| absolute advantage | A country has an absolute advantage in the production of a product when it is more efficient than any other country at producing it.
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| ad valorem tariff | A tariff levied as a proportion of the value of an imported good.
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| administrative trade policies | Administrative policies, typically adopted by government bureaucracies, that can be used to restrict imports or boost exports.
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| antidumping policies | Policies designed to punish foreign firms that engage in dumping and thus protect domestic producers from unfair foreign competition.
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| arbitrage | The purchase of securities in one market for immediate resale in another to profit from a price discrepancy.
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| balance-of-payments accounts | National accounts that track both payments to and receipts from foreigners.
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| banking crisis | A loss of confidence in the banking system that leads to a run on banks, as individuals and companies withdraw their deposits.
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| barter | The direct exchange of goods or services between two parties without a cash transaction.
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| basic research centres | Centres for fundamental research located in regions where valuable scientific knowledge is being created; they develop the basic technologies that become new products.
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| bill of lading | A document issued to an exporter by a common carrier transporting merchandise. It serves as a receipt, a contract, and a document of title.
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| Bill S-21 | Otherwise known as the Corruption of Foreign Officials Act that entered into force on February 14, 1999. It is Canadian legislation that makes the bribery, or other business corruption “tool” of a foreign official by a Canadian businessperson, a criminal offence.
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| business ethics | Accepted principles of right or wrong governing the conduct of businesspeople.
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| buyback | When a firm builds a plant in a country and agrees to take a certain percentage of the plant’s output as partial payment of the contract.
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| capital flight | Residents convert domestic currency into a foreign currency.
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| caste system | A system of social stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual’s lifetime.
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| central bank | The generic name given to a country’s primary monetary authority. It usually has the responsibility for issuing -currency, administering monetary policy, holding member banks’ deposits, and facilitating the nation’s banking industry.
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| channel length | The number of intermediaries that a product has to go through before it reaches the final consumer.
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| civil law (system) | A system of law based on a very detailed set of written laws and codes.
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| class consciousness | A tendency for individuals to perceive themselves in terms of their class background.
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| class system | A system of social stratification in which social status is determined by the family into which a person is born and by subsequent socioeconomic achievements. Mobility between classes is possible.
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| code of ethics | A business’s formal statement of ethical priorities.
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| collectivism | A political system that emphasizes collective goals as opposed to individual goals.
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| command economy | An economic system where the allocation of resources, including determination of what goods and services should be produced, and in what quantity, is planned by the government.
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| common law (system) . | A system of law based on tradition, precedent, and custom. When law courts interpret common law, they do so with regard to these characteristics
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| communist totalitarianism | A version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship.
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| communists | Those who believe socialism can be achieved only through revolution and totalitarian dictatorship.
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| comparative advantage | The theory that countries should specialize in the production of goods and services they can produce most efficiently.A country is said to have a comparative advantage in the production of such goods and services.
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| concentrated retail system | A few retailers supply most of the market.
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| Confucian dynamism | Theory that Confucian teachings affect attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favours.
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| contract | A document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved.
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| contract law | The body of law that governs contract enforcement.
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| Convention on Combating Bribery of Foreign Public Officials in International Business Transac-ti | The convention obliges member states to make the bribery of foreign public officials a criminal offence.
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| copyrights | Exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and dispose of their work as they see fit.
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| core competence | Firm skills that competitors cannot easily match or imitate.
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| corporate culture | Organization’s norms and value systems.
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| counterpurchase | A reciprocal buying agreement.
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| countertrade | The trade of goods and services for other goods and services.
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| countervailing duties | Antidumping duties.
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| country of origin effects | The extent to which the place of manufacturing influences product evaluations.
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| cross-licensing agreement | An arrangement in which a company licenses valuable intangible property to a foreign partner and receives a licence for the partner’s valuable knowledge; reduces risk of licensing.
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| cultural relativism | The belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate.
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| currency board | Means of controlling a country’s currency.
