International Business

balance of payments

A statement that summarizes an economy's transactions with the rest of the world for a specified time period. encompasses all transactions between a country's residents and its nonresidents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts. __ transactions and international investment position (IIP) together constitute its set of international accounts.

currency exchange rates

__ change constantly and affect trade because if a country has a stronger __, the goods are more expensive to import because the American dollar is worth less and has less purchasing power; if a country has a weaker __, the goods are less expensive to import because the American dollar is worth more and therefore more can be purchased.

Commission on International Trade Law

a United Nations trade agreement including US, Canada, China, Japan and several other prominent world trade countries

weak

a __ currency leads to lower imports

Human Development Index HDI

a combination of life expectancy at birth, education attainment, and average incomes - determines if a country has sufficient target markets to warrant the pursuit of sales

foreign exchange market

a company importing products from another country must enter the ___ to purchase currency for payment

supply and demand of labor

a concept that describes the amount of __ that an economy or firm is willing to employ at a given point in time. is determined by the real wage firms are willing to pay for this work, and the amount of energy workers are willing to supply at that wage.

subsidies

a direct infusion of cash by a government to a business for developing industries (tax breaks) - one measure of protectionism

trade surplus

a domestic __ can help offset a foreign country's trade deficit, but it could also mean bad news - that the domestic country is selling off assets like land, businesses, factories, and stock ownership to afford purchases of foreign goods and services

embargo

a government order that restricts commerce or exchange with a specified country. usually created as a result of unfavorable political or economic circumstances between nations. The restriction looks to isolate the country and create difficulties for its governing body, forcing it to act on the underlying issue.

market penetration

a measure of the amount of sales or adoption of a product or service compared to the total theoretical market for that product or service. The amount of sales or adoption can be an individual company's sale or industry while the theoretical market can be the total population or an estimate of total potential consumers for the product.

product adaptation

a partial change to a product to make it acceptable and marketable in a different country

imports

a strong currency leads to higher __

decreases

a strong dollar __ exports because the US products seem more expensive to foreign consumers

social loafing

a team member who exerts less effort than the rest of the group members because they see that others can get the work done so they do not try as hard because they don't believe they have to is engaging in ___.

product invention

a total change to the product itself to appeal to cultural differences, such as household income

voluntary export restraint

a trade restriction on the quantity of a good that an exporting country is allowed to export to another country. This limit is self-imposed by the exporting country. Typically a result of requests made by the importing country to provide a measure of protection for its domestic businesses that produce substitute goods. often created because the exporting countries would prefer to impose their own restrictions than risk sustaining worse terms from tariffs and/or quotas.

exports

a weak dollar increases __ because costs are lowered for the receiving country

trade agreement

addresses trade issues, such as tariffs and import quotas, those countries not part of a particular __ will be subject to higher tariffs and other trade barriers

Customs Border Patrol CBP

all imports to the US must first clear __

promotion adaptation

although the product is kept exactly the same, the promotional strategy is altered to appeal to consumer cultural preferences and spending habits

population growth rate

an economic indicator that shows how big the potential consumer market will be for product growth over time

market size

an economic indicator that shows how big the potential consumer market would be for product growth

dumping

anti-competitive event in which foreign companies or governments price their products below market values (sell products in large quantities for lower prices to foreign markets than they do in domestic markets) in an attempt to drive out domestic competition. This may lead to conditions where one company has a monopoly in a certain product or industry. Antitrust or competition laws forbid predatory __ in many countries such as the U.S. and the European Union. May also be cause for an anti-__ duty which causes the product prices to be higher and not sell as well as domestic products.

enhancement

any change or upgrade that increases software or hardware capabilities beyond original client specifications

North American Free Trade Agreement NAFTA

became active in 1994 and was signed by the US, Mexico, and Canada - forming the largest international free trade area - trade between these countries increased tremendously - some environmental concerns, some manufacturing job loss in Mexico

channel distribution

can include exclusive (specific group), intensive (many different groups), or selective (a mixture of the two) - the method a product or service travels from the producer to the consumer, could include several intermediaries (indirect) or go straight from producer to consumer (direct)

Export Administration Regulations EAR

compliance with the applicable rules of the __ is required for exporting goods to other countries - some items can be exported, some require a special license, and others carry restrictions to the type of good, quantity, and destination (ex. quotas, Cuba embargo)

infrastructure

concerned with the basic facilities and services needed for a country to function, such as transportation systems or public institutions (important indicator of viability of a global market)

marketing tactics

detailed day-to-day operational decisions essential to the overall success of marketing strategies

status

group __ is the importance of the group itself and its efforts and the value of their work to the company; __ within the group is the individual standing in the eyes of other team members - this varies culturally

duties

import taxes that vary by the type and quantity of the imported item

gross domestic product GDP

in analyzing the economic environment in a global market, this is the most known way to judge the size and market potential of an economy and the potential for global marketing - the market value of the goods and services produced by a country in a year

low context

in international communication, a __ culture are direct and individualistic with decisions based on facts, they want contract specifics and may have issues with trust

high context

in international communication, a __ culture regards trust as the most important part of business dealings, are collectivist, and focus on interpersonal relationships - they get to know business associates to get a gut feeling for decision making, and business teams and group success take precedence over individual achievement

