; Nonagricultural Products: 3.2%

Difference in Per Capita GDP, in Conventional and PPP Terms 11

Country: United States; Per-Capita GDP, Converted Using Market Exchange Rates: $61,687; Per-Capita GDP, Converted Using PPP Exchange Rates: $61,687

Difference in Per Capita GDP, in Conventional and PPP Terms 10

Country: Vietnam; Per-Capita GDP, Converted Using Market Exchange Rates: $2,482; Per-Capita GDP, Converted Using PPP Exchange Rates: $7,378

Ethical Connections 4

Critics point to self-interest in the banking sector as a basic cause of the crisis. But self-interest is a human condition. Pensioners and other investors happily accept rapid gains in stocks and bonds, often ignorant of how the gains are made.

Import Tariffs Have Been Declining 2

Economic integration also leads to lower tariffs, but only within economic blocs. e.g., Under NAFTA, Mexico eliminated nearly all tariffs on imports from the U.S., but maintains tariffs with the rest of the world

Resistance from family conglomerates

Economies may be dominated by privately-owned local firms that are highly diversified, and control supplies and employment. Common in South Korea (chaebols), India (business houses), Latin America (grupos), and Turkey (holding companies).

Economic Bloc example

European Union, NAFTA, MERCOSUR, APEC, ASEAN, and many others.

What is the effect of this change on Europeans? 3

European firms can increase their exports to the U.S.

What is the effect of this change on Europeans? 4

European firms can raise their prices to the U.S.

Inflation 6

Example: If inflation is 10%, banks must pay more than 10% to attract deposits.

The Rule of Law 1

Existence of a legal system where rules are clear, publicly disclosed, fairly enforced, and widely respected by individuals, organizations, and the government.

Why Do Nations Pursue Economic Integration?

Expand market size; Achieve economies of scale and productivity; Attract direct investment from outside the bloc; Acquire stronger defensive and political posture

R&D costs

Expensed as incurred in most of the world; capitalized in South Korea and Spain. Some countries use both conventions.

The Global Debt Crisis 1

Growing imbalances in the finances of numerous national governments is an emergent crisis in the international monetary and financial environment.

Globalization of Financial and Monetary Activities

Growing integration of financial and monetary global activity is due to: Evolution of monetary and financial regulations, worldwide.; Emergence of new technologies and payment systems in global finance, e.g., the Internet; Increased global and regional interdependence of financial markets.; Growing role of single-currency systems, e.g., the Euro.

Dimensions of Country Risk

Harmful or unstable political system; Laws and regulations unfavorable to foreign firms; Inadequate or underdeveloped legal system; Bureaucracy and red tape; Corruption and other ethical blunders; Government intervention, protectionism, and barriers to trade and investment; Mismanagement or failure of the national economy

Tariffs are Widespread 1

Harmonized code

Which of the following is a characteristic of advanced economies?

High Purchasing Power

Inflation 3

High inflation erodes a currency's purchasing power.

Market Liberalization in India 2

High trade barriers, state intervention, a large public sector, and central planning resulted in poor economic performance.

What is the effect of this change on Europeans? 2

Higher costs reduce profitability; require higher prices.

Catering to Emerging Market Economic Development Needs

Increasingly, firms are involved in fostering economic development in emerging markets; Assisting economic development may (or may not) be part of efforts aimed at corporate social responsibility; More commonly, doing business in emerging markets makes good business sense, and generates big profits; Helpful ventures include modernization projects (e.g., power plants); infrastructure projects (highways); injections of capital (via microfinance); marketing consumer products (which leads to distribution channels, reduces prices, and creates jobs).

Lobby for freer trade and investment

Increasingly, nations are liberalizing markets in order to create jobs and increase tax revenues.

Democracy and Openness Example

India has steadily lowered entry barriers to its car market. Foreign carmakers entered the market, greatly increasing the number of models for sale. Greater competition increased the quality of available cars, and car prices fell.

War and insurrection

Indirect effects can be disastrous for company activities.

Differences between Common Law and Civil Law 3

Legal issues: Specificity of contracts; Civil Law: Contracts tend to be brief because many potential problems are already covered in the civil code; Common Law: Contracts tend to be very detailed, with all possible contingencies spelled out., Usually more costly to draft a contract.

Expand market size

Increases size of the marketplace for firms inside the economic bloc. Belgium has a population of just 10 million; the EU has a population of nearly 500m.; Buyers can access larger selection of goods.

Differences between Common Law and Civil Law 1

Legal issues: Ownership of intellectual property; Civil Law: Determined by registration; Common Law: Determined by prior use

Mixed Systems Example

Legal systems in Lebanon, Morocco, and Tunisia share elements of civil law and Islamic law.

Commercial Banks (National institution level [2nd level <going down>])

Lend money to finance business activity, play a key role in nations' money supplies, and exchange foreign currencies; goes to the firm

NAFTA (Canada, Mexico, the United States) 4

NAFTA: Eliminated tariffs and most nontariff barriers for products and services; Established trade and investment rules, uniform customs procedures, and intellectual property rights.; Provided procedures for settling trade disputes.

Foreign Firms Support Local Economic Development 4

Narayana Health sells health insurance for less than $0.20 per person per month in India.

Protectionism

National economic policies that restrict free trade. Usually intended to raise revenue or protect domestic industries from foreign competition.

Offensive Rationale for Government Intervention

National strategic priorities; Increase employment

Challenges of Doing Business in Emerging Markets

Political instability; Weak intellectual property protection; Bureaucracy, red tape, and lack of transparency; Poor physical infrastructure; Partner availability and qualifications; Resistance from family conglomerates

Regional Economic Integration 1

Refers to the growing economic interdependence that results when nations within a geographic region form an alliance aimed at reducing barriers to trade and investment.

Internationalization by firms inside the economic bloc.

Regional integration facilitates company internationalization. Expansion into neighboring countries provides valuable experience, prompting internationalization to other markets worldwide.

Implications for the Firm

Regional products and marketing strategy;

Actors in Political and Legal Systems 3

Regional trade organizations, such as the European Union, and many others.

Central Banks(National government level [3rd level <going down>])

Regulate money supply, issue currency, manage exchange rates, control national reserves; goes to commercial banks

How Firms Can Respond to Government Intervention

Research to gather knowledge and intelligence; Choose the most appropriate entry strategies

Tariffs are Widespread 5

The European Union applies tariffs up to 191% on meat, 118% on cereals, and 106% on sugar

Which of the following is an example of nontariff trade barrier?

The U.S. Department of Commerce announced that white sugar imports will be limited to 7,500 million tons.

Which of the following is characteristic of family conglomerates?

extensive networks in various industries

Many new global challengers are

family-owned or family-run businesses (family conglomerates) and enjoy numerous advantages.

Political system 2

government; political parties; legislative bodies; lobbying groups; trade unions; other political institutions

Most easily convertible currencies are called _______

hard currencies

Products are classified under about 8,000 different unique codes in the ________ schedule, a standardized system used worldwide.

harmonized tariff

Andrew & Jamie Waskey 1

married recent graduates who got their master's degrees in international business at a state university in the United States

It reveals that several currencies in Europe are

overvalued, whereas those of emerging markets are undervalued.

Inflation 1

refers to increases in the prices of goods and services; thus, money buys less than before.

Market psychology

refers to investor behavior, such as herding behavior or momentum trading

National governance 1

refers to the system of policies and processes by which nations are governed and the manner in which they develop laws and regulations, conduct public affairs, and manage public resources

Marketing and distribution laws

regulate practices in advertising, promotion, and distribution.

The central is the monetary authority in each country that ________.

regulates the money supply, issues currency, and manages the exchange rate of the nation's currency relative to other currencies inflation.

National governance 2

related to political freedom and economic freedom.

The New Global Challengers example 3

-China: Galanz, Haier, Chunlan Group Corp., Lenovo, Pearl River Piano.

In 2012, for example, the Indian rupee was trading at

48 rupees to the U.S. dollar.

Ethical Connections: Political and Legal Systems 3

A culture of grease payments and other corruption is corrosive, harming the rule of law and sustainable economic development.

Authoritarianism 3

A state party is led by a dictator; Membership is mandatory for those wanting to advance

Country Risk Produced by Political Systems: Boycotts against Firms and Nations: Examples from France 1

Citizens boycotted Disneyland Paris, to express opposition to globalization and takeover of French farmland.

Democracy 1

Economic activity occurs freely, as per market forces

What is the effect of this change on Europeans? 1

European firms pay more for inputs from the U.S.

Ethical Connections: Emerging Markets 2

Every day, thousands die from treatable or preventable ailments such as malaria and AIDS.

Emerging Market Economies 2

Evolving towards wealthy nation status

Authoritarianism 6

Ex-authoritarian states tend to have much government intervention and bureaucracy

Five Potential Levels of Regional Integration

Free trade area; Customs union; Common market; Economic union

Market potential indicators include:

GDP growth rate; income distribution; commercial infrastructure; unemployment rate; consumer expenditures for discretionary items.

Socialism 2

Group welfare outweighs individual welfare

Which of the following statements is FALSE regarding country risk?

It is present only in poor nations

Euro vs. the Dollar 2

Now, suppose the rate has gone to: 1.50 = $1.

