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WGU D080 Managing in a Global Business Environment

Key Concepts:

Terms in this set (553)

The key element of globalization is interdependence and interconnectedness among companies and countries around the globe. Globalism is characterized by an increasing number of worldwide connections, rapid and discontinuous change, an increasing number of diverse participants, and growing complexity.

What is globalization?

economic: developed economies integrating with developing countries through foreign direct investment, lowering the costs of doing business, reducing trade barriers, and, in many cases, increasing cross-border migration.
political: globalization may ultimately reduce the importance of nation-states.
cultural: The spread of culture has added to processes such as commodity exchange and colonization, which have a more extended history of carrying cultural meaning around the globe. The circulation of cultures enables individuals to partake in extended social relations that cross national and regional borders.

What are the economic, political, and cultural effects of globalization?

any nonprofit, voluntary citizens' groups that are organized on a local, national, or international level

What is nongovernmental organization and how does it impact government public policy across national boundaries?

International business encompasses a full range of cross-border exchanges of goods, services, or resources across two or more nations. These exchanges can go beyond the exchange of money for physical goods to include international transfers of other resources such as people; intellectual property such as patents, copyrights, brand trademarks, and data; and contractual assets or liabilities. Such assets or liabilities include the right to use some foreign asset, provide some future service to overseas customers, or execute a complex financial instrument. The entities involved in international business range from large multinational firms with thousands of employees doing business in many countries to a small one-person company acting as an importer or exporter. This broader definition of international business also encompasses for-profit, border-crossing transactions as well as transactions motivated by nonfinancial gains.

What are the features of international business?

- Exporting
- franchising
- joint ventures
- home-owned affiliates
- fully global ventures

What are the different forms of international business? Explain each form.

1. market entry
2. product specialization
3. value chain disaggregation
4. value chain reengineering
5. creation of new markets

What are the 5 stages of entering a global market? Explain each stage

market, cost, competition, government

What are the 4 drivers of globalization? Explain

unsaturated demand for new products, lower labor costs, less expensive natural resources, and other inputs to products.

What are the benefits and costs of global expansion from MNCs' perspective?

1.0: the first stage of globalism and is pushed forward by nationalism and religion.
2.0: the second stage of globalization and is characterized by advances in methods of transportation.
3.0: the third stage of globalization and is characterized by advancements across the board, especially technology and communication.

What are the characteristics of each stage of globalization?

Ethical issues, governmental policies, and economic restrictions are all likely when a company moves into an unfamiliar global space. A multinational company may also face infrastructural and technological challenges in a developing country.

What are the criticisms of globalization?

There are more than 13 major types of government, each of which consists of multiple variations. At one end of the extremes of political ideologies is anarchism, which contends that individuals should control political activities, and public government is both unnecessary and unwanted. At the other extreme is totalitarianism, which contends that every aspect of an individual's life should be controlled and dictated by a strong central government.
Totalitarianism
Authoritarian
Monarchy
Democracy
Oligarchy
Dictatorship

What are different types of governments? Explain

Local policies, rules, and regulations can have a significant effect on the success rate of a business. Depending on how long a company expects to operate in a country and how easy it is for business to enter and exit, a firm may also assess the country's political risk and stability.

What impacts does a political system have on international trade and business?

- Industrialized nations have economies characterized by a healthy climate for private enterprise (business) and by a consumer orientation, meaning the business climate focuses on meeting consumers' long-term wants and needs.
- Less-developed nations, also known as least-developed countries (LDCs), have extensive poverty, low per capita income and standards of living, low literacy rates, and minimal technology.
- Developing nations are those that make the transition from economies based on agricultural and raw materials production to industrialized economies.

What are the features of industrialized, less-developed, and developing nations?

- Traditional economies are found in rural countries where the primary occupation is farming.
- In a command economy found in a communist country, most of the economic system is controlled by a centralized power.
- In a planned economy found in a socialist country, the factors of production are used for the common good.
- In an open economy, a democratic method is used to determine how to use the factors of production.
- A market economy is a decentralized economy in which firms and households determine how resources are allocated based on how best to satisfy their needs.
- A mixed economy has less government intervention than a command economy. Supply and demand control the economy, and ideally, the government steps in when needed.

What are different economic systems and how to differentiate them?

- Communisim is a system in which all property is publicly owned and the government controls global trade
- Social ownership, central control of the means of production, and a cooperative approach toward management of the economy are hallmarks of socialism.
- Capitalism is generally considered to be an economic system based on private ownership of the means of production and on the creation of goods or services for profit by privately owned business enterprises.

What is communism, socialism, and capitalism?

- civil law system is an inquisitorial system where the investigating judge investigates the facts of the case. It is the most widespread legal system in the world.
- Common law is based on traditions and precedence and can be traced to the English monarchy. In common law systems, judges interpret the law, and judicial rulings can set precedent.
- Religious law is also known as theocratic law and is based on religious guidelines.

Explain and differentiate common, civil, and theocratic legal systems.

- The IMF helps maintain liquidity of global funding by providing a straight-forward method for nations to borrow and loan to each other through a mechanism called the special drawing right.
- The World Bank's priorities are to help build sustainable economic growth, invest in people, and build resilience for shocks and threats.
- WTO reviews the trade policies of all nations to ensure that each country is treated fairly and equally under the most favored nation requirement.
- Criticisms are similar: a lack of transparency; neglect for considering the environment when making decisions; and policies in favor of more affluent, developed countries at the expense of poorer nations

Identify and differentiate the IMF, the World Bank, and the WTO's major functions and conditionality. Explain criticisms of each international organization.

- mercantilism, a zero-sum theory advocating for each country to maintain a trade surplus.
- Adam Smith's absolute advantage in which a country exports the goods it can make more efficiently or more cheaply.
- Ricardo's comparative advantage which extends the theory to show benefits as long as each country exports the product it is comparatively more efficient at or can produce more cheaply and imports the others
- Heckscher-Ohlin which states that competitive advantage comes from differences in natural resources.
-Leontief Paradox
- Country Similarity Theory
- Global Strategic Rivalry Theory

List and explain each international trade theory. Focus on the features of each theory.

Technology and trade are two mechanisms to increase productivity, which lead to more products and ultimately to lower prices.
it takes fewer resources to produce a product.
a good can be produced at a lower cost in terms of other goods.

What are the two mechanisms to increase productivity? Explain.

- many assumptions are made in this theory.
- The benefits of specialization may be overstated if the transportation costs are not taken into account.
- There is an increasing opportunity cost with increased specialization as less than ideal conditions or natural resources must be used.
- Unemployment may be higher with complete specialization because it would be difficult for workers to transfer from one role to another.
- Organizations may not recognize that their comparative advantage has changed over time as conditions change.
- technology may make it possible for countries to produce many or even most products using an economy of scale, which makes comparative advantage an obsolete concept

What are the criticisms of comparative advantage theory?

By specializing, countries would generate efficiencies because their labor force would become more skilled by doing the same tasks repeatedly. Production would also become more efficient because there would be an incentive to create faster and better production methods to increase the benefit from specialization. Specialization leads to increased productivity, which can in turn lead to increased unemployment.

What is specialization and what is the impact of it?

Economies of scale increase the available variety of goods for consumers and decrease the average cost of these goods. Economies of scale can result from the ability to divide labor into smaller parts, which allows for increased specialization.

What is the definition and impact of the economies of scale?

- Export refers to the selling of goods and services produced in the home country to other markets.
- Imports are defined as purchases of goods or services by a domestic economy from a foreign economy.

Define exporting and importing

- Import tariffs are taxes on goods that are imported into a country.
- Export tariffs are taxes on goods that are leaving a country. Taxing exports may be implemented to raise tariff revenue or restrict the world supply of a good.
- Protective tariffs are tariffs levied to reduce imports of a product and protect domestic industries.
- Revenue tariffs are tariffs levied to raise revenue for the government.
- Specific tariffs are tariffs that levy a flat rate on each item imported.
- Ad valorem tariffs are tariffs based on a percentage of the value of each item.
- Compound tariffs are tariffs that are a combination of specific tariffs and ad valorem tariffs.

List and explain types of tariffs.

If foreign goods can be sold at a lower price than domestic goods, consumer demand will go up, but the domestic price will do down. The decrease in price drives down the profit margin for domestic suppliers. With tariffs, domestic producers and the government gain and consumers and foreign producers lose overall

How does tariff impact the price of imported product, consumers, domestic businesses, and the government?

- An absolute quota is a limit on the number of specific goods that may enter a country during a certain period.
- A tariff-rate quota is a two-tier quota system that combines characteristics of tariffs and quotas. Under a tariff-rate quota system, an initial quota of a good is allowed to enter the country at a lower duty rate. Once the initial quota is surpassed, imports are not stopped; instead, more of the good may be imported, but at a higher tariff rate.

What are the types of quotas?

Voluntary export restrictions are a form of trade barrier by which foreign firms agree to limit the number of goods exported to a particular country.

What is the Voluntary Export Restraint (VER)?

Government procurement programs, Export subsidies, Countervailing duties

What are the trade barriers that involve direct government intervention?

Free trade can increase the wages and availability of jobs in some sectors but have the opposite effect in other sectors. Due to industry specializations, many workers are displaced and do not receive retraining or assistance finding jobs in other sectors. The nature of industries and trade increases economic inequality. As a result of unskilled workers, the wages within the various industries may decline.