Customs and Border Protection Declaration

in order to import items to the US, an importer must fill out a ___, containing the name and address of the supplier, a detailed description of the product, the purchase price, the weight, and the country of origin

lead strategy

in terms of international business practices, when a company collects foreign currency receivables early when that currency is expected to depreciate, OR paying foreign currency payables before they are due when a currency is expected to appreciate, they are using a ___

current

in the balance of payments (BOP), the __ account is used to measure the short-term inflows and outflows of money into a country. includes exports and imports of services and merchandise, commonly referred to when speaking of trade deficits and surpluses

capital

in the balance of payments (BOP), the __ account is where long-term flows of payments are recorded between countries, payments for physical __, such as factories and equipment, as well as financial __, such as stocks, bonds, and real estate, also referred to as the financial account

scalability

increased system resources resulting in increased performance in a manner proportional to resources added

joint ventures

international business through __ involves a company forming a partnership with another in an international market it wants to enter - inputs and outputs, profits or losses, are shared - familiarity with foreign market, less consumer resistance, understanding and ability to comply with laws and regulations, but some decision making power is sacrificed, disagreements from partnership can arise, and profits must be shared

contract manufacturing

international business through __ involves a company that designs a product but hires another company to manufacture and ship it using the company's brand name and specifications - company may benefit with lowered costs, production methods unavailable domestically - company may have difficulty because of lack of quality control, poor working conditions reflecting on the company, shared intellectual property risks, contract disputes

foreign subsidiaries

international business through __ involves a parent company that opens a new __ in a foreign country - by starting or buying an existing company. parent company is in charge and is the primary decision maker, cost savings because of shared resources, but liability issues difficulty if starting a new business venture (customers, suppliers), very expensive, large commitment. the parent company must follow the laws of the country where the __ operates, and the parent company still carries the foreign __'s financials on its books (consolidated financial statements). For the purposes of liability, taxation and regulation, __ are distinct legal entities.

franchising

international business through __ occurs when an individual leases the ability to replicate a business model and brand, for a large one-time fee and a percentage of the profits / marketing, sales, promotion, and training provided by the franchiser - barriers include laws and regulations, tastes and preferences of another country may be barriers to success

licensing

international business through __ occurs when one business makes an agreement with another to give special permission (right) to use a manufacturing process, patent design, or some other company-specific information to create the product. a fee or royalty is received by the company; problems encountered include loss of control, product or process copying, supplying raw materials to create the product on a regular basis

weak dollar problems

less purchasing power, more expensive to import, prices increase, consumers spend less, fuel costs increase, inflation occurs, central banks raise interest rates to attract investors, economy is negatively impacted

common market

lifts trade barriers between members and provides for an agreed-upon trade policy, as well as lifting most barriers to movement of capital, labor, and technology among member countries

free trade area

members of a __ will not be subject to most traditional trade barriers when engaging in trade with other members - non-members will be subject to trade barriers set up by individual members (NAFTA is an example)

surplus

more exports create a trade ___

deficit

more imports create a trade __

economic integration

occurs when a group of countries or a region reduces trade barriers and coordinates certain economic activities, including trade agreements, free trade areas, customs unions, and common markets - gives benefits of free trade with a level of protectionism still in place

countertrade

old method of pricing strategy in which all or part of the payment for goods or services is in the form of other goods or services (sometimes straight barter)

uncertainty avoidance

one part of Hofstede's cultural dimension's theory, ___ refers to a culture's comfort level with ambiguity and how it reacts to situations that are unclear

femininity

one part of Hofstede's cultural dimensions theory, __ refers to a culture's view of cooperation and quality of life

masculinity

one part of Hofstede's cultural dimensions theory, __ refers to a culture's view of material achievement

General Agreement on Tariffs and Trade GATT

treaty formed between 125 nations, governing 90% of international trade by the 90s - formed after World War 2 to help the economy by lowering obstacles to global trade such as quotas, tariffs and subsidies. helped increase free trade in the 20th century - equalized the tariffs for all countries, promoted tariffs over quotas, in effect until the World Trade Organization took over in 1995

protectionism

refers to government actions and policies that restrict or restrain international trade, often done with the intent of protecting local businesses and jobs from foreign competition. Typical methods are import tariffs, quotas, subsidies or tax cuts to local businesses and direct state intervention.

economic union

similar to a common market - member countries have a common trade policy, lift trade barriers and capital / labor / tech barriers, as well as maintain a consistent monetary, fiscal, and tax policy and act as a single economic unit in many ways (Europe is an example)

cultural dimensions theory

social psychologist Geert Hofstede identified components that make up national culture and affect international business relations; components include power distance, individualism versus collectivism, masculinity vs. femininity, uncertainty avoidance, and long-term vs. short-term orientation