Managing Country Risk

Proactive environmental scanning; Strict adherence to ethical standards; Alliances with qualified local partners; Protection through legal contracts

Religious Law 1

Strongly influenced by religious beliefs, ethical codes, and moral values, viewed as mandated by a supreme being.

National security

The United States prohibits exports of plutonium and similar products to North Korea.

Economic growth 4

The nation's central bank regulates the money supply, issues currency and manages the exchange rate, to accommodate economic growth

Evolution of Government Intervention 4

Trade policies greatly reduced tariffs after WWII

Protection of the national economy

Weak or young economies sometimes need protection from foreign competitors. e.g., India imposed barriers to shield its huge agricultural sector, which employs millions

Inadequate or underdeveloped legal systems (poor enforcement of existing laws) 2

While the problem is common in developing economies, it can occur in advanced economies too.

Jamie Waskey

a market research intern at U S Department of Commerce, in Buenos Aires, Argentina

Political system 1

a set of formal institutions that constitute a government; It includes legislative bodies, political parties, lobbying groups, and trade unions. The system also defines how these groups interact with each other.

Legal System

a system for interpreting and enforcing laws; the laws, regulations, and rules establish norms for conduct. It incorporates institutions and procedures for ensuring order and resolving disputes in commerical activities, as well as protecting intellectual property and taxing economic output.

While these assumptions may not be realistic, the index provides

a useful approximation of purchasing power and currency valuations around the world.

Index of Economic Freedom

assesses the rule of law, trade barriers, regulations, and other criteria; Virtually all advanced economies are "free"; Emerging markets are either "free" or "mostly free"; Most developing economies are "mostly unfree" or "repressed"

International Monetary Fund (IMF) 2 (International organization level [4th level <going down>])

at bottom level

World Bank 2 (International organization level [4th level <going down>])

at bottom level

The three major types of current political systems are ________.

authoritarianism, socialism, and democracy

Commercial banks

deal mainly with corporations or large businesses. Credit Lyonnais in France is an example.

Currencies such as the euro, yen, and U.S. dollar are traded on ________, the global marketplace for buying and selling national currencies.

exchange rate

They often access low-interest loans from

home-country, government-owned banks.

Most people in emerging markets and developing economies live

in relative poverty.

Laws on income repatriation

limit the amount of net income or dividends that firms can bring back to the home country.

Since prices vary greatly among countries, economists adjust

ordinary GDP figures for differences in purchasing power.

Which of the following terms refers to the existence of a legal system based on clear rules and fair enforcement?

rule of law

For example, the index implies that the Chinese yuan and the Russian rouble are

substantially undervalued compared to the dollar.

Which of the following is characteristic of an effective legal system?

systematically enforced laws and regulations

Many are expanding internationally by

taking their established brands to global markets.

refers to a tax imposed on imported products, effectively increasing the cost of acquisition for the customer

tariff

17 The Big Mac Index assumes

that business costs and McDonald's strategies are identical across countries.

One way to illustrate the PPP concept is

to examine the Big Mac Index developed by The Economist newsmagazine (www.economist.com)

Emerging markets have begun to produce new global challengers,

top firms that are fast becoming key contenders in world markets.

Investment banks

underwrite (guarantee the sale of) stock and bond issues and advise on mergers, such as the merger of Goldman Sachs in the U.S. and Nomura Securities in Japan.

Presently, emerging markets represent more than one-third of

world exports and receive more than one-third of world FDI.

Tariffs are Widespread 4

• For example, the U.S. typically collects high tariffs (often 48 percent) on imports of basic, low-quality shoes, and low tariffs (just 9 percent) on luxury shoes. Low-income shoe buyers end up paying the highest tariffs

New global challengers

Leading firms from emerging markets that are fast becoming key contenders in world markets.

Differences between Common Law and Civil Law 4

Legal issues: Compliance with contracts; Civil Law: Noncompliance is extended to include unforeseeable human acts such as labor strikes and riots; Common Law: Acts of God (floods, lightning, hurricanes, etc.) are the only justifiable excuses for noncompliance with the provisions of contracts

Government Intervention: Key Instruments

Tariff; Non-tariff trade barrier; Quota; Investment barriers

Market access

Tariffs and most nontariff barriers have been eliminated.

To generate revenue

Tariffs are an important source of government revenue in many developing economies.

Standards harmonization

Technical standards, regulations, and enforcements have been harmonized.

Terrorism 3

Terrorism particularly affects certain industries - tourism, hospitality, aviation, finance, retailing.

Inflation 5

That is, investors expect to be compensated for inflation-induced decline in the value of their money.

Bretton Woods Agreement

The Bretton Woods Agreement, which set the course for contemporary global financial relations, was conceived by 44 nations at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, in 1944.

Christopher Johnson 3

"Understanding the role that international business plays across cultural variations will allow for a well-developed global commerce perspective. Such exposure will also assist with determining your specific career path of choice."

Partner with Family Conglomerates

- F C s can provide various advantages, including financing, bank services, local suppliers, and distribution channels. F C s can help reduce risks, time, and capital requirements; develop relationships with governments and other key players; and overcome infrastructure hurdles

The New Global Challengers example 2

-India: Ranbaxy, Infosys, Tata Tea, W I P R O.

Evolution of Government Intervention 2

The Smoot-Hawley Act (1930) raised U.S. tariffs to more than 50% (compared to only 3% today).

NAFTA (Canada, Mexico, the United States) 3

2018, a new agreement was reached to replace NAFTA, called the United States-Mexico-Canada Agreement (USMCA).

The European Union Today 1

27 members. Founders members are Belgium, Italy France, Germany, Luxembourg, and the Netherlands.

Country Risk Arising from the Host Country

;Foreign investment laws; Controls on operating forms and practices; Marketing and distribution laws; Laws on income repatriation; Environmental laws; Contract laws; Internet and e-commerce regulations; Inadequate or underdeveloped legal systems; Extraterritoriality; Foreign Corrupt Practices Act; Accounting and reporting laws; Transparency in financial reporting

Emerging Market Global Challengers 5

Country: Russia; Example Multinational Firms: Gazprom, Lukoil, Severstal; Representative Industries: Natural Gas, Oil, Steel and mining

Economic Bloc

A geographic area consisting of two or more countries that agree to pursue economic integration by reducing tariffs and other barriers to the cross-border flow of products, services, capital, and, in more advanced cases, labor; There are five possible levels of economic integration.

Civil Law 4

A key difference is that common law is mainly judicial in origin and based on court decisions, whereas civil law is mainly legislative and based on laws passed by national and state legislatures.

Common Law 1

A legal system that originated in England and spread to Australia, Canada, U S A, and other former members of the British Commonwealth (also known as case law).

Median Household Income for a Sample of Emerging Markets 6

Country: Russia; Median Income Per Household (U.S. $): 14,487

Transition economies

A subset of emerging markets that evolved from centrally planned economies into liberalized markets.

Tariff

A tax on imports (e.g., Citrus, textiles).

Protection of an infant industry

A young industry may need protection, to give it a chance to grow and succeed. e.g., Japan long protected its car industry.

Factors that Influence the Supply and Demand for a Currency

Economic growth; Inflation; Market psychology; Government action; Balance of payments

Emerging Market Economies 1

About 30 countries with rising economic aspirations that enjoy rapidly growing standards of living

Christopher Johnson's major

Accounting

China: Growing Role in International Business 3

Achieved explosive economic growth, quadrupling its GDP during the succeeding 30 years.

Devaluation government

Action to reduce the official value of its currency relative to other currencies.

Emerging Markets Key Concepts

Advanced economies; Developing economies; Emerging market economies

Low-cost labor, skilled workforce, government support, and family conglomerates give emerging market firms various advantages

Advanced economy firms must

Countries Under Authoritarianism

Afghanistan; Iran; North Korea; Venezuela; Several countries in Africa (such as Eritrea, Sudan, Equatorial Guinea, Zimbabwe)

Ethical Connections: Emerging Markets 1

Africa bears the burden of about one-quarter of all disease worldwide, yet has only 3% of the world's health care workers. Most Africans cannot obtain medical care.

Christopher Johnson 2

After attending a study abroad program in Istanbul, Turkey, he gained a global business perspective and a passion to work in international finance.

Development of the Modern Exchange Rate System 1

After the Great Depression and World War II, the world economy and trading system were in a sorry state.

International Monetary Fund (IMF) 1

Agency that promotes exchange rate stability, monitors exchange systems, provides funding to developing economies.

World Bank 1

Agency that provides loans and technical assistance to combat global poverty around the world.

Market Liberalization in China 2

Agriculture and manufacturing were controlled by inefficient state-run industries.

Maria's jobs

All at Motorola; Credit analyst and auditor (based in the United States, but frequent travel to Latin America); Finance manager (United Kingdom); Financial controller (Dubai, United Arab Emirates)

Foreign exchange

All forms of internationally-traded monies including foreign currencies, bank deposits, checks, and electronic transfers.

Purchasing power parity (PPP)

An adjustment for prices that reflects the number of goods that consumers can buy in their home country, using their own currency and consistent with their own standard of living.