How does free international trade impact manufacturing jobs in developed nations?

Free trade is a policy by which governments do not discriminate against exports and imports. There are few or no restrictions on trade, and markets are open to both foreign and domestic supply and demand.

What is free trade agreement?

The WTO is the largest international trade organization, replacing the General Agreement on Tariffs and Trade (GATT) in 1995 and designed to enable international trade while reducing unfair practices.
NAFTA, EU, Mercosur, ASEAN

What are the international organizations that handle international trade agreements?

The General Agreement on Tariffs and Trade (GATT) consists of a set of promises or commitments that countries make to each other regarding their trade policies. The goal of GATT is to make trade freer, and thus, the promises countries make must involve reductions in trade barriers.

What is GATT?

Protect domestic industries and employment
Protect against unfair trade practices
Protect national security

Identify and explain political, economic, and social rationale of managing international trade from government's perspective.

- Portfolio investment refers to act of investing in a company's stocks, bonds, or assets, but not to control or direct the firm's operations or management. Typically, investors in this category are looking for a financial rate of return, as well as for diversifying investment risk through multiple markets.
- Foreign direct investment (FDI) refers to an investment in or the acquisition of foreign assets with the intent to control and manage them. Companies can make FDIs in several ways by purchasing the assets of an international company; investing in the company or new property, plants, or equipment; or participating in a joint venture with a foreign company, which typically involves an investment of capital or know-how. FDI is primarily a long-term strategy.

Define and compare portfolio investment and foreign direct investment.

governments seek to limit or control FDI to protect local industries and critical resources (oil, minerals, etc.), preserve the national and local culture, protect segments of the domestic population, maintain political and economic independence, and manage or control economic growth.

Identify the reasons that governments restrict or promote FDI.

- Horizontal FDI occurs when a company is trying to open a new market—a retailer, for example, that builds a store in a new country to sell to the local market.
- Vertical FDI is when a company invests internationally to provide input into its core operations—usually in its home country. A firm may invest in production facilities in another country. When a firm brings the goods or components back to its home country (i.e., acting as a supplier), this is referred to as backward vertical FDI. When a firm sells the goods into the local or regional market (i.e., acting as a distributor), this is termed forward vertical FDI.

Define two forms of FDI. Give an example for each.

- Greenfield FDIs occur when multinational corporations enter into developing countries to build new factories or stores.
- A brownfield FDI is when a company or government entity purchases or leases existing production facilities to launch a new production activity.

Define greenfield and brownfield FDIs. Give an example for each.

FDIs benefit both developing and developed nations by increasing jobs and bringing capital to the most successful companies.
- An inflow of capital can benefit the global and local economy.
- Invested capital goes to businesses with the highest potential for growth.
- The profit motive is color blind, and investments are made regardless of religion or politics.
- Investors can decrease their risk by diversifying
- Investing capital in firms can lead to growth and subsequently increased jobs.

What are the benefits of FDI?

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

What are the costs of FDI?

Horizontal FDI occurs when a company is trying to open a new market—a retailer, for example, that builds a store in a new country to sell to the local market. Vertical FDI is when a company invests internationally to provide input into its core operations—usually in its home country.

What is the difference between horizontal and vertical FDI?

MNC is a company that operates in two or more countries, leveraging the global environment to enter new markets to increase revenue.

Define multinational companies.

GCC

Which agreement was created in 1981 among Arab states, to expand trade, economic growth, and development and to promote social welfare, peace, and stability?

Economic integration is an agreement among nations to reduce or eliminate trade barriers among the nations at a minimum and to have a single political, economic, and trade policy identity at its maximum.

Define regional economic integration

-free trade area: most basic form of economic cooperation. Member countries remove all barriers to trade between themselves but are free to determine trade policies with nonmember nations independently. The key characteristic is no internal tariffs. (NAFTA).
- Customs unions: economic cooperation as in a free-trade zone. Barriers to trade are removed between member countries. Its primary difference from the free trade area is that members agree to treat trade with nonmember countries similarly, which means they share a common external tariff. (Mercosur)
-common market: creation of economically integrated markets between member countries. Trade barriers are removed, as are any restrictions on the movement of labor, technology, and capital between member countries. Like customs unions, there is a common trade policy for trade with nonmember nations. The primary advantage for workers is that they no longer need a visa or work permit to work in another member country of a common market. free movement of labor and capital. (COMESA)
- economic union: countries enter into an economic agreement to remove barriers to trade and adopt common economic policies, use a common currency, harmonized taxes, monetary, and fiscal policy (Eurozone)
- political union: a single nation is formed (UAE)

Identify the features of the 5 stages of regional economic integration and relate an example to each stage.

- Trade agreements create more opportunities for countries to trade with one another by removing the barriers to trade and investment.
- Studies indicate that regional economic integration significantly contributes to the relatively high growth rates in less-developed countries.1
- By removing restrictions on the labor movement, economic integration can help expand job opportunities.
- Member nations may find it easier to agree with smaller numbers of countries. Regional understanding and similarities may also facilitate closer political cooperation.

List the benefits of regional economic integration.

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

North American Free Trade Agreement (NAFTA)
United States-Mexico-Canada Agreement or USMCA
Central America Free Trade Agreement (CAFTA-DR)
Common Market of the South, Mercado Común del Sur or Mercosur
Caribbean Community and Common Market (CARICOM)
European Union, European Economic Area
Association of Southeast Asian Nations (ASEAN)
Cooperation Council for the Arab States of the Gulf, also known as the Gulf Cooperation Council (GCC)
African Economic Community (AEC)
Asia-Pacific Economic Cooperation (APEC)

Identify features of each regional integration bloc and differentiate them.

In foreign exchange markets, demand and supply become closely interrelated, because a person or firm who demands one currency must at the same time supply another currency—and vice versa.

Define supply and demand of a currency.

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

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

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

Identify reasoning behind strengthening and weakening currency.

Increase domestic sales and reduce its exports to Country B
The currency the firm is receiving from foreign sales is worth less than the currency it receives from domestic sales, making it more profitable to sell domestically.

A firm based in Country A exports products to Country B. The currency in Country A is strong in comparison to the currency in Country B. Which strategy should the firm use to capitalize on the value of its currency?

Multinational corporations tend to save a lot in labor costs by moving operations overseas. As they seek to lower costs by taking advantage of lower wages overseas, they have better negotiation power with the unions in their home country.

A multinational corporation (MNC) in a highly unionized country is seeking to move its operations overseas.
Which factor is a benefit of this action?

foreign direct investment
Singapore does not have many natural resources that provide it with a competitive advantage. However, it took advantage of its prime geographical location to develop an extensive export-based economy and one that thrives on foreign direct investment.

Which international activity allows a nation, such as Singapore, to create a sustainable economy without the abundance of natural resources?

It increases worldwide connections that support commodity trading.

How is global business positively affected by intercultural exchange?

Acquisition of resources
Resource acquisition will offer more capital, access to raw materials, and technology.

A multinational corporation has manufacturing facilities in many Asian countries due to cheaper labor. Which strategy is the corporation using?

More valuable export sales - When the currency from the point of sale in Country B is converted into the currency of Country A, it will buy more of that currency.

A firm in Country A exports products to Country B. The currency in Country B is strong relative to the currency in Country A. What does this mean for the firm?

The government is less flexible, so the globalization process is stopped. There is no market force to drive globalization forward.

What effect does a command economy have on the process of globalization?

Acquisition of resources

A multinational corporation has manufacturing facilities in many Asian countries due to cheaper labor. Which strategy is the corporation using?

More valuable export sales

A firm in Country A exports products to Country B. The currency in Country B is strong relative to the currency in Country A. What does this mean for the firm?

Export processing zones are distinct geographic areas usually located near a port, where parts are imported for final assembly into a finished product that is then exported back out of the country. Based on local governmental regulations, such investments usually are provided a tax incentive.

A business invests in an assembly plant located near a port in a foreign country. The business will import parts and raw materials for final assembly as a finished product, then export these products for international sales. The business receives tax incentives.

What is the name for the geographic area where these products are assembled?

Increases

Countries A and B participate in trade agreements that allow free trade among participant countries. However, Country A imposed quotas on several imported products to protect its domestic products.
What is the effect, if any, on the domestic prices of these products?

Value chain

A car manufacturer purchases raw materials from Country A, manufactures the product in Country B, and has a sales force in Country C. Which term reflects this production process that international agreements now enable?

It is based on a detailed set of laws that form a code.

A company is conducting a legal risk analysis for a country that has a civil law system. Which statement accurately characterizes this legal system?

The government is less flexible, so the globalization process is stopped. A command economy results in a less flexible economy, so the globalization is halted. There is no market force to drive globalization forward.

What effect does a command economy have on the process of globalization?

The stability of a currency, the macroeconomic indicators, and the relative ratio of the strength of the domestic currency versus the foreign currency all determine return on investment.

How does strengthening and weakening currency impact international trade?

Floating - This regime automatically adjusts to economic circumstances.

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

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

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

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

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

- A free-floating exchange rate fluctuates based on supply and demand. Many country's central banks intervene in a free-floating economy by buying and selling their currency to keep its value within a specific range. This is called a managed float.
- A fixed exchange rate can be pegged or fixed against gold, or frequently small countries will peg their currency against a large country with which it does the majority of its trade.
- Pegged floating currencies are pegged to some band or value, which is either fixed or periodically adjusted. They are a hybrid of fixed and floating regimes.