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| currency crisis | Occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate.
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| currency speculation | Involves short-term movement of funds from one currency to another in hopes of profiting from shifts in exchange rates.
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| currency swap | Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.
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| current account | In the balance of payments, records transactions -involving the export or import of goods and -services.
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| D’Amato Act | Act passed in 1996, similar to the Helms–Burton Act, aimed at Libya and Iran.
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| democracy | Political system in which government is by the people, exercised either directly or through elected representatives.
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| deregulation | Removal of government restrictions concerning the conduct of a business.
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| dirty-float system | A system under which a country’s currency is nominally allowed to float freely against other currencies, but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value.
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| draft | An order written by an exporter instructing an importer, or an importer’s agent, to pay a specified amount of money at a specified time; also called a bill of exchange.
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| dumping | Selling goods in a foreign market for less than their cost of production or below their “fair” market value.
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| eclectic paradigm | Argument that combining location-specific assets or resource endowments and the firm’s own unique assets often requires FDI; it requires the firm to establish production facilities where those foreign assets or resource endowments are located.
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| economic risk | The likelihood that events, including economic mismanagement, will cause drastic changes in a country’s business environment that adversely affect the profit and other goals of a particular business enterprise.
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| economies of scale | Cost advantages associated with large-scale production.
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| efficient market | A market where prices reflect all available information.
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| elastic | When a small change in price produces a large change in demand.
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| ethical dilemma | A situation in which there is no ethically acceptable solution.
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| ethical strategy | A course of action that does not violate a company’s business ethics.
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| ethical systems | Cultural beliefs about what is proper behaviour and conduct.
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| ethnocentric behaviour | Behaviour that is based on the belief in the superiority of one’s own ethnic group or culture; often shows disregard or contempt for the culture of other countries.
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| ethnocentric staffing policy | A staffing approach within the MNE in which all key management positions are filled by parent-country nationals.
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| European central bank | The Europe-an Central Bank is responsible for the monetary policy of all EU member -nations. It was set up in 1998 under the Treaty on European Union and it is based in Frankfurt, Germany.
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| exchange rate | The rate at which one currency is converted into another.
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| exclusive distribution channel | A distribution channel that outsiders find difficult to access.
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| expatriate failure | The premature return of an expatriate manager to the home country.
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| expatriate manager | A national of one country appointed to a management position in another country.
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| experience curve | Systematic production cost reductions that occur over the life of a product.
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| export management company | Export specialists who act as an export marketing department for client firms.
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| exporting | Sale of products produced in one country to residents of another country.
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| external stakeholders | Individuals or groups who have some claim on a firm such as customers, suppliers, and unions.
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| externalities | Knowledge spillovers.
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| externally convertible currency | Nonresidents can convert their holdings of domestic currency into foreign currency, but the ability of residents to convert the currency is limited in some way.
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| first-mover advantages | Advantages accruing to the first to enter a market.
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| first-mover disadvantages | Disadvantages associated with entering a foreign market before other international businesses.
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| fixed exchange rates | A system under which the exchange rate for converting one currency into another is fixed.
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| flexible machine cell | Flexible man-ufacturing technology in which a grouping of various machine types, a -common materials handler, and a centralized cell controller produce a family of -products.
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| flexible manufacturing technology | Manufacturing technologies designed to improve job scheduling, reduce setup time, and improve quality control.
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| floating exchange rates | A system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.
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| flow of foreign direct investment | The amount of foreign direct investment undertaken over a given time period (normally one year).
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| folkways | Routine conventions of everyday life.
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| Foreign Corrupt Practices Act | U.S. law regulating behaviour regarding the conduct of international business in the taking of bribes and other unethical -actions.
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| foreign debt crisis | Situation in which a country cannot service its foreign debt obligations, whether private-sector or government debt.
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| foreign direct investment (FDI) | The acquisition or construction of physical capital by a firm from one (source) country in another (host) country.