Acquire stronger defensive and political posture

Belonging to a bloc provides member countries with a stronger defensive posture relative to other nations and world regions. This was a key motive for formation of the European Union.

The legal system is:

Applied to all citizens equally; Issued via recognized government authorities; Enforced fairly and systematically by police forces and formally organized judicial bodies.

Other Economic Blocs 4

Asia Pacific Economic Cooperation (APEC)

Expropriation

Asset seizure with compensation.

Other Economic Blocs 3

Association of Southeast Asian Nations (ASEAN)

Development of the Modern Exchange Rate System 2

At war's end, seeking stability in the international monetary and financial systems, 44 countries signed the Bretton Woods agreement.

Other Economic Blocs 5

Australia and New Zealand Closer Economic Relations Agreement (C E R)

Common Law Countries

Australia; Canada; Ireland; New Zealand; United Kingdom; United States

Largely Democratic

Australia; Canada; Japan; New Zealand; United States; Most European countries; Most Latin American countries

Political and Economic Systems 1

Authoritarianism is associated with command economies, wherein the state makes all decisions on what to produce, how much to produce, and what prices to charge.

Mixed Systems 3

Authoritarianism is most associated with religious law and socialist law.

Three major types of political systems

Authoritatrianism, socialism, democracy; these categories are not mutually exclusive

Mixed Systems Countries

Bangladesh; India; Indonesia; Israel; Kenya; Malaysia; Philippines

Common market (EU)

Barriers to cross-border movement of production factors-labor, capital, and technology.

Civil Law 2

Based on an all-inclusive system of laws that have been "codified" - clearly written by legislative bodies.

Internationalization by firms from outside the bloc

Because external trade barriers mainly affect exporting, many foreign firms prefer to enter a bloc through FDI. In this way, after formation of the EU, Britain became the largest recipient of FDI from the United States.

Constantly fluctuating exchange rates require international managers to keep in mind three facts: 2

Because several months can pass between placement and delivery of an order, fluctuations in the exchange rate during that time can cost or earn the firm money.

China: Growing Role in International Business 2

Began pursuing market reforms in the late 1970s.

The Exchange Rate System Today 5

Belize pegs its currency to the dollar.

Achieve economies of scale and productivity

Bigger market facilitates economies of scale.; Internationalization inside the bloc helps firms learn to compete outside the bloc.; Competition and efficient resource usage inside the bloc leads to lower prices for bloc consumers.

The most well-known cryptocurrency is called _______.

Bitcoin

Countries Under Socialism

Bolivia; China; Egypt; India; Romania; Russia; Tanzania

The 'BRIC' Countries

Brazil, Russia, India, China

The New Global Challengers example 1

Brazil: Embraer, Sadia & Perdigao, Natura Mexico: America Movil, Grupo Modelo

Development of the Modern Exchange Rate System 3

Bretton Woods established a fixed exchange rate system in which the U.S. dollar was pegged to a set value for gold ($35 per ounce), and other major currencies were pegged to the dollar

Bureaucracy, red tape, and lack of transparency

Burdensome rules, excessive requirements for licenses, approvals, and paperwork; not accountable legal and political systems. e.g., It may take years, or many bribes, to obtain permissions to do business. China, India, and Russia are particularly problematic

China: Growing Role in International Business 6

But endures serious problems of air, water, and land pollution; has 8 of the world's top 10 polluted cities.

Rationalization of operations

By restructuring and consolidating company operations, managers can develop strategies and value-chain activities suited to the region as a whole, not just individual countries. Goal is to cut costs and redundancy, and increase efficiencies via scale economies.

Difference in Per Capita GDP, in Conventional and PPP Terms 4

Country: Mexico; Per-Capita GDP, Converted Using Market Exchange Rates: $10,021; Per-Capita GDP, Converted Using PPP Exchange Rates: $20,028

Gross Government Debt as a % of GDP 15

Country: New Zealand; %: 24

Median Household Income for a Sample of Emerging Markets 5

Country: Nigeria; Median Income Per Household (U.S. $): 20,960

Gross Government Debt as a % of GDP 14

Country: Norway; %: 33

Marketing and distribution laws example 2

Canada and other countries cap prices in the pharmaceutical and other industries.

Physical asset valuations

Canada and the U.S. use historical costs. Some Latin American countries use inflation-adjusted market value.

National culture and identity

Canada restricts foreign investment in its movie and TV industries

The rapid sell off by residents or foreigners of their holdings in a nation's currency or other assets, usually in response to a domestic crisis that causes them to lose confidence in the country's economy. The investors exchange their holdings in the weakening currency for those of another, often a hard currency.

Capital flight

Socialism 1

Capital is vested in the state and used primarily as a means of production for use rather than for profit

Other Economic Blocs 1

Caribbean Community and Common Market (CARICOM).

Foreign Firms Support Local Economic Development 3

Cemex provides low-cost building materials to millions of poor people.

National Characteristics of Major Country Groups 1

Characteristic: Advanced Economies ; Median Age of Citizens: 39 years; Major Sector Focus: Services, branded products; Economic and Political Freedom: Free or mostly free; Economic/Political System: Market; Regulatory Environment: Minimal regulations; Country Risk: Low; Intellectual Property: Strong; Infrastructure: Well-developed

National Characteristics of Major Country Groups 2

Characteristic: Developing Economies; Median Age of Citizens: 24 years; Major Sector Focus: Agriculture, commodities; Economic and Political Freedom: Mostly repressed; Economic/Political System: Command or Mixed; Regulatory Environment: Highly regulated, burdensome; Country Risk: moderate to high; Intellectual Property: Weak; Infrastructure: Inadequate

National Characteristics of Major Country Groups 3

Characteristic: Emerging Markets; Median Age of Citizens: 32 years; Major Sector Focus: Manufacturing, some services; Economic and Political Freedom: Moderately free or mostly not free; Economic/Political System: Mixed; Regulatory Environment: Achieved much economic liberalization; Country Risk: Variable; Intellectual Property: Moderate and Improving; Infrastructure: Moderate, improving

Authoritarianism 7

China (1949-1980s); Germany (1933-1945); Soviet Union (1918-1991); Spain (1939-1965)

China: Growing Role in International Business 5

China buys one-third of the world's coal, cotton, fish, and rice; one-quarter of the world's steel; and one-half its pork.

China: Growing Role in International Business 4

China is already the world's second-largest economy, but has poor business infrastructure.

Market Liberalization in China 6

China is now a key member of world trading system.

The Exchange Rate System Today 4

China pegs its currency to a basket of currencies

Import Tariffs Have Been Declining 3

China reduced its tariffs since joining the WTO in 2001.

Financial District in Beijing

Chinese banks play a growing role in global finance. China is home to the world's four largest banks: ICBC, China Construction Bank, Agricultural Bank of China, and Bank of China.

Christopher Johnson 1

Christopher got his undergraduate degree from a state university a few years ago. Read his profile.

Country Risk Example

Coca-Cola's business fell off in Germany when the government enacted a recycling plan. New laws required consumers to return non-reusable soft drink containers to stores for a refund of 0.25 euros. Rather than cope with the unwanted returns, big supermarket chains pulled Coke from their shelves.

Four major types of legal systems

Common Law, Civil Law, Religious Law, and Mixed Systems

The Rule of Law 2

Common in the advanced economies.

Attract direct investment from outside the bloc

Compared to investing in stand-alone countries, foreign firms prefer to invest in countries belonging to an economic bloc. General Mills, Samsung, and Tata have invested heavily in EU-member countries.

Other Economic Blocs 2

Comunidad Andina de Naciones (CAN)

Breakdown and Legacy of Bretton Woods 2

Concept of international monetary cooperation, especially aimed at minimizing currency risk.

Three approaches for resolving contract disputes: 1

Conciliation is a formal process of negotiation whose objective is to resolve differences in a friendly manner. It is the least adversarial method. Common in China.

Advanced economy firms must

Conduct research to understand target markets and the indigenous challengers; Acquire new capabilities that build competitive advantage (e.g., develop new products, new ways of doing business, local alliances); Leverage the same advantages in emerging markets enjoyed by local firms (e.g., low-cost labor, skilled workforce, cheap capital, key partnerships).

Country Risk Produced by Political Systems: Government Takeover of Corporate Assets

Confiscation; Expropriation; Nationalization

Protection through legal contracts

Contract law varies widely. The firm must follow the law in each country.

The Exchange Rate System Today 2

Conversely, most developing and emerging economies use fixed exchange rate systems.