Define 3 exchange rate policies and give an example of each.

when companies hold a monopoly in a particular market segment, they have the power to make choices that are harmful to consumers.

Define monopoly. How does monopoly hurt consumers?

The Sherman Antitrust Act (1890) was the first American antitrust policy. It dealt with limiting the power of price-controlling cartels. Its scope has since been expanded to include a range of anticompetitive practices.

The EU has a centralized administrative system for antitrust enforcement, whereas antitrust enforcement in the United States is considered a matter of criminal law.

Identify how antitrust law is implemented in Europe and U.S.

- UN enacted an Antarctica Treaty in 1991, which prohibited mining of the region, limited pollution of the environment, and protected its animal species.
- The Paris Agreement is the first legally binding, global climate deal. This agreement proposes concrete steps for keeping long-term global temperature increase at below 2°C. The agreement was formally ratified in October 2016; however, 13 nations have yet to ratify, including some major emitters.
- The EPA is charged with monitoring the environmental practices of industry.
- 1997 Kyoto Protocol was a binding resolution to reduce greenhouse gases. Although the United States initially supported the resolution, the Senate failed to ratify the treaty.

List different environmental laws and identify the features for each.

to protect workers from potential workplace dangers and abuses

Why do countries need production and labor law?

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

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

The Worst Forms of Child Labor Convention defines a child as an individual younger than 18 years old.

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

National Labor Committee
- Worst Forms of Child Labour Convention, 1999: This convention defines a child as a person under 18 years of age and aims to eliminate all practices of slavery or those similar to slavery, such as the sale and trafficking of children, debt bondage, forced or compulsory recruitment of children for use in armed conflict, child prostitution, and so on.
- The Maritime Labour Convention (MLC), 2006: This convention sets out seafarers' rights to decent work conditions. Sometimes referred to as the "Seafarers' Bill of Rights," this international agreement applies to all seafarers, including those with jobs in hotels and those who provide passenger services on cruise ships and commercial yachts.
- Domestic Workers Convention, 2011: This convention details specific rights and protections for domestic workers working both in their home country and as migrant workers.

List labor conventions that help protect workers. Explain the features of each labor convention.

Contracts are legally enforceable promises that, if breached, result in compensable damages. Contracts require not only performance of the terms, but also honesty in dealings.

Define contract.

the common law and the Uniform Commercial Code (UCC)

Identify two primary sources of law that govern contracts in the U.S.

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

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

Identify applications of different laws in the U.S.

patents, trademarks, and copyright

Define 3 ways to protect intellectual properties.

World Intellectual Property Organization

Which organization aims to develop a global intellectual property infrastructure?

Its goal is to develop a global IP infrastructure, build international respect for IP, and implement global policy related to IP.

What is WIPO's major functions?

The Sarbanes-Oxley Act of 2002 (SOX) was designed to address the investing public's lack of trust in corporate America by addressing financial accountability issues and requiring public companies to adopt and disclose a code of business conduct and ethics.
SOX requires compliance by any company with a dual listing on the U.S. exchange with 500 or more U.S.-based shareholders. Many companies have found compliance too onerous and have gone private.
SOX also provides whistleblower protections. These can apply to any company that is indirectly related to a U.S. corporation. Numerous law cases have arisen where whistleblowers for foreign corporations in foreign lands were targeted.

What's the function of Sarbanes-Oxley Act?

Businesses that are perceived as valuing ethical actions more than the bottom line are gaining favor with the buying public. Consumers—especially those in North America—are likely to vote with their wallets against companies whose social and environmental performance is poor.
Today, many organizations face pressure as consumers are demanding proof of ethical behavior from the organizations from which they purchase.

How do business ethics impact different parties in the society, such as business and consumers?

Business ethics refers to contemporary standards or sets of values that govern the actions and behavior of individuals in the business organization and the actions of the business itself.

What is business ethics?

the ethical role of a corporation in society. The aim of CSR is to increase long-term profits and shareholder trust through positive public relations and high ethical standards.

Define Corporate Social Responsibility.

Different cultures use radically different systems to get things done. Whereas Western cultures are primarily rule-based, most of the world's cultures are relationship-based.

How does culture impact business ethic standard? Explain and give examples.

Paying bribes, slush funds, misleading statements, cronyism

Identify examples of unethical practices in business operation.

All the redundancies added to a system to make certain that it functions properly

What is internal control?

These include segregating employee duties, assigning specific duties to each employee, rotating employee job assignments, using mechanical devices, and maintaining complete and accurate accounting records.

What are the functions of internal control system?

Discrepancies are best described as accounting errors that are not intentional. Irregularities are the intentional misrepresentation of accounting data with the aim to defraud.

Define and differentiate discrepancies and irregularities.

It is the blueprint for how a business functions, who makes decisions, how work is assigned, and which resources are shared.
functional/departmental, divisional, matrix, and teams

What is an organizational structure, and what types organizational structures are found in international business?

The WTO, or the World Trade Organization, strives to ensure fair business practices among its member nations around the globe.

Which organization aims to create support and cooperation among participating nations as well as respecting the unique laws and regulations of each sovereign country?

Horizontal contracts with vertical legal structure
The contracts between international companies are more like a treaty and are therefore horizontal in nature. However, since the parties choose which of the laws apply for resolution of disputes under the contract, the contracts also have vertical legal structure.

What is the directional nature of contracts between international businesses?

- functional/departmental structure: employees are divided into departments related to a functional area of the business
- divisional structure: employees are divided into departments based on different markets the company serves, product areas, and/or geographic regions
- matrix structure: simultaneously uses functional and divisional structures in combination.
- teams structure: is composed of people with complementary skills working together for a common purpose.

What is the difference between the functional/departmental structure, the divisional structure, and the matrix structure and the teams structure?

Opportunities:
higher levels of revenue, lower cost structure, economies of scale, economies of scope, technological developments, new markets

Challenges:
public relations, ethics, leadership, and organizational structure.

What are the challenges and opportunities associated with creating an international division?

Export
The scenario describes a company that is strictly domestic but wants to earn additional revenue by sending the product overseas. Normally, a company in the other country must import the product for sale.

A company wants to gain market share but does not want to establish operations in other countries nor tailor its products to the other countries.
Which entry strategy should the company use to meet this goal under these conditions?

- export strategy is used when a company is primarily focused on its domestic operations.
- standardization strategy is used when a company treats the whole world as one market with little meaningful variation.
- multidomestic strategy customizes products or processes to the specific conditions in each country.
- transnational strategy combines a standardization strategy and a multidomestic strategy. It is used when a company encounters significant cost pressure from international competitors but must also offer products that meet local customer needs.

Describe the export, standardization, multidomestic and transnational strategies.

Companies must weigh the costs and benefits of adapting processes, resources, and products to meet the needs and expectations of the local markets while assessing the costs and benefits of global production, distribution, and marketing to the company's bottom line when choosing a strategy for doing business internationally.

Explain the trade-offs between global integration and local responsiveness.

FDIs benefit both developing and developed nations by increasing jobs and bringing capital to the most successful companies. There are benefits and risks in FDIs for both the host and the investor. Developing countries can have stronger economic growth as a result in FDI. Foreign investors bring knowledge, technology, and capital to more rapidly build infrastructure in a developing country.

positive effects of foreign direct investment
money flow to the country goes up
job creation
inflow of forex
country is seen is investor friendly
general well-being of the economy grows
negative
if repatriation of profits is allowed then lot of outflow of capital can happen
total control cannot be given to foreigners especially in sensitive sectors like telecom
indian managers have to be appointed as ceo's
inflow of foreign labour has to be controlled
domestic industry can suffer in the short-run
technology developed indigenously may suffer

List and describe the positives and negatives of FDI.

- Standardization is the effort to keep the product the same everywhere and maintain strict quality control to stay true to the brand.
- Adaptation is any modification of the domestic product for the foreign market.
- Localization is a form of adaptation that customizes a product or the marketing of the product with a special location in mind.

What types of marketing strategies are used when entering foreign markets?

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

What are the various strategies for entering foreign markets?

- Exporting:
Advantage: Fast entry, low risk:
Disadvantage: Low control, low local knowledge, potential negative environmental impact of transportation
- Licensing and franchising:
Advantage: Fast entry, low cost, low risk
Disadvantage: Less control, licensee may become a competitor, legal and regulatory environment (IP and contract law) must be sound
- Partnering and strategic alliance:
Advantage: Shared costs reduce investment needed, reduced risk, seen as local entity
Disadvantage: Higher cost than exporting, licensing, or franchising, integration problems between two corporate cultures
- Acquisition of a subsidiary:
Advantage: Fast entry; known, established operations
Disadvantage: High cost, integration issues with home office
- Greenfield venture (new business or subsidiary):
Advantage: Gain local market knowledge; can be seen as insider who employs locals; maximum control
Disadvantage: High cost, high risk due to unknowns, slow entry due to setup time

Explain the risks and rewards associated with exporting, franchising, licensing, joint ventures, strategic partnerships, direct investment and wholly owned subsidiaries.

Education

An international company works with many economic sectors and notices that one sector in particular is slower to adopt artificial intelligence, which limits their opportunities on a global scale.Which economic sector shows this slower pace?