World Trade Organization WTO

started in 1995 by the Marrakech Agreement - international organization related to trade rules between different countries - agreements negotiated and created to benefit producers, importers, and exporters - place for companies to negotiate trade and work through trade restrictions - formed trade rules, promoting safe and effective trade without conflicts between nations - also helps nations create their own trade agreements, ensures complaince with agreements made, and resolves disputes - staff of more than 600 people in Geneva, Switzerland

tariff

tax that applies to imported goods - making domestic production cheaper because the tax makes the cost of imports more expensive - advantageous for domestic manufacturers

mode of entry

term for breaking into a foreign market through one of several methods, such as exporting, direct investment, licensing, contract manufacturing, etc.

absolute advantage

the ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service. can produce a product or service using a smaller number of inputs and/or using a more efficient process than another party producing the same product or service.

comparative advantage

the ability of a firm or individual to produce goods and/or services at a lower opportunity cost than other firms or individuals. gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins. - from a national perspective, it is a counteraction to protectionism, to focus on markets where they have __ for exports and import items for which they do not have __

global marketing standardization

the decision to sell a product overseas without making any changes to the marketing mix

balance of trade

the difference between a country's imports and its exports. the largest component of a country's balance of payments. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy. A country has a trade deficit if it imports more than it exports; the opposite scenario is a trade surplus.

power distance

one part of Hofstede's cultural dimensions theory, this relates to how the authority is distributed within an organization; a company / culture with a high __ is hierarchical in nature and has significant differences in authority - they do not ask for feedback from employees; a company / culture with a low __ has more informal hierarchies and allows for interaction between executives and subordinates, is open to socializing and requesting feedback from employees

orientation

one part of Hofsteed's cultural dimensions theory refers to a long-term vs. short-term ___, whether long-term solutions or short-term perspectives are valued

collectivism

one part of Hofsteed's cultural dimensions theory, individualism vs. __ relates to a culture's preference to work individually or as a team

direct investment

one way to enter a foreign market - consists of active ownership of a foreign company or factory - may choose to build new facilities or purchase existing ones, costly, huge employee investment, but it allows for quick entry into the market

exporting

one way to enter foreign market - involves selling the product to buyers in another country - high transportation costs and trade barriers are some challenges encountered, but the low cost, small investment, and no setup of manufacturing operations make it a low-risk option

Bureau of Industry and Security BIS

part of the US Department of Commerce, has the goal of promoting national security, foreign policy, and economic interests - governs exports

International Monetary Fund IMF

part of the United nations, promotes economic stability in 188 member countries - gives advice on policies to encourage international growth - helps developing nations reduce poverty levels, keeps exchange rates table and balances international trade - provides financing, training and technical assistance to struggling countries - provides surveillance to track economic and financial problems, looks at worldwide economic trends, helps countries create policies best for their situation. Criticisms include intrusive intervention of loan conditions, forcing privatization, lack of consideration for special needs of countries, immediate implementation expected, doesn't take criticism well

quota

puts a restriction on the amount of imports - beyond this number, the products must be made domestically, which may be more expensive but results in a greater profit for domestic companies.

credit

recorded as an inflow of money from foreign countries for financial and physical assets in the domestic economy, also known as __

debit

recorded as an outflow of money in the capital account of the balance of payments, domestic investment in the foreign sector, also known as a __

debit

recorded as an outflow of money or a debit in the capital account of the balance of payments

customs union

trade barriers between member countries are eliminated and members of a __ will develop a unified trade policy regarding non-members

weak dollar benefits

trade deficit decreases, domestic job growth, demand for exports increases, jobs increase (some lost jobs for businesses that pay more for supplies)

technological framework

whether the country has sophisticated logistic systems that will support product inventory, supply, and delivery - an important indicator in determining whether to enter a particular global market

World Bank

works to reduce poverty by loaning money to developing countries for capital programs - part of the United Nations - promotes foreign investment, international trade, and capital investment - works to improve health and fight disease by sending vaccines internationally - fights for environmental causes - focused on 14 centralized global practices, including health and water - criticism includes layoffs and lowered budgets - based in D.C.

strong dollar

foreign goods cost less, importing may increase while exporting / domestically produced items decrease, prices go down, most often signifies a healthy economy

opportunity cost

the expense of an alternative that must be forgone in order to pursue a certain action. the benefits you could have received by taking an alternative action. The difference in return between a chosen investment and one that is necessarily passed up. Say you invest in a stock and it returns a paltry 2% over the year. In placing your money in the stock, you gave up the opportunity of another investment - say, a risk-free government bond yielding 6%. In this situation, you lose 4% (6% - 2%), which is your ___

distribution strategy

this part of the marketing mix must be analyzed and possibly adjusted based on the structure and transportation channels of a particular country - may adjust the size of the vehicle, timing of delivery, or costs associated to determine profitability