Regional Economic Integration 3

Cooperating nations obtain:

Socialism 6

Corporate income tax rates are higher

Political instability

Corruption, weak legal systems, and unreliable government authorities increase business risks and costs, and hinder forecasting

Difference in Per Capita GDP, in Conventional and PPP Terms 5

Country: Poland; Per-Capita GDP, Converted Using Market Exchange Rates: $15,050; Per-Capita GDP, Converted Using PPP Exchange Rates: $30,827

Gross Government Debt as a % of GDP 16

Country: Russia; %: 18

Government Intervention is a Component of

Country Risk

Gross Government Debt as a % of GDP 12

Country: Australia; %: 42

Sampling of Import Tariffs 1

Country: Australia; Agricultural Products: 1.2% ; Nonagricultural Products: 3.0%

Gross Government Debt as a % of GDP 5

Country: Belgium; %: 103

Sampling of Import Tariffs 2

Country: Brazil; Agricultural Products: 10.0%; Nonagricultural Products: 14.1%

Emerging Market Global Challengers 1

Country: Brazil; Example Multinational Firms: Brasil Foods, Embraer, Natura Cosmetics; Representative Industries: Food Processor, Aerospace, Cosmetics

Median Household Income for a Sample of Emerging Markets 1

Country: Brazil; Median Income Per Household (U.S. $): 15,372

Difference in Per Capita GDP, in Conventional and PPP Terms 1

Country: Brazil; Per-Capita GDP, Converted Using Market Exchange Rates: $10,515; Per-Capita GDP, Converted Using PPP Exchange Rates: $15,919

Gross Government Debt as a % of GDP 8

Country: Canada; %: 88

Sampling of Import Tariffs 3

Country: Canada; Agricultural Products: 15.6%; Nonagricultural Products: 2.3%

Gross Government Debt as a % of GDP 11

Country: China; %: 51

Sampling of Import Tariffs 4

Country: China; Agricultural Products: 15.5%; Nonagricultural Products: 9.0%

Emerging Market Global Challengers 2

Country: China; Example Multinational Firms: Alibaba Groups, Huawei Technologies, Lenovo Group; Representative Industries: E-commerce, Information and communications technology, Computer Technology

Median Household Income for a Sample of Emerging Markets 2

Country: China; Median Income Per Household (U.S. $): 9,721

Difference in Per Capita GDP, in Conventional and PPP Terms 2

Country: China; Per-Capita GDP, Converted Using Market Exchange Rates: $9,377; Per-Capita GDP, Converted Using PPP Exchange Rates: $17,943

Sampling of Import Tariffs 5

Country: European Union; Agricultural Products: 11.1%; Nonagricultural Products: 4.2%

Gross Government Debt as a % of GDP 6

Country: France; %: 97

Gross Government Debt as a % of GDP 10

Country: Germany; %: 62

Gross Government Debt as a % of GDP 2

Country: Greece; %: 184

Gross Government Debt as a % of GDP 9

Country: India; %: 67

Sampling of Import Tariffs 6

Country: India; Agricultural Products: 32.7%; Nonagricultural Products: 10.2%

Emerging Market Global Challengers 3

Country: India; Example Multinational Firms: Bharti Airtel, Infosys, Tata Motors; Representative Industries: Telecommunication Services, Technology Consulting, Automotive

Median Household Income for a Sample of Emerging Markets 3

Country: India; Median Income Per Household (U.S. $): 4,965

Difference in Per Capita GDP, in Conventional and PPP Terms 3

Country: India; Per-Capita GDP, Converted Using Market Exchange Rates: $1,989; Per-Capita GDP, Converted Using PPP Exchange Rates: $7,750

Median Household Income for a Sample of Emerging Markets 4

Country: Indonesia; Median Income Per Household (U.S. $): 5,919

Gross Government Debt as a % of GDP 3

Country: Italy; %: 131

Sampling of Import Tariffs 7

Country: Japan ; Agricultural Products: 13.1%; Nonagricultural Products: 2.5%

Gross Government Debt as a % of GDP 1

Country: Japan; %: 240

Sampling of Import Tariffs 8

Country: Mexico; Agricultural Products: 14.6%; Nonagricultural Products: 5.7%

Emerging Market Global Challengers 4

Country: Mexico; Example Multinational Firms: America Movil, Cemex, Grupo Bimbo; Representative Industries: Telecommunication, Building Materials, Baking, Snacks

Strategies for Doing Business in Emerging Markets

Customize Offerings to Unique Emerging Market needs; Partner with Family Conglomerates; Target Governments; Skillfully Challenge Emerging Market Competitors; Low-cost labor, skilled workforce, government support, and family conglomerates give emerging market firms various advantages

_______ are checkpoints at the ports of entry in each country where government officials inspect imported products and levy tariffs

Customs

Special Interest Groups Typical Issues 3

Group: Customers; Typical Issue: May avoid foreign-made products. Dislike improper marketing practices.; Example: Motorists in Australia accused BP of unfair pricing of petroleum products

Special Interest Groups Typical Issues 1

Group: Labor unions; Typical Issue: Oppose imported goods and global sourcing; Example: U.S. united steelworkers union opposed imports of steel from China

Country Risk

Degree of political and macroeconomic risk.

Christopher Johnson Jobs

Deloitte Tax LLP, Chicago; and Ayco (Subsidiary of Goldman Sachs)

Democracy and Openness

Democracy is associated with "openness", the lack of regulation and barriers to the entry of firms in foreign markets

Mixed Systems 4

Democracy is associated with common law, civil law, and mixed systems.

Political and Economic Systems 2

Democracy is associated with market economies and capitalism, in which decisions are largely left to market forces, that is, supply and demand.

Which form of government is characterized by private property rights and limited government?

Democratic

Commercial Infrastructure

Density of telephone lines, number of personal computers, density of paved roads, population per retail outlet, and other such characteristics

Maria's Success Factors

Develop a deliberate career strategy; Cultivate relationships with helpful people, both in college and in the work world; Work hard to maximize your job performance; Establish yourself as a knowledgeable professional helps overcome gender stereotypes

Key Differences Among the Three Major Country Groups 1

Dimension: Advanced Economies; Representative Countries: Canada, France, Japan, U.K., U.S.A; Approximate Number of Countries: 35; Population (% of world): 13%; Approximate Average Per-Capita Income (U .S. dollars; PPP basis): $44,400; Approximate Share of World GDP (PPP basis): 45%; Population (millions): 1,040; Telephone Lines per 1,000 People (fixed and mobile): 1,700; Secure Internet Servers per 1,000,000 People: 1,287; Internet Users per 1,000 People: 902; Motor vehicles per 1,000 people: 602

Key Differences Among the Three Major Country Groups 2

Dimension: Developing Economies; Representative Countries: Angola, Bolivia, Nigeria, Bangladesh; Approximate Number of Countries: 125; Population (% of world): 32%; Approximate Average Per-Capita Income (U .S. dollars; PPP basis): $3,650; Approximate Share of World GDP (PPP basis): 5%; Population (millions): 2,380; Telephone Lines per 1,000 People (fixed and mobile): 680; Secure Internet Servers per 1,000,000 People: 12; Internet Users per 1,000 People: 365; Motor vehicles per 1,000 people: 60

Key Differences Among the Three Major Country Groups 3

Dimension: Emerging Markets; Representative Countries: Brazil, China, India, Indonesia, Turkey; Approximate Number of Countries: 30; Population (% of world): 55%; Approximate Average Per-Capita Income (U .S. dollars; PPP basis): $13,830; Approximate Share of World GDP (PPP basis): 50%; Population (millions): 4,180; Telephone Lines per 1,000 People (fixed and mobile): 1,100; Secure Internet Servers per 1,000,000 People: 72; Internet Users per 1,000 People: 576; Motor vehicles per 1,000 people: 230

Weak intellectual property protection

Discourages producing or selling goods that entail valuable assets

Economic growth 3

Driven by entrepreneurship and innovation.

To pursue economic, political, or social objectives

E.g., intervention can promote domestic job growth

Country Risk 3

Each country has unique political and legal systems that often pose challenges for company performance

The Rule of Law 4

Economic activity suffers and uncertainty increases when the rule of law is weak.

Authoritarianism 2

Either theocratic (religion-based) or secular

A(n) ________ is an official ban on entire exports to or imports from a particular country, in order to isolate it and punish its government

Embargo

•The New Global Challengers benefit from

Emerging Markets

What Makes Emerging Markets Attractive?

Emerging Markets as Target Markets; Emerging Markets as Manufacturing Bases; Emerging Markets as Sourcing Destinations

El Mercado Comun del Sur (MERCOSUR) 3

Established free movement of products and services, common external tariff and trade policy, and coordinated monetary and fiscal policies.

Estimating the Potential of Emerging Markets 1

Estimations are challenging because of peculiar economic and social environments in these countries.

Subsidies examples 2

Europe and the U.S. provide huge agricultural subsidies to farmers. EU subsidies represent 40% of the EU budget.

Trade surplus

Exports exceed imports; may result when the exporter's currency is undervalued, as in China's official policy regarding its currency.

Country Risk 1

Exposure to potential loss or adverse effects on company operations and profitability caused by developments in a country's political and/or legal environments.

Take advantage of foreign trade zones

FTZs are areas where imports receive preferential tariff treatment, intended to stimulate local economic development. e.g., A successful experiment with FTZs has been the maquiladoras - export-assembly plants in northern Mexico.

National Stock Exchanges and Bond Markets (National institution level [2nd level <going down>])

Facilities for trading securities and bonds; goes to the firm

Maria's majors

Finance, International Business, and Spanish

Ethical Connections 3

Financial globalization has contributed greatly to economic development in poor countries.

Marketing and distribution laws example 1

Finland, France, Norway, and New Zealand prohibit cigarette advertising on television.