Empowerment

A community has the skills and ability to access computers and the internet but does not value that form of technology. A company is trying to change the situation in order to facilitate increased online transactions. Which stage of the digital divide is the company hoping to correct?

Patent

A multinational company forms a joint venture revealing some of its invented production processes to the host national company. What should this company use to mitigate theft of its production processes?

Reduced cost through lower wages

What is the primary factor that a company considers when deciding to offshore some or all of its operations?

Lowered profit

A multinational company uses transfer pricing to reduce its tax burden in the subsidiaries' countries. Which effect does this action have on subsidiaries?

Temporal

A multinational firm decides to use the rates of exchange when purchases and liabilities occurred in the host countries when the company prepares its financial statements. Which method did the company use for their financial statements?

Process

A global furniture company has three departments: lumber cutting and treatment, furniture finishing, and shipping. Which type of departmentalization does this company use?

Teams

Which organizational structure helps increase employee creativity, productivity, and mutual accountability?

Matrix

Which organizational structure is common in international high-tech and engineering firms that have projects of limited lengths of time where employees can be put on different teams to maximize ingenuity?

Functional

An international company has employees divided into departments related to designated areas of the business, such as marketing, production, human resources, information technology, and customer service. What is the organizational structure of this company?

Standardization

A company has entered several foreign markets and maintains the same branding in all of them.

What is the term for this marketing strategy?

Greenfield venture

As a company enters a foreign market, it provides assets, takes on all of the responsibility, and assumes significant risk.

What is this market entry strategy?

Exporting

Which entry strategy offers the least amount of risk for a company entering a foreign market?

Started to produce its own shows to be telecast on its channel

A movie rental company has expanded its business by vertical integration.

Which action has the company taken?

Centralized manufacturing

A company located in the United States ships its products to a country overseas. Frequent bad weather causes significant delays, thus leading to reduced profits. As a result, the company wants to encourage leadership to consider adding a location in this overseas country. Which strategy solves this problem?

Clean Water Act

A company paid millions of dollars to a government in reparation for an oil spill. Which law did the company breach?

National Environmental Policy Act

An environmental consultant is advising a large oil drilling business in the United States. The consultant reminds the business of its obligations to create and maintain conditions so a healthful environment can be ensured for all people. Which specific act of the United States government is being referenced by the consultant?

Improving quality of life

What is the current focus of the World Bank?

International Monetary Fund

Which institution helps to maintain liquidity of global funding?

The currency in Country A is strong relative to the currency in Country B.

A firm based in Country A manufactures its products in Country B and pays the manufacturing employees in the currency in which they are located. Which currency situation will result in the maximum profit for the firm?

To end frequent wars between neighboring countries

What was the original reason for the creation of the European Union in 1950?

Almost half of all automobile parts must be made by a labor force that earns a minimum of $16 per hour by 2023.

The United States-Mexico- Canada Agreement (USMCA), a modification of the North American Free Trade Agreement (NAFTA), broadened the scope of free-trade between member nations and tightened restrictions in the region. Which regulation was established by this new agreement?

Dividend repatriation

A country wants to develop an international relationship with another country for future investments, allowing new foreign investors entitlement to a five-year tax holiday. Which benefit leads to foreign direct investment (FDI) in this situation?

They reduce domestic competition by limiting domestic companies' sales volume.

How do Congress and the Department of Agriculture use quotas to their advantage?

Developing countries have not been satisfied with the proposed reductions in agricultural tariffs.

Why has the Doha Round of the General Agreement on Tariffs and Trade (GATT) been inconclusive?

Direct investment and wholly owned subsidiaries are the most risky, but they also carry the most rewards, and they allow you to have total control over the business operations.

What market entry strategy has the highest reward but is also the riskiest?

Joint ventures, strategic partnerships, and alliances are sometimes the best or only way to gain influence in a market. It is critical to partner with someone in country who has the same goals and a compatible work styles.

What market entry strategy is the best way to gain influence?

Licensing and franchising are low-risk, fast ways to enter a market, but they can mean a loss of control and a lower return on investment.

What is low-risk and fast way to enter the global market?

Exporting is the easiest and least costly way to move into the global market. You work with a distributor or an export management company to handle much of the bureaucracy, but it still carries the risk that someone will start making a similar product locally and price you out of the market.

What is the easiest way to enter the global market?

Subsidiary
This means of entering an international market is the most expensive. The owner must assume all the financial, economic, political, and currency risk.

A company wants to enter the international market and is placing the entry modes into a hierarchy to determine the most and least expensive options.
Which strategy has the greatest risk from a financial perspective?

Some common reasons are to increase revenues through market growth and to increase cost savings from the economies of scale, local sourcing, and operational flexibility. Diversified investment also reduces operational risk by mitigating the effects of problems in a single area.

Given potential risks, why do businesses expand into international markets?

Culture is the beliefs, values, mind-sets, and practices of a group of people. It includes the behavior pattern and norms of that group—the rules, the assumptions, the perceptions, and the logic and reasoning that are specific to a group.

What is culture?

- Power distance: The different solutions to the basic problem of human inequality
- Individualism vs. collectivism: The integration of individuals into a primary group
- Masculinity vs. femininity: The division of emotional roles between women and men
- Uncertainty avoidance: The level of stress in a society despite an unknown future
- Long-term orientation vs. short-term orientation: The choice of focus for people's efforts: the future or the present and past
- Indulgence vs. restraint: The gratification of needs vs. self-control

Describe each of Hofstede's six cultural dimensions with respect to global business.

Geert Hofstede created a framework for analyzing national culture based on six dimensions: power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence.

What are the significant cultural differences, norms and values of the various nations in which a multinational organization function?

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

What is the impact of cultural attributes on the way the business functions?

- Primary: firsthand accounts by people who have lived in the culture; raw data about everything from health statistics to business data to weather information; and newspapers, diaries, travel journals, blogs, photographs, and videos.
- Secondary: U.S. Department of State, U.S. government's export site, Read articles and advice about living abroad.

What are the reputable primary and secondary sources for learning about foreign cultures?

Culture affects how employees are best managed based on their values and priorities. It also affects the functional areas of marketing, sales, and distribution. It can affect a company's analysis and decision on how best to enter a new market. When you are dealing with people from another culture, you may find that their business practices, communication, and management styles are different from those to which you are accustomed.

How does culture influence staffing strategies, performance evaluation, benefits and compensation in global business?

- Advantages: The company maintains control and consistency of product quality and messaging; it simplifies processes.

- Disadvantages: The decisions may not reflect the needs of the foreign market or workplace; lack of diversity may discourage employee motivation; a colonial mentality can develop.

Describe advantages and disadvantages of the Ethnocentric HR strategy

- Advantages: The company and its subsidiaries coordinate and cooperate as an integrated organization.

- Disadvantages: Higher travel costs and investment in skills training as executives travel more.

Describe advantages and disadvantages of the Geocentric HR strategy.

- Advantages: The local employees are more engaged; the needs of the local office are addressed; there is more flexibility to adjust to changing local conditions.

- Disadvantages: There is the potential for overlapping efforts or dual demands for shared resources.

Describe advantages and disadvantages of the Polycentric HR strategy

- Ethnocentric: Decisions are made at the home office. Expatriates hold key positions in the field.
- Polycentric: Decisions are made at the local level. Locals hold key positions in the field.
- Geocentric: Decisions are made at the home office but with input from the field. Mix of expatriates and locals holds key positions throughout the company.

Describe the three HR strategies.

Shipping, Workforce, Costs, Community, Country factors, Business environment, Market impressions

What are the considerations for locating and relocating production facilities?

Several factors should be considered when selecting production sites in a global supply chain: production method, shipping costs and logistics, available raw materials, quality of workforce, taxes, local costs, business culture, and community incentives.

List and explain the factors in location decisions.

Growth, Government incentives, Costs, Innovation
These primary drivers—the need to find growth, take advantage of incentives, reduce costs, and facilitate innovation—must be balanced by a company's capacity to manage risks.

List and explain the factors in relocation decisions.

By outsourcing, companies can turn over business activities to those who have more expertise or shift production to areas that have lower costs. Outsourcing has risks and does not always work out. Outsourcing may not be effective with some business activities, such as human resources or customer relations, so businesses turn to insourcing, which is keeping or returning responsibility for those activities to in-house staff.

What are the reasons for insourcing and outsourcing?

lower costs, greater flexibility, enhanced expertise, greater discipline, and the freedom to focus on core business activities

Explain the advantages of outsourcing.

When firms cannot resolve their supplier problems, they find other suppliers to work with or they move the activities back in-house, which is a process called insourcing. Insourcing is the safer option in many aspects of employee management. Functions that have the potential to interrupt the flow of product or service between a company and its customers are the riskiest to outsource.

Explain the reasons for insourcing

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

Describe the risks associated with outsourcing.

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

What are the advantages and disadvantages of direct distribution strategies?

Advantages:
- There are no up-front costs if you are using an existing channel.
- Intermediaries may have more knowledge of the markets.
- Intermediaries can use their expertise to speed up the process.
Disdvantages:
- Must trust intermediaries to represent your brand and interact with customers
- Intermediaries may develop sense of ownership over your products
- An existing channel may carry competing products
- Intermediaries will be in control of the marketing efforts
- Adds layers of cost and bureaucracy with more intermediaries

What are the advantages and disadvantages of indirect distribution strategies?