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| foreign exchange market | A market for converting the currency of one country into that of another country.
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| foreign exchange risk | The risk that changes in exchange rates will hurt the profitability of a business deal.
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| forward exchange | When two parties agree to exchange currency and execute a deal at some specific date in the future.
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| forward exchange rates | The exchange rates governing forward exchange transactions.
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| fragmented retail system | Many retailers, with no one having a major share of the market.
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| franchising | A specialized form of licensing in which the franchiser sells intangible property to the franchisee and insists on rules to conduct the business.
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| free trade | The absence of barriers to the free flow of goods and services between countries.
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| freely convertible currency | A country’s currency is freely convertible when the government of that country allows both residents and nonresidents to purchase unlimited amounts of foreign currency with the domestic currency.
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| fundamental analysis | Draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.
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| General Agreement on Tariffs and Trade (GATT) | International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO.
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| geocentric staffing policy | A staffing policy where the best people are sought for key jobs throughout an MNE, regardless of nationality.
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| global learning | The flow of skills and product offerings from foreign subsidiary to home country and from foreign subsidiary to foreign subsidiary.
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| global web | When different stages of value chain are dispersed to those locations around the globe where value added is maximized or where costs of value creation are minimized.
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| globalization | Trend away from distinct national economic units and toward one huge global market.
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| globalization of markets | Moving away from an economic system in which national markets are distinct entities, isolated by trade barriers and barriers of distance, time, and culture, and toward a system in which national markets are merging into one global market.
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| globalization of production | Trend by individual firms to disperse parts of their productive processes to different locations around the globe to take advantage of differences in cost and quality of factors of production.
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| gold standard | The practice of pegging currencies to gold and guaranteeing convertibility.
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| greenfield investment | Establishing a new operation in a foreign country.
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| gross fixed capital formation | Summarizes the total amount of capital -invested in factories, stores, office buildings, etc.
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| gross national income (GNI) | The total income of all citizens of a county, including the income from factors of production used abroad. Since 2001, the World Bank has used this measure of economic activity instead of the previously used GNP.
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| group | An association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other’s behaviour.
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| Helms–Burton Act | Act passed in 1996 that allowed Americans to sue foreign firms that use Cuban property confiscated from them after the 1959 revolution.
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| Human Development Index (HDI) | An attempt by the United Nations to assess the impact of a number of factors on the quality of human life in a country.
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| human resource management | Activities an organization conducts to use its human resources effectively.
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| import quota | A direct restriction on the quantity of a good that can be imported into a country.
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| individualism | An emphasis on the importance of guaranteeing individual freedom and self-expression.
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| individualism versus collectivism | Theory focusing on the relationship between the individual and his or her fellows. In individualistic societies, the ties between individuals are loose and individual achievement is highly valued. In societies where collectivism is emphasized, ties between -individuals are tight, people are born into collectives, such as extended families, and everyone is supposed to look after the interests of his or her collective.
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| inefficient market | One in which prices do not reflect all available information.
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| inelastic | When a large change in price produces only a small change in demand.
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| inflows of FDI | Flow of foreign direct investment into a country.
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| innovation | Development of new products, processes, organizations, management practices, and strategies.
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| internal stakeholders | People who work for or own the business such as employees, directors, and -stockholders.
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| internalization theory | A theory that seeks to explain why firms often prefer foreign direct investment over licencing as a strategy for entering foreign markets.
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| international business | Any firm that engages in international trade or investment.
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| International Fisher Effect | For any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between countries
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| International Monetary Fund (IMF) | International institution set up to maintain order in the international monetary system.
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| international monetary system | Institutional arrangements countries adopt to govern exchange rates.
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| international trade | Occurs when a firm exports goods or services to consumers in another country.
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| ISO 9000 | Certification process that requires certain quality standards that must be met.
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| joint venture | A cooperative undertaking between two or more firms.
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| just distribution | A distribution that is considered fair and equitable.
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| Kantian ethics | Holds that people should be treated as ends, and never purely as means to the ends of others.