Import Tariffs Have Been Declining 4

Firms bypass tariffs by entering countries via FDI. E.g., Toyota built factories in the U.S. partly to avoid tariffs

Regional products and marketing strategy

Firms cut costs by standardizing products and services. Case Inc. reduced its Magnum line of tractors from 17 to only a few versions in Europe, following integration of the EU.

Strict adherence to ethical standards

Firms that engage in questionable practices or operate outside the law invite redress from the governments of the host countries where they do business.

The Global Debt Crisis 3

Fiscal imbalances are an important source of risk and uncertainty in the global business environment.

Market Liberalization in India 1

Following independence from Britain in 1947, adopted a quasi-socialist model of isolationism and government control.

Alliances with qualified local partners

For example, firms often enter China and Russia by partnering with local firms who assist in navigating the complex legal and political landscape.

To ensure citizen safety, security, and welfare

For example, governments pass laws to prevent importation of harmful products such as contaminated food

Development of the Modern Exchange Rate System 4

For nearly 30 years, the system kept exchange rates of major currencies at a fixed level.

Types of Country Risk Produced by Legal Systems

Foreign investment laws; Controls on operating forms and practices; Marketing and distribution laws; Laws regarding income repatriation; Environmental laws; Contract laws; Internet and e-commerce regulations; Inadequate or underdeveloped legal systems

Emerging market economies

Former developing economies that achieved substantial industrialization, modernization, and remarkable economic growth. e.g., Indonesia, Mexico, Poland, Turkey.

Civil Law 1

Found in France, Germany, Italy, Japan, Turkey, and much of Latin America.

Country Risk Produced by Political Systems: Boycotts against Firms and Nations: Examples from France 2

French farmers boycotted McDonald's, and crashed a tractor into a shop, to vent their anger with agricultural policies and globalization.

Economists estimate real buying power by calculating

GDP statistics based on purchasing power parity (PPP).

Ethical Connections 2

Globalization of the financial sector allowed the crisis to spread quickly, harming people worldwide.

Authoritarianism 1

Government controls all economic and political matters

________ is at odds with free trade, the unrestricted flow of products, services, and capital across national borders

Government intervention

Government Intervention 3

Government intervention alters the competitive landscape, by hindering or helping the ability of firms to compete internationally.

To serve company and industrial interests

Government intervention can help stimulate development of domestic industries

Socialism 5

Government intervention in the private sector.

Government Intervention 4

Government intervention is an important dimension of country risk.

Non-tariff trade barrier

Government policy, regulation, or procedure that impedes trade.

Socialism 3

Government's role is to control the basic means of production, distribution, and commercial activity

Import Tariffs Have Been Declining 1

Governments have reduced tariffs over time, mainly via the General Agreement on Tariffs and Trade (GATT), which became the World Trade Organization (WTO).

Government Intervention 6

Governments impose both defensive and offensive barriers to trade and investment. Pictured is the Ministry of Economy, Trade, and Industry in Japan, a typical federal agency that regulates international trade and investment.

General Rationale for Government Intervention

Governments impose tariffs and other trade barriers to achieve various goals: To generate revenue; To ensure citizen safety, security, and welfare; To pursue economic, political, or social objectives; To serve company and industrial interests

Government Intervention 2

Governments impose trade and investment barriers that benefit interest groups, such as domestic firms, industries, and labor unions.

Government Intervention 1

Governments intervene in trade and investment to achieve political, social, or economic objectives.

Government action

Governments intervene to influence the value of their own currencies, e.g., the Chinese government regularly intervenes in the foreign exchange market to keep the renminbi undervalued, to help ensure exports

Country Risk Produced by Political Systems: Embargoes and Sanctions

Governments may respond to offensive activities of foreign countries by imposing embargoes and sanctions.

Country Risk Produced by Political Systems: Government Takeover of Corporate Assets Examples 2

Gradual yet persistent pressure from the Russian government led TNK-BP, a Russian subsidiary of British energy giant BP, to sell a major stake in its oil business to the national gas monopoly Gazprom.

The Global Debt Crisis 2

Gross government debt is especially high in Japan and Greece. In these countries, as well as in Belgium, Italy, and the United States, gross government debt exceeds 100 percent of each nation's GDP.

Special Interest Groups Typical Issues 2

Group: Competing businesses; Typical Issue: Dislike competition from foreign firms; Example: Japanese rice producers opposed imports of rice from the United States

Special Interest Groups Typical Issues 4

Group: Conservationists; Typical Issue: Fight against wildlife loss and destruction of the natural environment; Example: Environmentalists oppose lumber imports from countries with tropical rain forests

Emerging Markets as Manufacturing Bases

Home to low-wage, high-quality labor for manufacturing and assembly operations; Large reserves of raw materials and natural resources. e.g., South Africa, Brazil, Russia.

Emerging Market Economies 4

Hong Kong, Israel, Saudi Arabia, Singapore, South Korea, and Taiwan have developed beyond the emerging market stage

Example of Protectionism: U.S. Steel Industry 2

However it resulted in: Higher steel costs. Increased production costs for firms that use steel, such as Ford, Whirlpool, and General Electric. Reduced prospects for selling products in world markets, making U.S. steel firms less competitive

China: Growing Role in International Business 1

Huge population; rapidly growing economy; big importer

When foreign automakers tried to enter the market, they found

Hyundai's advantages overwhelming.

The Balance of Trade 2

If the total value of U.S. imports from Japan exceeds the total value of U.S. exports to Japan, then Japan will have a trade deficit with the U.S. What other factors cause trade deficits?

Emerging Market Economies 3

Importance in the world economy is increasing as attractive destinations for exports, F D I, and sourcing

Trade deficit

Imports exceed exports; the government may devalue the nation's currency to correct a trade deficit.

Evolution of Government Intervention 5

In 1947, 23 nations signed the General Agreement on Tariffs and Trade (GATT)

Market Liberalization in China 1

In 1949, China established communism and centralized economic planning.

The GATT 3

In 1995 the GATT was superseded by the World Trade Organization (WTO), and grew to include 150 member nations

Market Liberalization in China 5

In 2001, China joined the WTO.

The European Union Today 4

In 2016, the United Kingdom (U.K.) voted to withdraw from the European Union. In the wake of 'Brexit', the U.K. may exit from the EU altogether. Or it may adopt an approach similar to Norway, which maintains free movement of goods, capital, and workers with the EU but is not an EU member and follows only selected EU regulations.

Inadequate or underdeveloped legal systems (poor enforcement of existing laws) example 1

In China and Russia, foreign firms sometimes abandon business ventures due to erratic legal environments.

Subsidies examples 1

In China, Shanghai Automotive ($123b ann. sales) and numerous other MNEs are partly owned by the Chinese government, and receive huge financial resources.

Internet and e-commerce regulations example

In Germany, firms are responsible for recycling product packaging.

Country Risk Produced by Political Systems: Government Takeover of Corporate Assets Examples 1

In Venezuela, ExxonMobil and ConocoPhillips were forced to abandon multibillion-dollar investments in the local oil industry.

How Exchange Rates Are Determined 1

In a free market, the "price" of any currency (the exchange rate) is determined by supply and demand: The greater the supply of a currency, the lower its price.; The lower the supply of a currency, the higher its price.; The greater the demand for a currency, the higher its price.; The lower the demand for a currency, the lower its price.

Tariffs are Widespread 3

In advanced economies, tariffs provide significant revenue

Three approaches for resolving contract disputes: 2

In arbitration, a neutral third party hears both sides of a case and decides in favor of one party or the other, based on an objective assessment of the facts.

Tariffs are Widespread 2

In developing economies, tariffs are common

The Exchange Rate System Today 3

In fixed regimes, the value of a currency is pegged to the value of another, or to a basket of currencies, at a specified rate.

Purchasing Power Parity (PPP)Adjustment to per capita GDP 1

In relying on per capita G D P for comparison of different countries, one should use P PP exchange rates, rather than the market exchange rates.

Market Liberalization in China 4

In the 1970s, China liberalized its economy.

Market Liberalization in India 3

In the 1990s, markets opened to foreign trade and investment; state enterprises were privatized.

Example of Protectionism: U.S. Steel Industry 1

In the early 2000s, the U.S. government imposed tariffs on imports of foreign steel to protect U.S. steel manufacturers from foreign competition, aiming to give the U.S. steel industry time to restructure and revive itself.

Controls on operating forms and practices example

In the telecommunications sector in China, the Chinese government requires foreign investors to seek joint ventures with local firms. This ensures local control of the telecom industry; and China gains access to foreign capital and technology.

Market Consumption Capacity

Income of the middle class

What is the effect of this change on Europeans? 5

Increased exports to the U.S. lead to higher revenues. What is the effect on European consumers?

Inflation 4

Interest rates and inflation are positively related; high inflation forces banks to pay high interest.

Breakdown and Legacy of Bretton Woods 3

International Monetary Fund (IMF); World Bank

Actors in Political and Legal Systems 2

International organizations such as the World Bank, World Trade Organization, and the United Nations.