The shortest channel consists of just two parties—a producer and a consumer—is a direct channel. By contrast, a channel that includes one or more intermediaries—like a wholesaler, distributor, or broker or agent—is an indirect channel.

Compare the indirect strategy to the direct strategy.

Cash, Loans, Bonds, Equity (shares)

What are the sources of financing (funding) global business and international investment?

VCs, Angel investors, FFF, Crowdsourcing

List and describe funding sources.

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

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

U.S. firms and any listed on a U.S. stock exchange must prepare financial statements in accordance with the U.S. FASB standards, which are known as generally accepted accounting principles (GAAP). Firms based in the EU follow standards adopted by the IASB known as International Financial Reporting Standards (IFRS).

How do the functions of generally accepted accounting principles (GAAP) and the international accounting standards board (IASB) differ?

Political
Cultural
Legal
Economic

What are the risks associated with investing, financing and foreign exchange in global business?

derivatives: Swaps, options, and futures

What are the various ways to hedging foreign exchange risks?

Investors use a variety of financial tools called derivatives to hedge or reduce their losses in currency exchange.
- forward contract that agrees on an exchange rate at a set point in the future.
- currency swap contracts that are two-way deals to trade currency on different dates
- currency option contracts that give the holder the right to a certain rate on a certain date but do not oblige the holder
- currency futures contracts that require an exchange of money on a certain date.

Explain hedging and financial derivatives.

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

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

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

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

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

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

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

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

Countries with no corporate tax or very low rates are considered tax havens. MNCs use various strategies to maximize profits by minimizing the amount of taxes they must pay. Some of these strategies involve transferring assets across borders to better tax rates or brackets. Corporations also use fronting loans as a way of taking advantage of the tax benefits while transferring funds to subsidiaries.

How do international corporate tax brackets influence global business decisions?

a discrepancy in access to information technology (IT) between populations.
Jakob Nielsen breaks the digital divide up into three stages: the economic divide, the usability divide, and the empowerment divide.

What is meant by the digital divide?

ICT provide access to information and promote the growth and development of fields such as health, education, knowledge sharing, agriculture, peace promotion, and disaster reduction, putting those who do not have internet access at a significant disadvantage in all of these areas.

How can technology bridge gaps to promote globalization?

Without information about the processes of and the participants in an organization—including orders, products, inventory, scheduling, shipping, customers, suppliers, and employees—a business cannot operate.

How has technology significantly affected global business?

supercomputers, database management, cloud networks

Describe the types of technology used by global businesses.

Artificial intelligence (AI), enhanced reality, robotics, 3-D printers, and biotechnology, data mining,

What are the trends in global business adoption, use and growth in technology?

- AI: Machine learning allows computers to learn from experience with previous data and patterns.
- Augmented and virtual reality: allow users to be placed inside a virtual world.
- Cybersecurity: Companies are providing restrictions on how data can be accessed and are exploring next-generation security tools such as blockchain technology

Describe artificial intelligence, cybersecurity and virtual reality.

GDPR, COPPA, IgCC, FSC

What are the major international legislation and reforms regarding the use of technology by global businesses?

Organizations that do not protect PII can face penalties, lawsuits, and loss of business. In the United States and EU, most states now have laws in place requiring that organizations that have had security breaches related to PII notify potential victims.

Explain how various countries determine the trade-offs between easier internet access and more privacy.

AAA ratings

The highest possible rating that may be assigned by a credit rating agency for a bond

absolute advantage

The ability of an individual or group to produce a good or service more efficiently than another

absolute quota

Quota that strictly limits the quantity of goods that may enter a country

acquisition

The act of taking over ownership or controlling a business

Ad valorem tariffs

Import taxes based on a fixed percentage of the assessed commercial value of imported goods

agility

Ability to move quickly and flexibly

algorithms

A process or set of rules to be followed in calculations especially by a computer

antimonopoly laws

See antitrust laws.

antitrust laws

Consumer protection policy used to limit unfair business practices related to competition and control of prices

Apple Inc. vs. Pepper

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

artificial intelligence (AI)

Any type of computer that engages in humanlike activities

asset seizure

An act of confiscating or taking control of private assets such as funds or property by a government

assets

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

autarky

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

balance of payments

The difference in total value between payments into and out of the country over a period of time

barriers to entry

The obstacles that make it difficult for a new company to enter a given market. These barriers may include technology challenges, high start-up costs, or government regulations

blood diamonds

Diamonds mined in war zones and sold in order to finance war efforts

brand

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

Bribery

Cash payment or other bonus that benefits an individual but provides little advantage to the company

broadband

Any type of high-speed wired or wireless communication

Business ethics

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

capital

Financial assets such as funds but also equipment, facilities, and other means of production

centralization

The degree to which decision-making authority is concentrated at higher levels in an organization and business functions controlled in a central location

centralized companies

Companies with structures that limit decision-making to higher levels in the organizational hierarchy

chief information officer

An executive with responsibility for managing all information resources in an organization

collateral

Something pledged as security for repayment of a loan to be forfeited in the event of a default

collective environment

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

collectivist

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

colonialism

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

commodities

A raw material or primary agricultural product that can be bought or sold

compensation

What an employee is paid in exchange for work

competition laws

See antitrust laws.

Compound tariffs

Taxes on imported goods that are a combination of a fixed amount and an amount based on the value of the goods

conflict of interest (COI)

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

conglomerates

Large corporations made up of several combined companies, often formed through mergers and takeovers

consumer

Any person who needs, uses, or has used a particular service or product

consumer surplus

The difference in price between the highest price a consumer is willing to pay for a good or service and what they actually paid

Contracts

A legally enforceable promise

convertible

A currency that can be used to buy or sell without government restrictions

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

copyrights

A government authority or license giving the owner of an invention the right to exclude others from making or selling the invention for a set period of time

Corporate social responsibility (CSR)

The ethical role of a corporation in society

Countervailing duties

Import taxes imposed on certain goods to prevent dumping or counter export subsidies

country-of-origin effect

The effect the consumer's perception or opinion of the country where a product is made has on the consumer's perception or opinion of the product itself

crowdsourcing

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

Cultural norms

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

culture

The beliefs, values, mind-sets, and practices of a group of people

currency

Any form of money in circulation in a country

Currency futures contracts

Contracts that require the exchange of a specific amount of currency at a specific future date and at a specific exchange rate

Currency option contracts

The option or the right to exchange a specific amount of currency on a specific future date and at a specific agreed-on rate

Currency risk

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

Currency swap contracts

A simultaneous buy and sell of a currency for two different dates

currency translation

The act of translating currencies on a financial statement to another currency.

Current-rate method

A method of foreign currency translation that translates items on financial statements at the current exchange rate

Customer departmentalization

Organizing a company's people, tasks, and resources based on the type of customer served

damages

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

data mining

A class of sophisticated database applications that look for hidden patterns in a group of data to help track and predict future behavior

databases

An electronic filing system that collects and organizes data and information

debt

Amount owed to someone

debt instruments

A tool used by a company or any other entity to raise money or capital

decentralized companies

Companies with structures that distribute the authority to make decisions to lower levels of employees who are closer to the problem

Deep learning

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

Deepwater Horizon oil spill

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

departmentalization

Grouping a business's people, tasks, and resources into units

deregulation

The removal of regulations or restrictions in a particular industry

derivatives

Special types of financial instruments, the prices of which are ultimately derived from the price or performance of some underlying assets.

developing economies

A term that describes countries with a less-developed industrial infrastructure and lower per capita income

digital divide

The inequality between groups to access knowledge and use of information in communication technologies

direct channel

The shortest path between a producer and a consumer

direct distribution strategy

Distribution strategy that reaches customer directly without any intermediaries; distribution channel and distribution strategy are often used interchangeably

Discrepancies

Accounting errors that occur unintentionally

disincentives

Something that discourages people from an action

distribution

The process of supplying goods to customers

distribution channel

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

distributor

Someone who supplies goods to businesses

diversifying

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

Diversity

A variety of differences

dividend

A sum of money paid regularly by a company to its shareholders out of its profits

dividend repatriation

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

division of labor

Dividing organizational activities into smaller tasks

Divisional structure

An organizational structure grouping employees into departments based on products, processes, or geographic regions

DNS blocking

A strategy that makes it difficult for users to locate specific domains or websites on the internet

dollarize

A country that is not the United States uses the U.S. dollar as its currency

domestic

Related to home or place of origin

Domestic Workers Convention

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

due diligence

When officers adequately investigate and enforce procedures

dumping

When a country or company exports a product at a price that is below market price to gain an unfair share of the market

Economic inefficiency

An economic state in which every resource is not optimally allocated to serve each individual or entity in the best way possible by minimizing waste and inefficiency

economic sanctions

Commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual

economies of scale

A proportionate savings in costs gained by an increased level of production

economies of scope

The savings from producing more than one type of item

embargos

An order of a government prohibiting the departure of commercial ships from its ports

Emerging markets

A country that is transitioning from a less developed economy to a more developed one with an expanding middle class and increasing social-political stability

equity

Value of the shares of a company

ethical consumerism

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

Ethics

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

Ethnocentric:

HR strategy of hiring only people from the home country for key positions in foreign subsidiaries

ethnocentrism

The belief that one's own culture is most important

exascale

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

exchange rate regime

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

exchange rates

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

expatriates

People who live and work outside their own country

export management company (EMC)

A private company that is hired to act as a company's export department

export strategy

An international commerce strategy that focuses on shipping domestic products to other countries

Export subsidies

A government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low-cost loans, tax relief for exporters, or government-financed international advertising

Export tariffs

Taxes on goods leaving a country

exporting

Sending goods to another country to sell

exports

A commodity, good, or service sold abroad

Financial Accounting Standards Board

An independent group that oversees the development and revision of the GAAP

financial instrument

A monetary contract between parties

fixed costs

The necessary expenses of the manufacturing process other than the cost of materials or labor used in production

fixed exchange rates

A system where a currency's value is tied to the value of another single currency, to a basket of other currencies, or to another measure of value, such as gold

fixed-rate currency exchange system

When a country's currency value is fixed or pegged by a monetary authority against the value of another currency, a basket of currencies, or another measure of value

flat structures

Organizational structures with few layers

floating exchange rate

A system where the value of currency in relation to others is allowed to freely fluctuate subject to market forces

foreign currency

Any form of money in circulation in a different country

foreign direct investment

An investment strategy of investing in a foreign market through direct involvement in the operations of a company, either by acquisition or partnership or by creating a new business

foreign exchange market

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

forward contract

A contract in which the firm agrees to pay a set rate at the beginning of a contract.

franchising

A system where a business grants an entrepreneur the right to use their products, names, and processes in exchange for a percentage of the profits

Free trade

International trade left to its natural course without tariffs, quotas, or other restrictions

Free Trade Agreement

Economic agreement between countries to allow free trade between members

free-trade zone

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

fronting loan

A loan made between a parent company and its subsidiary through a financial intermediary such as a bank

Functional departmentalization

Organizing a company's people, tasks, and resources based on business functions such as marketing, production, and sales

Functional/departmental structure

An organizational structure dividing employees into departments based on business functions

GAAP

A collection of generally accepted accounting principles used in the United States

Geocentric

HR strategy that takes a whole-world view of the company, hiring the best people for positions regardless of location

Geographic departmentalization

Organizing a company's people, tasks, and resources based on a geographic region

Gini coefficient

Measures the inequality among values of a frequency distribution such as levels of income

Global integration

The degree to which a company is able to use the same products and methods in multiple countries

Global Reporting Initiative

An international standards organization that assists organizations in understanding and communicating their impact on ethical issues such as human rights, climate change, and corruption

Globalization

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

glocalization

The process of adapting to local markets while maintaining a global identity

goods and services tax (GST)

A consumption tax added to products incrementally for all stages of production but collected by the end retailer; also called a goods and services tax in some countries; similar to a sales tax

Government procurement programs

The process of buying goods and services by a government agency through a specific process of issuing bid proposals and seeking responses from companies

government subsidies

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

graphical user interface

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

grease payments

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

greenfield

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

gross domestic product (GDP) growth

The total value of goods and services provided in a country in a one-year period

Group of 77 developing countries and China

The Group of 77 (G77) at the United Nations is a coalition of 134 developing nations that join together to promote their economic interests at the United Nations. China participates in the G77 but does not consider itself to be a member

guanxi

Concept in China that describes a connection based on reciprocity

Happy Planet Index

Measures how well nations are doing at achieving long, happy, sustainable lives

hedging

Using financial instruments to reduce adverse price movements

horizontal integration

The expansion at a single point in the supply chain, often through the combination of two or more similar companies

horizontal laws

Laws that govern disputes in a horizontal structure

horizontal structure

Structure of law where neither party is in a legally dominant position over the other

human capital

The education and skills of workers

human resources (HR) management (HRM)

Department within an organization responsible for employment issues

Import tariffs

Taxes on goods that are imported into a country

imports

Bringing goods or services into the country from abroad for the purpose of selling

indirect channel

An indirect path between producer and consumer with intermediaries

indirect distribution strategy

Distribution strategy that uses intermediaries to reach customers; distribution channel and distribution strategy are often used interchangeably

Individualistic

One of Hofstede's six dimensions of national culture. It measures how focused people are on their immediate circle at the expense of the greater group.

Indulgence versus restraint

One of Hofstede's six dimensions of national culture. It measures the degree of freedom and spontaneity that is valued.

information technology (IT)

The equipment and techniques used to manage and process information

insourcing

Using in-house staff to complete a business task

intellectual property

A work or invention that is a result of creativity, such as a manuscript

Intellectual property (IP)

The creation of the mind, whether it is an invention, literary or artistic work, or unique process

intellectual property rights

The legal protections for creations of the mind

Internal auditing

A control in which the company investigates and evaluates employees' compliance with company policies and procedures

internal controls

The redundancies that are build into a system to make certain that it accurately maintains material statements

internal forward rate

A company-generated forecast of future spot exchange rates

International Accounting Standards Board

An independent group that oversees the development and revision of the IFRS

International Financial Reporting Standards

A collection of accounting principles used through much of the world outside the United States.

International Telecommunication Union

A specialized agency of the United Nations responsible for communication and information issues

irregularities

Misrepresentations of accounting data with the intention to defraud

Jakob Nielsen

Danish web usability consultant. He holds a PhD in human-computer interaction from the Technical University of Denmark in Copenhagen

knowledge workers

Workers who develop or use knowledge, contributing to and benefiting from information used to perform planning, acquiring, searching, analyzing, organizing, storing, programming, producing, distributing, marketing, or selling functions

kyat

The basic monetary unit of Burma (Myanmar), equal to 100 pyas

lean manufacturing principles

A collection of methods or theories for reducing waste in manufacturing

liabilities

Being responsible for a debt or financial obligation, something you owe

LIBOR

The London Interbank Offered Rate, a benchmark interest rate for short-term loans

licensee

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

licensing

A type of contract that allows one party to use another's property as their own without paying royalties for a designated length of time

licensor

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

Local responsiveness

The degree to which a company must customize its products and methods to meet the conditions in other countries

localize

Modify something to appeal to people in a specific location

long position

A strategy used in investing of a trader who buys an asset with expectation that it will increase in value

Long-term orientation

One of Hofstede's six dimensions of national culture. It measures how focused a society is on traits such as perseverance and shame.

machine learning

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

Macro risk

A type of political risk that applies to all foreign investments in a country

macroeconomic

A branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole

Make-to-order

A manufacturing method that allows customers to customize the product

management information systems

The methods and equipment that provide information about all aspects of a firm's operations

market capitalization

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

marketing channel

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

Masculinity versus femininity

One of Hofstede's six dimensions of national culture. It measures how the society views traits that it considers masculine or feminine.

Mass customization

A manufacturing method that combines the flexibility of custom production with the scale of mass production by allowing the customer to dictate some of the design elements in products that will have a wide distribution

Mass production

A manufacturing method that creates large amounts of identical products

Matrix structure

An organizational structure that combines more than one organizing perspective at once, such as combining geographic and product models

mature economies

A term that describes countries with a stable population and slowing economic growth

McKinsey Global Institute

An organization whose mission is to "help leaders in the commercial, public and social sectors develop an understanding of the evolution of the global economy"

mercantilism

One of the earliest economic theories, which stated that a country's wealth was determined by the amount of gold and silver they had in their possession

micro risk

A type of political risk that applies to a specific foreign company or a group of foreign companies in a country

minimum efficient scale (MES)

The balance point between price and cost that allows a company to make a profit

monopoly

Market in which single producer is a price maker that can determine the price level by deciding what quantity of a good to produce

monopoly power

When a specific person or enterprise is the only supplier of a particular product

multibrand strategy

The practice of a company offering different brands of similar products for different markets

multidomestic strategy

A strategy of international commerce that customizes products to each country

multilevel marketing

Marketing strategy in which revenue is derived from a nonsalaried worker selling the company's products or services and earning a commission

multinational corporation (MNC)

A company that operates in two or more countries

Multinational production

Manufacturing process that spans multiple countries outside a firm's country of origin, usually in a coordinated multistage system

nation-states

When a group of people are conscious of sharing a common identity and the same culture

National Environmental Policy Act (NEPA)

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

National Labor Committee

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

Navigation Acts

British Acts in 1651 to tighten and protect trade between Asia, American colonies, Africa, and England. Trade had to come in English ships. The purpose was to use the American colonies to increase British finances and power

negotiate

A conversation to achieve an agreement

nongovernmental organizations

Not for profit organizations that are independent of the government and are active in humanitarian causes

Oil Pollution Act of 1990

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

open government information regulations

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

operational

Relating to everyday expenses

opportunities for scale

Cost advantages due to an increase in the amount of output and a decrease in the cost per unit

opportunity cost

The loss of potential gain from the next best option when one alternative has been chosen

organizational chart

A visual map of the roles and relationships within an organization and how functions and responsibilities are divided

Organizational ethics

How an organization ethically responds to an internal or external stimulus

organizational structure

The formal way a company divides labor, groups employees, and assigns responsibilities

outsource

To obtain goods or services from an outside or foreign supplier

outsourcing

Hiring staff or business outside the company to complete business activities

Paris Agreement

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

partnering

An agreement between two or more entities to share responsibilities for a business

patent

The exclusive legal right granted to an inventor to profit from his or her creation

patents

Protects inventions and improvements to existing inventions for a limited period of time in exchange for detailed public disclosure of those inventions

pegged exchange rate

A currency system that fixes an exchange rate around a certain value, but still allows fluctuations, usually within certain values, to occur

perfectly competitive market

A market in which no individual economic actor can affect the price of a good

performance evaluations

Formal processes for evaluating an employee

personality

A person's unique characteristics that shape thought and behavior patterns

Political risk

Possible political changes or instability in a country that could hurt a company's financial return on a foreign investment

