International Business Final Exam

What is the price of one currency in terms of another called?

Foreign exchange rate.

What does it mean when a currency appreciates?

An increase in the value of the currency.

What does depreciation of a currency refer to?

A loss in the value of the currency.

What does the Balance of Payment (BOP) refer to?

A country’s international transaction statement includes merchandise trade, service trade, and capital movement.

What is a floating exchange rate policy?

A government policy that lets supply and demand conditions determine the exchange rate.

What is a clean (free) float?

A pure market solution to determine exchange rates.

What is a dirty (managed) float?

Using selective government intervention to determine exchange rates.

What is a peg in the context of currency stabilization?

A stabilization policy of linking a developing country’s currency to a key currency.

What is a bandwagon effect in currency markets?A9: The effect of investors moving in the same direction at the same time, like a herd.

The effect of investors moving in the same direction at the same time, like a herd.

What is capital flight?

A phenomenon where many individuals and companies exchange domestic currency for foreign currency.

What is regional economic integration?

Efforts to reduce trade and investment barriers within one region.

What is global economic integration?

Efforts to reduce trade and investment barriers around the globe.

What is the World Trade Organization (WTO)?

The official title of the multilateral trading system and the organization underpinning this system since 1995.

What is a Free Trade Area (FTA)?

A group of countries that remove trade barriers among themselves.

What does the European Union (EU) represent?

The official title of European economic integration since 1993.

What is the difference between a customs union and a free trade area?

A customs union imposes common external policies on nonparticipating countries, whereas a free trade area only removes trade barriers among its members.

What is a monetary union?

A group of countries that use a common currency.

What is Brexit?

The British exit from the European Union.

What does the Eurozone refer to?

The 19 EU countries that currently use the euro as the official currency.

What is the African Continental Free Trade Area (AfCFTA)?

A free trade area formed by 54 of the 55 African countries to promote Africa-wide economic integration.

What is a first-mover advantage?

Benefits that accrue to firms that enter the market first.

What is a late-mover advantage?

Benefits that accrue to firms that enter the market later.

What is a turnkey project?

A project in which clients pay contractors to design and construct new facilities and train personnel.

What is a joint venture (JV)?

A new corporate entity created and jointly owned by two or more parent companies.

What is the difference between equity and non-equity entry modes?

Equity modes involve larger commitments (e.g., joint ventures, wholly owned subsidiaries), while non-equity modes involve smaller commitments (e.g., exports, licensing agreements).

What is a greenfield operation?

Building factories and offices from scratch in a foreign market.

What is the country-of-origin effect?

The positive or negative perception of firms and products from a certain country.

What is a wholly owned subsidiary (WOS)?

A subsidiary located in a foreign country that is entirely owned by the parent multinational.

What is the purpose of a research and development (R&D) contract?

To outsource R&D between firms.

What is a build-operate-transfer (BOT) agreement?

A non-equity entry mode used to build a longer-term presence by first constructing and then operating a facility for some time before transferring operations to a domestic agency or firm.

What is competitive dynamics?

Actions and responses undertaken by competing firms.

What is collusion in the context of competition?

Collective attempts by competing firms to reduce competition.

What is a cartel?

An output-fixing and price-fixing entity involving multiple competitors.

What is game theory?

A theory that studies the interactions between two parties that compete and/or cooperate.

What is the prisoner’s dilemma?

A type of game in which the outcome depends on the two parties deciding whether to cooperate or to defect.

What is tacit collusion?

Firms indirectly coordinate actions by signaling their intention to reduce output and maintain pricing above competitive levels.

What is a price leader?

A firm that has a dominant market share and sets “acceptable” prices and margins in the industry.

What is mutual forbearance?

Multimarket firms respect their rivals’ spheres of influence in certain markets, leading to tacit collusion.

What is predatory pricing?

An attempt to monopolize a market by setting prices below cost to eliminate rivals.

What is dumping?

An exporter selling goods below cost with the intent to raise prices after eliminating local rivals.

What does the integration-responsiveness framework help an MNE manage?

It helps an MNE manage the pressures for both global integration and local responsiveness.

What is a home replication strategy?

A strategy that emphasizes the duplication of home country-based competencies in foreign countries.

What is a transnational strategy?

A strategy that is cost-efficient, locally responsive, and learning-driven globally.

What is a global product division structure?

An organizational structure that assigns global responsibilities to each product division.

What is the role of a country (regional) manager?

The manager of a geographic area, either a country or a region.

What is knowledge management?

The structures, processes, and systems that actively develop, leverage, and transfer knowledge.

What is open innovation?

The use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation.

What is absorptive capacity?

The ability to recognize the value of new information, assimilate it, and apply it.

What is the role of a global virtual team?

A team whose members are physically dispersed in multiple locations and often operate on a virtual basis.

What is a subsidiary initiative?

The proactive and deliberate pursuit of new opportunities by a subsidiary.

What is marketing?

Marketing refers to efforts to create, develop, and defend markets that satisfy the needs and wants of individual and business customers.

What is a supply chain?

A supply chain is the flow of products, services, finances, and information that passes through a set of entities from a source to the customer.

What is supply chain management?

Supply chain management involves activities to plan, organize, lead, and control the supply chain.

What are the components of the marketing mix?

The marketing mix consists of four underlying components: product, price, promotion, and place.

What is a product in marketing?

A product is an offering for customers to purchase.

What is market segmentation?

Market segmentation is identifying segments of consumers who differ from others in purchasing behavior.

What is the definition of price in marketing?

Price refers to the expenditures that customers are willing to pay for a product.

What is price elasticity?

Price elasticity refers to how demand changes when the price changes.

What is value-based pricing?

Value-based pricing is setting the price at a level that seems to the customer to have great value compared to the prices of other options.

What is total cost of ownership?

The total cost of ownership is the total cost needed to own a product, including both the initial purchase cost and follow-up maintenance/service costs.

What is promotion in marketing?

Promotion involves communications that marketers insert into the marketplace to encourage purchasing behaviors.

What is "place" in the context of marketing?

Place refers to the location where products and services are provided to consumers.

What is a distribution channel?

A distribution channel is a set of firms that facilitates the movement of goods from producers to consumers.

What does omnichannel mean?

Omnichannel refers to the integration of different channels available to consumers, such as physical stores and online platforms.

What is agility in the context of a supply chain?

Agility is the ability to react quickly to unexpected shifts in supply and demand.

What does adaptability mean in a supply chain?

Adaptability refers to the ability to change supply chain configurations in response to longer-term changes in the environment and technology.

What is alignment in a supply chain?

Alignment refers to balancing the interests of various players in the supply chain.

What are third-party logistics (3PL) providers?

Third-party logistics (3PL) providers are neutral, third-party intermediaries in the supply chain that provide logistics and other support services.

What is market orientation?

Market orientation is a philosophy or way of thinking that places the highest priority on creating superior customer value in the marketplace.

What is relationship orientation?

Relationship orientation focuses on establishing, maintaining, and enhancing relationships with customers.

How do market orientation and relationship orientation differ in their effectiveness in global markets?

Marketers debate whether a market orientation or a relationship orientation is more effective, as firms benefit differently from each orientation depending on global market dynamics.