The Firm (firm level[1st level <going down>])

International transactions require firms to deal with huge sums of foreign exchange; top of pyramid

Implications of Regional Integration for the Firm

Internationalization by firms inside the economic bloc; Rationalization of operations

Types and Effects of Government Intervention 5

Intervention Type: Administrative and bureaucratic procedures; Definition: Complex procedures or requirements imposed on importers or foreign investors that hinder trade and investment.; Practical Effects on customers, Firms, or Government:Slows the import of products or services; hinders or delays firms' investment activities

Types and Effects of Government Intervention 6

Intervention Type: FDI and ownership restrictions; Definition: Rules that limit the ability of foreign firms to invest in certain industries or acquire local firms.; Practical Effects on customers, Firms, or Government: Limits how much foreigners can invest in a country, and/or the proportion of ownership that foreigners can hold in firms in the country

Types and Effects of Government Intervention 3

Intervention Type: Local content requirements; Definition: Requirement that firms include a minimum percent of locally sourced inputs in the production of given products or services.; Practical Effect on Customers, Firms, or Government: Discourages imports of raw materials, parts, and supplies, which harms manufacturers' sourcing options; may result in higher costs and lower product quality for buyers

Types and Effects of Government Intervention 2

Intervention Type: Quota; Definition: Quantitative restriction on imports of a product during a specified period of time.; Practical Effect on Customers, Firms, or Government: Gives early importers monopoly power and the ability to charge higher prices; harms late importers; usually results in higher prices to the buyer

Types and Effects of Government Intervention 4

Intervention Type: Regulations and technical standards; Definition: Safety, health, or technical regulations; labeling requirements.; Practical Effect on Customers, Firms, or Government: May hinder the entry of imported products and reduce the quantity of available products, resulting in higher costs to importers and buyers

Types and Effects of Government Intervention 7

Intervention Type: Subsidy; Definition: Financing or other resources that a government grants to a firm or group of firms, to ensure their survival or success.; Practical Effects on customers, Firms, or Government: Increases the competitive advantage of the grantee while diminishing the competitive advantages of those that do not receive the subsidy

Types and Effects of Government Intervention 1

Intervention Type: Tariff; Definition: Tax imposed on imported products; Practical Effect on Customers, Firms, or Government: Increases cost to the importer, exporter, and usually the buyer of the product; discourages product imports; generates government revenue

Types of Banks and Their Primary Activities

Investment banks; Merchant banks; Private banks; Offshore banks; Commercial banks

Religious Law 3

Islamic law spells out norms of behavior regarding politics, economics, banking, contracts, marriage, and many other social and business issues

Differences between Common Law and Civil Law 2

Legal issues: Enforcing agreements; Civil Law: Commercial agreements become enforceable only if properly notarized or registered; Common Law: Proof of agreements is sufficient for enforcing contracts

The Balance of Trade 1

Japan exports cars to the U.S. Car importers in the U.S. pay exporters in Japan, resulting in a surplus item in Japan's balance of trade and a deficit in the U.S. balance of trade.

Foreign investment laws Examples 1

Japan: The "large-scale retail store law" restricted foreigners from opening warehouse-style stores like Toys'R'Us, in favor of smaller Japanese retailers.

Common Law 3

Judges have much power to interpret laws based on the circumstances of individual cases. Thus, common law is relatively flexible.

El Mercado Comun del Sur (MERCOSUR) 2

Launched in 1991, the four initial members were Argentina, Brazil, Paraguay, and Uruguay.

Civil Law 3

Laws are more "cast in stone" and not strongly subject to interpretation by courts.

Inadequate or underdeveloped legal systems (poor enforcement of existing laws) 1

Laws may be weak regarding intellectual property, pollution, consumer protection, and other areas.

Economic union

Like a common market, but members also aim for common fiscal and monetary policies, and standardized commercial regulations. The E U is moving toward an economic union by forming a monetary union with a single currency, the euro.

Common market

Like a customs union, except products, services, and factors of production such as capital, labor, and technology can move freely among the member countries. e.g., The EU countries put in place many common labor and economic policies.

Estimating the Potential of Emerging Markets 2

Limited availability and reliability of data.

Democracy 2

Limited government; Private property rights

Three approaches for resolving contract disputes: 3

Litigation occurs when one party files a lawsuit against another. The most adversarial approach, it is common in the United States.

Requirement that firms include minimum percentage of locally-sourced inputs in the production off given products or services.

Local Content Requirements

Actors in Political and Legal Systems 5

Local competing firms, which oppose foreign firms.

Developing economies

Low-income countries characterized by limited industrialization and stagnant economies. e.g. Bangladesh, Bolivia, Zaire.

Poor physical infrastructure

Lower quality roads, drainage systems, sewers, and electrical utilities are often a factor in emerging markets. For example, India's ports, roads, railways, and airports are insufficient to handle the massive volumes of cargo that enter and leave the country every day

Ethical Connections: Emerging Markets 3

M N E s play a growing role to address such challenges; Private firms such as GlaxoSmithKline and General Electric use innovative business approaches to provide needed medications and medical care to impoverished countries in Africa.

Emerging Markets as Sourcing Destinations

MNEs have established numerous call centers in eastern Europe, India, the Philippines, and elsewhere; Intel and Microsoft have much of their programming activities performed in Bangalore, India; Investments from abroad benefit emerging markets, leading to jobs, technology transfer, and linkages to the global marketplace.

Partner availability and qualifications

MNEs that seek alliances with well-qualified local companies may find such partners in short supply in emerging markets

Proactive environmental scanning

Management should develop a comprehensive understanding of the political and legal environment in target countries; Minimize exposure to country risks.

Ethical Connections: Political and Legal Systems 1

Many countries lack antibribery laws for international transactions.

Emerging Markets as Target Markets

Many have huge middle classes, with significant income for buying electronics, cars, health care services, and countless other products; Many exhibit high economic growth rates.

Key Criteria for Assessing the Attractiveness of Emerging Markets and Developing Economies

Market Size; Market Growth Rate; Market Consumption Capacity; Commercial Infrastructure; Economic Freedom; Country Risk

The EU: A Full-Fledged Economic Union

Market access; Common market; Trade rules; Standards harmonization; Common fiscal, monetary, taxation, and social welfare policies

Estimating the Potential of Emerging Markets 4

Market potential indicators

Estimating the Potential of Emerging Markets 3

Market research can be very costly and less precise, as compared to the advanced economies.

Andrew & Jamie Waskey Challenges of working abroad

Mastering cross-cultural communication; Adapting to different living situations; Making friends; Striking a healthy work—life balance

El Mercado Comun del Sur (MERCOSUR) 4

May be integrated with NAFTA and DRCAFTA as part of a future Free Trade Area of the Americas.

Economic growth 2

Measured as the annual increase in real G D P (in which the inflation rate is subtracted from growth).

Defensive Rationale for Government Intervention 1

Protection of the national economy; Protection of an infant industry; National security; National culture and identity

Take advantage of investment incentives and other government support programs example 2

Mercedes-Benz received several hundred million dollars in subsidies to build a plant in the U.S. state of Alabama.

Foreign investment laws Examples 2

Mexico: Foreign oil companies cannot obtain 100% ownership of Mexican oil firms.

Currencies and Exchange Rates 1

More than 170 currencies in use worldwide

Currencies and Exchange Rates 3

Most currencies are not very convertible. The dollar, yen, pound, euro are hard currencies - universally accepted and preferred in international transactions

Choose the most appropriate entry strategies

Most firms choose exporting as their initial trategy, but if high tariffs are present, other strategies should be considered, such as licensing, or FDI and JVs that allow the firm to produce directly in the market.

Religious Law 2

Most important religious legal systems are based on Hindu, Jewish, and Islamic law.

The European Union Today 3

Most new E U entrants are in Eastern Europe - onetime satellites of the Soviet Union, most are emerging markets with fast economic growth rates.

Religious Law Countries

Much of the Middle East and North Africa; Afghanistan; Mauritania; Pakistan; Sudan

Civil Law Countries

Much of western Europe and Latin America; Japan; Russia; South Korea

Skillfully Challenge Emerging Market Competitors

New global challengers and other emerging market firms possess various advantages that require skillful strategies and due diligence to overcome.

The European Union Today 2

New members such as Poland, Hungary, Czech Republic - are lowcost manufacturing sites

Ethical Connections: Emerging Markets 4

Numerous firms have established clinics that provide low-cost health care.

Market Liberalization in India 4

Protectionism has declined, but high tariffs (averaging 20%) and F D I limitations remain

Regional Economic Integration 2

Over 50 percent of world trade today occurs under some form of preferential trade agreements signed by groups of countries.

Purchasing Power Parity (PPP)Adjustment to per capita GDP 3

PPP adjusted per capita GDP represents the amount of products that consumers can buy in a given country, using their own currency and consistent with their own standard of living.

Purchasing Power Parity (PPP)Adjustment to per capita GDP 2

PPP adjustment provides a more realistic indicator of purchasing power of consumers in emerging and developing economies.

low-cost manufacturing sites

Peugeot, Citroën (France) - factories in Czech Republic; Hyundai (South Korea) - Kia plant in Slovakia; Suzuki (Japan) - factory in Hungary

Accounting and reporting laws examples

Physical asset valuations; R&D costs

National governance 3

Political freedom is characterized by

Political freedom is characterized by:

Political freedom is characterized by: Free and fair elections; The right to form political parties; Fair electoral laws; Existence of a parliament or other legislative body; Freedom from domination by the military or other powers, or; Self-determination for cultural, ethnic, and religious groups

Government Intervention 5

Protectionism; Customs

Advanced economies

Post-industrial countries with high per capita income, competitive industries, and developed commercial infrastructure. Typically the richest countries, including Australia, Canada, Japan, United States, and nations of Western Europe.