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| karoshi | Japanese term meaning to die from overwork.
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| late-mover advantages | Benefits enjoyed by a company that is late to enter a new market, such as consumer familiarity with the product or knowledge gained about a market.
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| late-mover disadvantages | Handicap experienced by being a late entrant in a market.
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| law of one price | In competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in the same currency.
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| learning effects | Cost savings from learning by doing.
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| legal risk | The likelihood that a trading partner will opportunistically break a contract or expropriate intellectual property rights.
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| legal system | System of rules that regulates behaviour and the processes by which the laws of a country are enforced and through which redress of grievances is obtained.
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| letter of credit | Issued by a bank, indicating that the bank will make payments under specific circumstances.
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| licensing | Occurs when a firm (the licensor) licenses the right to produce its product, use its production processes, or use its brand name or trademark to another firm (the licensee). In return for giving the licensee these rights, the licensor collects a royalty fee on every unit the licensee sells.
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| licensing agreement | Arrangement in which a licensor grants the rights to intangible property to the licensee for a specified period and receives a royalty fee in return.
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| local content requirement | A requirement that some specific fraction of a good be produced domestically.
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| location economies | Cost advantages from performing a value creation activity at the optimal location for that activity.
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| location-specific advantages | Advantages that arise from using resource endowments or assets that are tied to a particular foreign location and that a firm finds valuable to combine with its own unique assets (such as the firm’s technological, marketing, or management know-how).
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| logistics | The procurement and physical transmission of material through the supply chain, from suppliers to customers.
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| long-term versus short-term orientation | Theory that deals with virtue regardless of truth; values associated with long-term orientation are thrift and perseverance; values associated with short-term orientation are respect for tradition, fulfilling social obligations, and protecting one’s “face.”
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| maquilladoras | NAFTA-related Mexican work zones of cheap labour that are commonly found along the Texas–Mexican borders.
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| market economy | An economic system in which the interaction of supply and demand determines the quantity in which goods and services are -produced.
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| market segmentation | Identifying groups of consumers whose purchasing behaviour differs from others in important ways.
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| marketing mix | Choices about product attributes, distribution strategy, communication strategy, and pricing strategy that a firm offers its targeted markets.
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| masculinity versus femininity | Theory of the relationship between gender and work roles. In masculine cultures, sex roles are sharply differentiated and traditional “masculine values” such as achievement and the effective exercise of power determine cultural ideals. In feminine cultures, sex roles are less sharply distinguished, and little differentiation is made between men and women in the same job.
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| mass customization | The production of a variety of end products at a unit cost that could once be achieved only through mass production of a standardized output.
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| materials management | The activity that controls the transmission of physical materials through the value chain, from procurement through production and into distribution.
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| mercantilism | An economic philosophy advocating that countries should simultaneously encourage exports and discourage imports.
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| mixed economy | Certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant government ownership and government planning.
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| Moore’s Law | The power of microprocessor technology doubles and its costs of production fall in half every 18 months.
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| moral hazard | Arises when people behave recklessly because they know they will be saved if things go wrong.
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| mores | Norms seen as central to the functioning of a society and to its social life.
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| Multilateral Agreement on Investment (MAI) | An agreement that would make it illegal for signatory states to discriminate against foreign investors; would have liberalized rules governing FDI between OECD states.
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| multinational enterprise (MNE) | A firm that owns business operations in more than one country.
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| multipoint competition | Arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.
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| multipoint pricing | Occurs when a pricing strategy in one market may have am impact on a rival’s pricing strategy in another market.
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| naive immoralist | Asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.
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| noise | The amount of other messages competing for a potential consumer’s attention.
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| nonconvertible currency | A currency is not convertible when both residents and nonresidents are prohibited from converting their holdings of that currency into another currency.
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| norms | Social rules and guidelines that prescribe appropriate behaviour in particular situations.