Polycentric:

HR strategy that gives local hiring control to foreign subsidiaries

portfolio investment

An investment in another country is purely financial and does not involve any management responsibility

Power distance

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

preferential tariff

A tariff that is lower for some nations than others

Primary sources

Original information that could be firsthand accounts, raw data, or artifacts

privatization

Selling government holdings to private companies

privatized

To transfer a business, industry, or service from public to private ownership and control

Process departmentalization

Organizing a company's people, tasks, and resources based on a production process

producer surplus

The difference between how much money producers want to sell a good for and how much they receive by selling it

product adaptation

The process of changing a product in some way so it is more acceptable or desirable in a particular market

Product departmentalization

Organizing a company's people, tasks, and resources based on goods or services

production cycle

All the activities involved in creating a product

production planning

The allocation of resources in the production process

production possibility frontier

A curve that shows various combinations of the amounts of two goods that can be produced within the limits of the given resources and technology

profitability

The degree that a company is able to make a profit

protectionism

The theory or practice of protecting a country's domestic industries from foreign competition by taxing imports

Protective tariffs

Tariffs that protect a domestic industry by making imported goods more expensive than equivalent goods produced domestically

pull model

Theory in supply chain management that bases decisions and activities on the needs of the customer

push model

Theory in supply chain management that focuses decisions on the needs of the product

quotas

A limited quantity of a particular product that can be produced, exported, or imported under official controls

renminbi

The renminbi is the official currency of the People's Republic of China and translates to "people money." The yuan is the name of the unit of account or denomination of the country's economic and financial system

repatriation

The process of transitioning employees back to their home countries

return volatility

A measure of the variation in returns on an investment

Revenue tariffs

Tariffs levied to raise revenue for the government

robber barons

Corporations and cartels that monopolized business in the period following the American Civil War

Sarbanes-Oxley Act

Law aimed at increasing level of ethical transparency within corporate America

Sarbanes-Oxley Act of 2002

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

scope

To develop efficiencies in terms of variety not volume

Secondary sources

Information that has been passed on from an original source or interpreted

Securities and Exchange Commission

An independent U.S. agency aimed at regulating the nation's securities industry

Sherman Antitrust Act

The first American antitrust policy. Established in 1890, it dealt with limiting the power of price-controlling cartels

short position

A strategy used in investing of a trader who sells someone else's asset with the expectation of buying it back later when it decreases in value

short-term orientation

One of Hofstede's six dimensions of national culture. It focuses on immediate gratification and fulfilling current social obligations.

Six Sigma

A method that provides tools for organizations to increase performance and decrease process variation

slope

The gradient of a graph at any point calculated as the change in y over the change in x

social media

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

sourcing

Obtaining needed materials from a supplier

special drawing rights

The international type of monetary reserve currency created by the IMF

specific strategic business unit (SBU)

An independent division within a large company with responsibility for specific products or activities

Specific tariffs

Import taxes expressed in an amount of money per unit imported

spot rates

Currency exchange rates that require immediate settlement with the delivery of the traded currency

stakeholders

All parties who have a stake in the performance and output of the corporation

standardization

The process of making everything conform to expectations and guidelines for consistency

standardization strategy

A strategy for international commerce that does not customize products for local markets

strategic alliances

An agreement between two companies to cooperate on the mutually beneficial project

strategic plan

A formal agreement on priorities, focus, and goals

subsidiaries

Companies completely owned or controlled by a parent company

subsidies

A sum of money granted by the government to assist an industry or business

supply chain

The sequence of processes involved in the production and distribution of a commodity

supply chain management

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

supply chain networks

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

sweatshop

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

tall structures

Organizational structures with many levels

tariff-rate quota

Quota that permits a specified quantity of imported goods to enter a country at a reduced rate during the quota period

tariffs

A tax or duty to be paid on a particular class of imports or exports

tax haven

A country that has very low corporate taxes

Teams structure

A newer type of organizational structure that includes a group of workers, with complementary skills, all working toward a common goal, such as a specific project

Teapot Dome scandal

A scandal dating back to the 1920s, in which the an American cabinet official received a jail sentence and fine for the first time for adopting bribery practices

Temporal method

A method of foreign currency translation that uses exchange rates based on the rate in place when the assets and liabilities were originally acquired or incurred

The Clean Water Act

A US federal law governing water pollution

The Environmental Protection Agency (EPA)

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

The European Union (EU)

European Statute established in 1951 with the purpose of reducing the ability for one country/region to gain a monopoly on critical natural resources

The Maritime Labour Convention (MLC)

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

trade

The action of buying and selling goods and services

trade diversion

Trade is diverted from a more efficient exporter toward a less efficient one by the formation of a free trade agreement or a customs union

trade secret

Intellectual property that is kept private

trade surplus

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

Trade-Related Aspects of Intellectual Property Rights (TRIPS)

A WTO agreement that governs all intellectual property law

trademarks

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

training

A focused educational program with a specific goal

transfer pricing

The practice of shifting assets to a subsidiary in a country with a better tax bracket

transnational strategy

An international commerce strategy that combines the aspects of standardization and multidomestic strategies

U.K. Bribery Act

A United Kingdom act (2010) that enhances U.K. law related to bribery, including bribery of foreign corporations

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

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

UN Global Compact

A nonbinding UN pact aimed at encouraging businesses to adopt sustainable and socially responsible policies and to report on implementation

Uncertainty avoidance

One of Hofstede's six dimensions of national culture. It measures how comfortable a society is with uncertainty.

underground economies

Economic transactions that are deemed illegal

Uniform Commercial Code (UCC)

Source of contract law in the United States

United Nations Environment Programme (UNEP)

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

unity of command

One employee should only report to one person

value

The preference for one condition over another

value chain

The process or activities by which a company adds value to an article, including production, marketing, and the provision of after-sales services

value-added tax (VAT)

A consumption tax added to products incrementally for all stages of production but collected by the end retailer; also called a value-added tax in some countries; similar to a sales tax

value-to-weight ratio

The value of a product per pound or kilogram

venture capital (VC)

A type of high-risk investing

vertical and horizontal linkages

Lines on an organizational chart showing the relationships within an organization

vertical integration

The combination of two or more stages of production in one company

vertical structure of law

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

virtual private network

A private corporate network connected over a public network, such as the internet. It includes strong security measures to allow only authorized users to access the network

Voluntary export restrictions

A trade restriction on the quantity of a good that an exporting country is allowed to export to another country

whistleblower

A person who exposes any kind of information or activity that is deemed illegal, unethical, or not correct within an organization

wholesalers

A person or company that sells goods in large quantities at low prices, typically to retailers

wireless

Communication using radio frequencies

World Intellectual Property Organization (WIPO)

Established by the United Nations to implement global policy related to intellectual property

World Trade Organization (WTO)

An international organization that works at standardizing competitive market practices in conjunction with the internal laws of individual nations

Worst Forms of Child Labour Convention - 1999

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

- trade and transactions
- capital and investment movements
- the migration and movement of people
- the dissemination of knowledge

What four fundamental aspects of globalization were identified by the IMF in 2000?

global warming, cross-boundary water and air pollution, and overfishing in the ocean

What environmental challenges are linked with globalization?

economic, cultural, and political

What are the three main areas of globalization?

CAGE analysis
Culture, Administration, Geography, Economics

How would you study the barriers to cross-border economic activity?

The IMF helps maintain liquidity of global funding by providing a straight-forward method for nations to borrow and loan to each other through a mechanism called the special drawing right.

What are the major functions of the IMF?

The conditions put on the loan require the recipient country to have a policy of austerity. This policy, which usually results in a cut in funding for social programs, can have a significant effect on citizens who are living in poverty, according to critics of the IMF.
Other criticisms of the IMF address a lack of representation by the global south and an overrepresentation by the United States.

What are some criticisms of the IMF?

- three priorities: helping build sustainable economic growth, investing in people, and building resilience to shocks and threats.
- two goals: end extreme poverty, improve the income of the lowest 40% of citizens in each country.

What are the priorities and goals of the World Bank?

- the hegemony or power imbalance in the leadership of both organizations.
- enforced conditionality, or structural reforms causing harm, not help to developing countries.
- the World Bank's support for privatization in general and specifically in the health sector.
- not considering how funding projects will adversely affect the environment.
- emerging markets, particularly China, frustrated with their lack of influence in the World Bank.

What are some criticisms of the World Bank?

The World Trade Organization serves as trade moderator in the world. Governments determine how much and what to trade after voting on trade policies that all governments must follow. The World Trade Organization enforces rules and reviews each government's trade policies to evaluate for fairness and transparency.

What is the purpose of the WTO?