Authoritarianism 4

Power is sustained via secret police, propaganda, regulation of free discussion and criticism

Exchange rate 1

Price of one currency in terms of another

National strategic priorities

Protection helps ensure the development of industries that bolster the nation's economy. Countries create better jobs and higher tax revenues when they support high value-adding industries, such as IT, automotive, pharmaceuticals, or financial services.

Increase employment

Protection helps preserve domestic jobs, at least in the short term. However, protected industries become less competitive over time, especially in global markets, leading to job loss in the long run.

Evolution of Government Intervention 1

Protectionist tendencies, the Great Depression, and isolationism shaped early 20th century world trade.

Functions of Political Systems

Provide protection from external threats; ensure stability based on laws; govern the allocation of valued resources among the members of a society; define how society's members interact with each other

Quota

Quantitative restriction on imports of a specific product (e.g., Imports of Japanese cars).

Emerging Markets

Rapidly growing markets, some of which are large; Low-cost labor; Training grounds for competing with global incumbents; Complex operating environments, which produce some very capable firms

Seek favorable customs classifications for exported products

Reduce exposure to trade barriers by ensuring that products are classified properly.

Consequences of Protectionism

Reduced supply of goods to buyers; Price inflation; Reduced variety, fewer choices available to buyers; Reduced industrial competitiveness; Various adverse unintended consequences (e.g., while the home country dithers, other countries can race ahead).

The GATT 1

Reduced tariffs via continuous worldwide trade negotiations; Created an agency to supervise world trade; Created a forum for resolving trade disputes.

Investment barriers

Rules or laws that hinder foreign direct investment (e.g., Mexico's restrictions in its oil industry).

Confiscation

Seizure of corporate assets without compensation.

Andrew & Jamie Waskey Success Factors

Set goals and persistently work toward them. If you want to work abroad, pursue your goal actively; Know what you want to do. Develop a clear professional path; Leverage friends and other contacts to connect with key people in your field.

Country Risk 2

Similar to "political risk", but also includes economic challenges

Customs union

Similar to a free trade area except the members harmonize their trade policies toward nonmember countries, by enacting common tariff and nontariff barriers on imports from nonmember countries. MERCOSUR is an example

Free trade area

Simplest, most common arrangement. Member countries agree to gradually eliminate formal trade barriers within the bloc, while each member maintains an independent international trade policy with countries outside the bloc. One example is NAFTA

NAFTA (Canada, Mexico, the United States) 2

Since its inception, Canada and Mexico became the top export markets of the United States.

How Firms Respond to Intervention

Take advantage of foreign trade zones; Seek favorable customs classifications for exported products; Take advantage of investment incentives and other government support programs; Lobby for freer trade and investment

Political and Economic Systems 3

Socialism is associated with mixed economies, which have features of both market and command economies, combining state intervention and market mechanisms (e.g., Sweden, Singapore).

The New Global Challengers

Some 100 companies from emerging markets are poised to become important 21st-century multinationals.

Ethical Connections 5

Some argue the real cause of the crisis was a failure of governments to adequately regulate the financial sector.

Inflation 2

Some countries (e.g., Argentina, Israel, Russia) have experienced hyperinflation.

Terrorism 2

Some terrorism is sponsored by national governments.

Actors in Political and Legal Systems 4

Special interest groups such as labor unions and environmental advocates.

Harmonized code

Standardized worldwide system that determines tariff amount

Customize Offerings to Unique Emerging Market needs

Successful firms develop a deep understanding of the distinctive characteristics of buyers, local suppliers, and distribution channels in emerging markets, and customize offerings and business models accordingly

Openness is associated with:

Successful market entry; Increased market demand; Competition on quality which improves overall product quality; Increased competition, leading to efficiencies and lower prices

Bank for International Settlements (International organization level [ 4th level <going down>])

Supervises Central Bank monetary policy and other activities; goes into central bank; at bottom level

Euro vs. the Dollar 1

Suppose, last year, the exchange rate was 1 = $1.

Nationalization

Takeover of an entire industry, with or without compensation.

Key Participants in the Monetary and Financial Systems

The Firm; National Stock Exchanges and Bond Markets; Commercial Banks; Central Banks; Bank for International Settlements

Country Risk Produced by Legal Systems: Country risk arising from the home country legal Environment: 1

The Foreign Corrupt Practices Act (F C P A); Accounting and reporting laws; Transparency in financial reporting

The GATT 4

The GATT and WTO presided over the greatest global decline in trade barriers in history.

NAFTA (Canada, Mexico, the United States) 1

The North American Free Trade Agreement (NAFTA) was passed in 1994 and established free trade among the member countries.

Ethical Connections: Political and Legal Systems 2

The Organization for Economic Cooperation and Development (OECD) recently called for a ban on "grease payments," small-scale bribes intended to speed up telephone hookups, government paperwork, and other everyday matters in global commerce.

Private property rights

The ability to own property and assets to increase one's asset base by accumulating private wealth; Property includes land, buildings, stocks, contracts, patents; Encourages initiative, ambition, innovation.

Balance of payments 2

The annual accounting of all economic transactions of a nation with all other nations.

What should managers do to estimate market potential more accurately?

The answer lies in using per-capita GDP figures adjusted for price differences.

Extraterritoriality

The application of home-country laws to other countries. For example, the European Union pursued Microsoft for monopolistic practices.

Common Law 2

The basis of law is tradition, past practices, and legal precedents set by courts via interpretation of statutes, legislation, and past rulings.

Customs

The checkpoint at national ports of entry where officials inspect imported goods and levy tariffs.

Global Financial Systems

The collection of financial institutions that facilitate and regulate the flows of investment and capital funds worldwide. It includes the national and international banking systems, the international bond market, and national stock markets.

Mixed Systems 2

The contrast between civil and common law has become blurred as countries combine both systems.

Market Liberalization in China 3

The country was long closed to international trade.

Market Size

The country's population, especially those living in urban areas.

Market Growth Rate

The country's real GDP growth rate.

Constantly fluctuating exchange rates require international managers to keep in mind three facts: 3

The firm and its customers can use the exchange rate as it stands on the date of each transaction, or they can agree to use a specific exchange rate.

Ethical Connections 1

The global financial crisis of 2008-2009 raised many ethical issues.

Foreign Exchange Markets

The global marketplace for buying and selling national currencies.

Take advantage of investment incentives and other government support programs example 1

The government of Hong Kong put up much of the cash to build the Hong Kong Disney Park.

Actors in Political and Legal Systems 1

The government, or the "public sector", operating at national and local levels.

The International Monetary

The institutional framework, rules, and procedures by which national currencies are exchanged for one another

El Mercado Comun del Sur (MERCOSUR) 1

The leading economic bloc in South America, accounting for nearly all of the region's GDP.

The Rule of Law 3

The legal system is

Constantly fluctuating exchange rates require international managers to keep in mind three facts: 1

The prices the firm charges can be quoted in the firm's currency or in the currency of each foreign customer.

Global sourcing

The procurement of products or services from independent suppliers or company-owned subsidiaries located abroad for consumption in the home country or a third country.

Outsourcing

The procurement of selected value-chain activities, including production of intermediate goods or finished products, from independent suppliers.

Inadequate or underdeveloped legal systems (poor enforcement of existing laws) example 2

The recent global financial crisis was triggered partly by poor regulation in the United States and Europe.

Example of Protectionism: U.S. Steel Industry 3

The steel tariffs were removed within two years.

Terrorism 1

The threat or actual use of force or violence to attain a political goal through fear and intimidation.

Andrew & Jamie Waskey 2

They are making their careers as business managers in Dubai, in the United Arab Emirates

Andrew & Jamie Waskey 3

They have traveled extensively in Europe, Latin America, and the Middle East.

Defensive Rationale for Government Intervention 2

To safeguard its national culture, the French government prevents foreign companies from owning television and movie companies in France. Shown here is Cannes, the site of France's popular film festival.

The Exchange Rate System Today 1

Today, advanced economy currencies (dollar, euro, pound, yen) float according to market forces, their value determined by supply and demand.

Authoritarianism 5

Today: Some countries in the Middle East and Africa; Cuba, North Korea

Trade Conditions in the Major Country Groups 1

Trade Condition: Advanced Economies; Industry: Highly developed; Competition: Substantial; Trade Barriers: Minimal; Trade Volume: High; Inward FDI: High

Trade Conditions in the Major Country Groups 2

Trade Condition: Developing Economies; Industry: Poor; Competition: Limited; Trade Barriers: Moderate to high; Trade Volume: Low; Inward FDI: Low

Trade Conditions in the Major Country Groups 3

Trade Condition: Emerging Markets; Industry: Rapidly improving; Competition: Substantial; Trade Barriers: Moderate; Trade Volume: High; Inward FDI: Moderate to High

Evolution of Government Intervention 3

Trade policies greatly reduced tariffs after WWII.