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| offset | A buying agreement similar to counterpurchase, but the exporting country can then fulfill the agreement with any firm in the country to which the sale is being made.
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| oligopoly | An industry composed of a limited number of large firms.
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| organization culture | The values and norms shared among an organization’s employees.
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| Organization for Economic Co-operation and Development (OECD) | A Paris-based intergovernmental organization of “wealthy” nations whose purpose is to provide its 30 member states with a forum in which governments can compare their experiences, discuss the problems they share, and seek solutions that can then be applied within their own national contexts.
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| outflows of FDI | Flow of foreign direct investment out of a country.
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| Paris Convention for the Protection of Industrial Property | Interna-tional agreement to protect intellectual property; signed by 96 countries.
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| patent | Grants the inventor of a new product or process exclusive rights to the manufacture, use, or sale of that invention.
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| pegged exchange rate | Currency value is fixed relative to a reference currency.
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| pioneering costs | Costs an early entrant bears that later entrants avoid, such as the time and effort in learning the rules, failure due to ignorance, and the liability of being a foreigner.
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| political economy | The political, economic, and legal systems of a country.
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| political risk | The likelihood that political forces will cause drastic changes in a country’s business environment that will adversely affect the profit and other goals of a particular business enterprise.
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| political system | System of government in a nation.
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| polycentric staffing policy | A staffing policy in an MNE in which host-country nationals are recruited to manage subsidiaries in their own country, while parent-country nationals occupy key positions at corporate headquarters.
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| positive-sum game | A situation in which all countries can benefit even if some benefit more than others.
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| power distance | Theory of how a society deals with the fact that people are unequal in physical and intellectual capabilities. High power distance cultures are found in countries that let inequalities grow over time into inequalities of power and wealth. Low power distance cultures are found in societies that try to play down such inequalities as much as possible
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| predatory pricing | Reducing prices below fair market value as a competitive weapon to drive weaker competitors out of the market (“fair” being cost plus some reasonable profit margin).
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| price elasticity of demand | A measure of how responsive demand for a product is to changes in price.
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| private action | Theft, piracy, blackmail, and the like by private individuals or groups.
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| privatization | The sale of state-owned enterprises to private investors.
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| product liability | Involves holding a firm and its officers responsible when a product causes injury, death, or damage.
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| product safety laws | Laws that set certain safety standards to which a product must adhere.
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| profit | Difference between total revenues and total costs.
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| profitability | A ratio or rate of return concept.
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| property rights | Bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from the resource.
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| public action | The extortion of income or resources from property holders by public officials, such as politicians and government bureaucrats.
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| pull strategy | A market strategy emphasizing mass media advertising as opposed to personal selling.
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| purchasing power parity (PPP) | An adjustment in gross domestic product per capita to reflect differences in the cost of living.
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| push strategy | A marketing strategy emphasizing personal selling rather than mass media advertising.
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| regional economic integration | Agr-eements among countries in a geographic region to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other.
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| relatively efficient markets | One in which few impediments to international trade and investment exist.
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| religion | A system of shared beliefs and rituals concerned with the realm of the sacred.
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| representative democracy | A political system in which citizens periodically elect individuals to represent them in government.
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| right-wing totalitarianism | A political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to the rise of communism.
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| righteous moralist | Claims that a multinational’s home-country standards of ethics are the appropriate ones to follow in foreign countries.
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| rights theories | A twentieth century theory that human beings have fundamental rights and privileges that transcend national boundaries and cultures.
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| sight draft | A draft payable on presentation to the drawee.
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| social democrats | Those committed to achieving socialism by democratic means.
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| social mobility | The extent to which individuals can move out of the social strata into which they are born.
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| social responsibility | The idea that businesspeople should consider the social consequences of economic actions when making business decisions.
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| social strata | Hierarchical social categories often based on family background, occupation, and income.
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| society | A group of people who share a common set of values and norms.
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| source effects | When the receiver of the message evaluates the message based on the status or image of the sender.
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| sourcing decisions | Whether a firm should make or buy component parts.