- the required review of a nation's trade policies compromises national sovereignty.
- WTO trade rules prohibit tariff protections.
- The most favored nation policy can give multinational companies an unfair advantage.
- it has refused to address the impacts of free trade on labor rights.
- Free trade is not equal across all industries. The United States and the European Union both have high tariffs on agriculture. These tariffs on agriculture hurt developing countries where agricultural exports are their primary goods to trade.
- WTO requires consensus to pass a policy. Major trading blocs like the EU and NAFTA can effectively prevent any plan from moving forward due to this policy.
- has been accused of ignoring environmental concerns.
- It protects developed countries more than developing countries.

What are some criticisms of the WTO?

The World Trade Organization was formed after World War II to encourage international trade by creating a mechanism to negotiate trade agreements.

Which organization was formed after World War II to encourage international commerce?

The WTO was established to work towards decreasing tariff rates and protecting the trade of goods, services, and intellectual property.

Which strategic network was established to work towards decreasing tariff rates and protecting commerce and intellectual property globally?

The IMF's purpose is to provide a way for countries to easily exchange money, provide financial help to its members, and supervise international economic policies.

What is the purpose of the IMF?

The World Bank is directly associated with development project.

Which critical distinction should a developing country make when choosing between the World Bank and the International Monetary Fund (IMF) to improve the country's highways?

Because of the voting power highly-developed countries have on World Bank policies
Five highly developed countries combine to have 38% of the voting power for the World Bank.

Why should the newly-elected leader of a developing country be careful when working with the World Bank to eliminate the nation's trade deficit?

To receive help building international exchange capacity
One of the functions of the WTO is to help developing countries build trade and international exchange capacity so they can have a presence in the international markets.

Why should the newly-elected leader of a developing country use the World Trade Organization (WTO) to form favorable trade agreements?

A country has an absolute advantage in those products that it has a productivity edge over other countries; it takes fewer resources to produce a product. A country has a comparative advantage when a good can be produced at a lower cost in terms of other goods.

Absolute advantage compares the productivity of a worker between countries. Comparative advantage identifies the good for which the producer's absolute advantage is relatively larger or where the producer's absolute productivity disadvantage is relatively smaller.

What is the difference between comparative advantage and absolute advantage?

An absolute advantage is a term coined by Adam Smith and refers to the multiple things that a country can do more efficiently than other countries.

A country produces goods more efficiently than all other countries in the same industry.
Which type of advantage does this country have?

- Some parts of the economy may not be able to compete with cheaper or better imports.
- Global demand may shift so there is no longer a demand for the goods or services produced by a country.
- Relying on another country for vital resources makes a country dependent on that country.

What are some downsides to specializaton?

- Quotas restrict competition for domestic commodities, which raises prices and reduces the selection.
- Quotas may also foster negative economic activities. Import quotas may promote administrative corruption, especially in countries where import quotas are given to selected importers.

Explain the impact of quotas

An important distinction between quotas and tariffs is that quotas do not increase costs to foreign producers whereas tariffs do. In the short run, a tariff will reduce the profits of foreign exporters of a good or service. A quota, however, raises the price, but not costs, of production and thus may increase profits.

What is the difference between tariffs and quotas?

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

What are the five main types of trade barriers?

A protective tariff is put into place to reduce the number of imports of a product that is produced domestically and to increase the cost of the imports to make the domestic product's price more appealing to consumers.

Which type of tariff is put in place to specifically ensure that domestic industries are given an advantage?

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

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

Free trade can increase the wages and availability of jobs in some sectors but have the opposite effect in other sectors.

What are the concerns on the use of labor in developing nations caused by free trade?

steady decrease in tariff rates as well as served as a protector for the trade of goods, services, and intellectual property
GATT eventually evolved into the WTO.

How does GATT function to promote trade?

- the first involves core principles regarding nondiscrimination
- the second involves allowable exceptions to these principles.

What two principles of behavior concerning international trade policies must GATT countries agree to?

country-specific and product-specific promises.

What are the two promises, or commitments, countries make under GATT?

Trade agreements, because they include a revenue stream, must be passed by both the U.S. Senate and the House of Representatives.

How is a trade agreement approved?

technology and transportation, the lure for higher profits, the fall of the Berlin Wall, and financial liberalization.

What four factors caused the rapid increase in FDI?

- Host governments can specify ownership restrictions if they want to keep control of local markets or industries in their citizens' hands.
- A company's home government usually imposes tax rates and a sanction to persuade companies to invest in the domestic market rather than a foreign one.
- Foreign investors may be required to purchase a certain percentage of intermediate goods from the host countries.
- Changes in governments or changes in policies may lead to governments choosing to expropriate foreign assets to nationalize critical industries such as oil, electric power, mines, and telecommunications.

Identify the strategies that governments use to restrict FDI.

- Host countries offer businesses a combination of tax incentives and loans to invest.
- Host governments improve or enhance local infrastructure—energy, transportation, and communications—to encourage specific industries to invest.
- Host-country governments streamline the process of establishing offices or production in their countries.
- Countries seek to improve their workforce through education and job training.
- Host-country governments seek to reassure businesses that the local operating conditions are stable, transparent (i.e., policies are clearly stated and in the public domain), and unlikely to change.
- Export processing zones or special economic zones are usually a distinct geographic area near a port that is ready to promote export industries.

Identify the strategies that governments use to promote FDI.

Political stability and security

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

One of the possible problems for a host government is that foreign investors could transfer the natural resources away from the host country.

What is a potential disadvantage of foreign direct investment from a host government's perspective?

unsaturated demand for new products, lower labor costs, less expensive natural resources, and other inputs to products

Identify benefits of being a multinational company.

incomes are rising, increased volume of sales and exchange, more significant growth rates in GDP, and more empowerment of individuals and political systems through the acquisition of additional resources and capital.

Identify impacts of multinational companies.

An MNC improves relations between countries, as they need to cooperate to trade.

What is a potential influence of the existence of multinational corporation (MNC) on international relations?

A multinational corporation (MNC) differs slightly from a transnational corporation (TNC) because while MNCs are traditionally national companies with foreign subsidiaries, a TNC does not identify itself with one national home.

How are MNCs and TNCs different?

Countries do not like to go to war with a country in which they are doing business. The existence of an MNC could influence the country to not go to war with the home country of the MNC.

How does the existence of a multinational corporation (MNC) affect a country's engagement in political conflict?

The relationships are mixed because MNCs can cause, but also solve, problems for the host country.

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

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

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

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

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

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

Which level of economic integration permits the formation of economically integrated exchanges of goods and services between parties from member countries?

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

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

- Currency swap contracts are coordinated transactions with a simultaneous buy and sell of a currency for two different dates.
- Currency option contracts are the option or the right—but not the obligation—to exchange a specific amount of currency on a specific future date and at a specific agreed-on rate.
- Currency futures contracts are contracts that require the exchange of a specific amount of currency at a specific future date and at a specific exchange rate.
- internal forward rate is a company-generated forecast of future spot exchange rates.
- Companies use additional strategies to make money in the exchange markets by taking either a long position or a short position on an asset. Essentially, taking a long position is purchasing an asset and forecasting that the value is going to increase. Taking a short position is looking for the value of an asset to go down.

Describe the four derivative currency instruments used to hedge against currency risk.

- The other side to trade creation is trade diversion.
- Countries may move production to cheaper labor markets in member countries.
- With each new round of discussions and agreements within a regional bloc, nations may find that they have to give up more of their political and economic rights.
- An economic bloc may impose greater external trade blocs to keep all trading internal to the bloc.
- Countries may see a dilution of their national cultural identity.
- Regional integration may encourage mergers and acquisitions within the block to create large rivals.

List the costs of regional economic integration.

It helps U.S. businesses invest overseas, particularly in developing countries. It provides debt financing, political risk insurance, and support for private equity funds

What is the purpose of OPIC?

The pact removed a web of Mexican licensing requirements, quotas, and tariffs that limited transactions in U.S. goods and services

How did NAFTA make trade easier among the US, Canada, and Mexico?

When the treaty went into effect, tariffs on about half the items traded across the Rio Grande disappeared. Since NAFTA came into effect, U.S.-Mexican trade has increased from $80 billion to $515 billion annually. As international trade increases, it contributes to shift jobs away from industries where that economy does not have a comparative advantage and toward industries where it does have a comparative advantage.

What was the result of NAFTA?

Guatemala
Ecuador
Indonesia
Pakistan
China

Which countries have cultures where people have stronger bonds to their groups and group membership forms a person's self-identity, according to Hofstede?

Six proposed corridors will connect 152 countries and international organizations in Asia, Europe, the Middle East, and the Americas. President Xi said that China's Belt and Road Initiative will serve as a platform for international cooperation but will require that all "involved parties embrace the principle of extensive consultation, joint contribution, and shared benefits."

What was the purpose of China's Belt and Road Initiative?

Note for users

Attached is my OA score so you can tell in what areas my quizlet might be lacking

Lots of detailed questions about different policies/blocs/theories

Because people asked: time to completion from starting class to OA was 4 days. I only watched a couple of the embedded videos if they looked interesting or helpful. I didn't read any of the external linked documents. I filled out the study guide as I went along and did all the embedded/unit quizzes. Then spent a few hours before OA doing Learn & Practice Quizzes on Quizlet, then took the PreA a second time. Some of the questions were taken straight from the PreA. A lot were weirdly worded scenario questions like why would a company put expat managers in leadership roles in their foreign office. I wish I would've spent more time reading a bit more thoroughly, but I skimmed this one more than I should've. Good Luck.

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