Value of the Currency and Trade Surplus vs. Trade Deficit

Trade surplus; Trade deficit; Devaluation government; Balance of payments

Privatization

Transfer of state-owned industries to private concerns.

The New Global Challengers example 4

Turkey: Koc Holding, Vestel & Sisecam.

Mixed Systems 1

Two or more legal systems operating together.

Foreign Firms Support Local Economic Development 5

Various cell-phone and telecom firms have substantially increased telecommunications infrastructure in Africa.

Research to gather knowledge and intelligence

Understand trade and investment barriers abroad. Scan the business environment to identify the nature of government intervention.

Maria Petit's Challenges

Understanding current and evolving regulations in the finance and accounting area across numerous countries; Not knowing the local language slows the pace of meetings; Being a women in countries with fewer female managers

Foreign Firms Support Local Economic Development 2

Unilever and P & G sell shampoo in India for less than $0.02 per mini-sachet.

Foreign investment laws Examples 3

United States: Restricts inward investments seen to affect national security. e.g., The U.S. Congress blocked Dubai Ports World, a Middle Eastern firm, which sought a deal to manage U.S. ports.

Country Risk Produced by Political Systems: Boycotts against Firms and Nations

Voluntary refusal to engage in commercial dealings with a nation or a company.

Foreign Firms Support Local Economic Development 1

Walmart and Home Depot have created new, cost-effective distribution channels in Mexico.

Country Risk Produced by Political Systems: Wars, Insurrection, and Violence

War and insurrection; Terrorism

Despite strong growth in emerging markets, many of these nations face cyclical poverty that reduces

access to basic social infrastructure such as education, health care, and sanitation. Poverty increases the fragility of national governments.

It then compares the prices based on

actual exchange rates to those based on the PPP price of Big Macs to assess whether a nation's currency is under- or overvalued.

Foreign investment laws

affect FDI-based entry.

Exchange rate 2

affect the fortunes of the firm in various ways - costs of inputs, sales performance, which market entry strategies to use, etc

Contract laws

affect the sale of goods and services; intermediary agreements; licensing and franchising; foreign direct investment; and joint ventures.

Environmental laws

aim to preserve natural resources, combat pollution, and ensure safety.

Andrew Waskey

also worked as a marketing intern at the U S Department of Commerce, in Shanghai, China

When a currency goes up in value, we say the currency _________.

appreciates

Embargoes

are bans on exports or imports that forbid trade in specific goods with specific countries. Example: The U.S. has enforced embargoes against Cuba, Iran, and North Korea, labeled as state sponsors of terrorism.

Sanctions

are bans on international trade, usually undertaken by a country, or a group of countries, against another judged to have jeopardized peace and security.

Subsidies

are government grants (monetary or other resources) to firm(s), intended to ensure their survival or success by facilitating production at reduced prices, or encouraging exports

Controls on operating forms and practices

are laws and regulations on how firms can conduct production, marketing, and distribution activities.

Offshore banks

are located in jurisdictions with low taxation and regulation, such as Switzerland and Bermuda.

factors of production such as capital, labor, and technology are allowed to move freely among the member countries in a ______.

common market

Exchange rates are in

constant flux.

A ______ can be easily exchanged for other currencies

convertible currency

The British Pound, european euro, japanese yen, and U.S. dollar are

convertible currency; hard currency

Governments sometimes retaliate against subsidies by imposing ________, tariffs on products imported into a country to offset subsidies given to producers or exporters in the exporting country.

countervailing duties

Which of the following terms indicates potential loss or adverse effects on company operations and profitability caused by developments in a country's political and/or legal environments

country risk

Economic disparity and poverty are

critical global challenges.

Restrictions on the outflow of hard currency from a country or on the inflow of foreign currencies is called ________.

currency control

Members of ______ allow free trade between members and agree to adopt common tariffs and non-tariffs barriers that are applied to imports from nonmember countries.

customs unions

Accounting and reporting laws

differ widely around the world

Poverty increases the likelihood of

disease, food shortages, terrorism, illicit trade, and international migration.

Breakdown and Legacy of Bretton Woods 1

dissolved in 1971, as the world economy was evolving and governments could no longer maintain fixed exchange rates on the gold standard. Bretton Woods established the

In purchasing-power terms,

emerging markets now account for about half of world GDP.

In coming decades, it is estimated that the majority of growth in world GDP will come from

emerging markets, especially Brazil, Russia, India and China, the BRIC countries.

When evaluating the potential of individual markets, managers often start by

examining aggregate country data, such as gross national income (GNI) or per-capita GDP, expressed in terms of a reference currency such as the U.S. dollar.

The PPP concept suggests that, in the long run,

exchange rates should move toward levels that would equalize the prices of an identical basket of goods and services in any two countries.

The price of one currency expressed in terms of another is called _______.

foreign exchange; exchange rate

A ________ is an area within a country that receives imported goods for assembly or other processing and subsequent re-export.

foreign trade zone

Emerging markets are ________.

former developing economies that have achieved substantial industrialization, modernization, and rapid economic growth since the 1980s

Maria Petit

got her undergraduate degree from a state university a few years ago

Emerging markets are important in international business and trade due to ________.

high growth rate of middle class population

Grants

include cash, tax breaks, infrastructure construction, or government contracts at inflated prices

Advanced economies are highly industrialized and enjoy various benefits,

including general access to electricity and high-quality infrastructure.

Family conglomerates enjoy various competitive advantages in their home countries,.

including government protection and support, extensive networks in various industries, superior market knowledge, and access to capital.

Cooperating nations obtain:

increased product choices, productivity, living standards, lower prices, and more efficient resource use.

The GATT 2

introduced the concept of most favored nation (renamed normal trade relations), according to which each member nation agreed to extend the tariff reductions covered in a trade agreement with one country to all other countries. A concession to one became a concession to all.

Economic Freedom 1

is the absence of government coercion so that people can work, produce, consume, and invest however they want to; flourishes with appropriate of intervention; too much regulation harms the economy.; The degree to which government intervenes in business activities.

Transparency in financial reporting

is the degree to which firms regularly reveal substantial financial and accounting information. This varies worldwide.

Economic growth 1

is the increase in value of the goods and services produced by an economy

Balance of payments 1

is the nation's balance sheet of trade, investment, and transfer payments with the rest of the world. It reflects the difference between the total amount of money coming into and going out of a country.

Common fiscal, monetary, taxation, and social welfare policies

is the ultimate goal over time.

However, per-capita GDP converted at market exchange rates paints an inaccurate picture of market potential because

it overlooks the substantial price differences between advanced economies and emerging markets

The challengers from emerging markets leverage

low-cost labor in their home countries.

Foreign Corrupt Practices Act (1966; U.S.)

made it illegal to offer bribes to foreign parties. But the act may harm U.S. firms because foreign competitors are usually not so constrained.

Private banks

manage the assets of the very rich. Union Bank in Switzerland (UBS) and ABN AMRO Private Banking in Luxembourg are examples.

Prices are usually lower for

most products and services in emerging markets.

Multiple-income households have

much greater spending power than individuals, a fact overlooked by statistics that emphasize per-capita GDP.

For example, a U.S. dollar exchanged and spent in China will buy

much more than a dollar spent in the United States.

Socialism 4

occurs in much of the world as social democracy (e.g., Western Europe, Brazil, India).

Scanning

ongoing assessment of potential risks and threats to the firm, via intelligence sources such as: Employees working in the host country.; Embassy and trade association officials.; Consulting firms, such as Business Entrepreneurial Risk Intelligence (BERI).

Which of the following is typical of developing economies?

poor education systems

Merchant banks

provide capital to firms in the form of shares rather than loans. The Arab-Malaysian Merchant Bank is an example.

A quantitative restriction on specific imports for a set period of time is referred to as ________.

quota

They also possess engineering and managerial talent often superior to

that of competitors in advanced economies.

Exhibit 8.8 presents

the Big Mac Index for the most recent year.

This shift made the rupee less expensive for Americans, and

the U.S. dollar more expensive for Indians. Such shifts can complicate international business.

By 2013, the rate had depreciated to 58 rupees-the rupee's value went down relative to

the dollar by more than 20 percent.

Although advanced economies such as the United States and Europe will remain relatively robust,

the emerging markets hold the most promise as target markets and engines of global commerce in the future.

Limited government

the government performs only essential functions that serve all citizens, such as national defense, maintaining law & order, foreign relations, and providing basic infrastructure

Hyundai Group was an early mover in South Korea's auto industry and now holds

the largest share of that country's car market.

In a free market, levels of supply and demand for a currency vary inversely with its price. Thus, all else being equal, the greater the supply of a currency,

the lower its price

Adjusted per-capita GDP more accurately represents

the number of products consumers can buy in a given country, using their own currency and consistent with their own standard of living.

Household income is substantially larger than per capita income in these countries due to

the presence of multiple wage earners in individual households

The index first gathers information about

the price of hamburgers at McDonald's restaurants worldwide.

Target Governments

which buy enormous quantities of products, such as computers, furniture, office supplies, and motor vehicles, as well as services. State enterprises operate in areas such as railways, airlines, banking, oil, chemicals and steel

Emerging markets, especially China, India, and Brazil, have contributed enormously to

world growth in GDP and will continue to do so in the future.