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| specific tariff | Tariff levied as a fixed charge for each unit of good imported.
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| spot exchange rate | The exchange rate at which a foreign exchange dealer will convert one currency into another that particular day.
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| staffing policy | Strategy concerned with selecting employees for particular jobs.
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| stakeholders | The individuals or groups who have an interest, stake, or claim in the actions and overall performance of a company.
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| stock of foreign direct investment | The total accumulated value of foreign-owned assets at a given time.
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| strategic alliances | Cooperative agreements between two or more firms.
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| strategic commitment | A decision that has a long-term impact and is difficult to reverse, such as entering a foreign market on a large scale.
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| strategic pricing | Pricing aimed at giving a company a competitive advantage over its rivals.
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| strategy | Actions managers take to attain the firm’s goals.
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| subsidy | Government financial assistance to a domestic producer.
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| switch trading | The use of a specialized third-party trading house in a countertrade arrangement.
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| tariff | A tax levied on imports.
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| technical analysis | Uses price and volume data to determine past trends, which are expected to continue into the future.
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| theocratic law (system) | A system of law based on religious teachings.
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| theocratic totalitarianism | A political system in which political power is monopolized by a party, group, or individual that governs according to religious principles.
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| time draft | A promise to pay by the accepting party at some future date.
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| timing of entry | Entry is early when a firm enters a foreign market before other foreign firms and late when a firm enters after other international businesses have established themselves.
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| total quality management | Management philosophy that takes as its central focus the need to improve the quality of a company’s products and services.
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| totalitarianism | Form of government in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited.
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| trade creation | Trade created due to regional economic integration; occurs when high-cost domestic producers are replaced by low-cost foreign producers in a free trade area.
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| trade diversion | Trade diverted due to regional economic integration; occurs when low-cost foreign suppliers outside a free trade area are replaced by higher-cost foreign suppliers in a free trade area.
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| Trade Related Aspects of Intellectual Property Rights (TRIPS) | An agreement among members of the WTO to enforce stricter intellectual property regulations, including granting and enforcing patents lasting at least 20 years and copyrights lasting 50 years.
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| trademarks | Designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products.
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| transnational strategy | Plan to exploit experience-based cost and location economies, transfer core competencies with the firm, and pay attention to local responsiveness.
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| tribal totalitarianism | A political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power.
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| turnkey project | A project in which a firm agrees to set up an operating plant for a foreign client and hand over the “key” when the plant is fully operational.
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| uncertainty avoidance | Extent to which cultures socialize members to accept ambiguous situations and to tolerate uncertainty.
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| United Nations | An international organization made up of 189 countries, headquartered in New York City, formed in 1945 to promote peace, security, and cooperation.
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| United Nations Convention on Contracts for the International Sale of Goods (CIGS) | A set of rules governing certain aspects of the making and performance of commercial contracts between sellers and buyers who have their places of business in different nations.
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| Universal Declaration of Human Rights | A United Nations document that lays down the basic principles of human rights that should be adhered to.
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| universal needs | Needs that are the same all over the world, such as steel, bulk chemicals, and industrial electronics.
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| utilitarian approaches | Hold that the moral worth of actions or practices is determined by their consequences.
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| value creation | Activities performed that increase the value of goods or services to consumers.
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| values | Abstract ideas about what a society believes to be good, right, and desirable.
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| voluntary export restraint (VER) | A quota on trade imposed from the exporting country’s side, instead of the importer’s; usually imposed at the request of the importing country’s government.
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| wholly owned subsidiary | A subsidiary in which the firm owns 100 percent of the stock.
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| World Bank | International institution set up to promote general economic development in the world’s poorer nations.
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| World Trade Organization (WTO) | The organization that succeeded the General Agreement on Tariffs and Trade (GATT) as a result of the successful completion of the Uruguay Round of GATT negotiations.
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| zero-sum game | A situation in which an economic gain by one country results in a economic loss by another.
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