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international monetary fund (IMF)

maintain order in the global monetary system

Future Positions

require a margin deposit to be posted and maintained daily

Speculation

Traders take risks as they buy/sell currencies based on predicted rise/fall in the price of the given currency

FX swap

Simultaneous purchase and the sale of a currency for different delivery dates

Currency Board

Monetary authority for a country/operates like a central bank

Forward Exchange

Rate at which currency can be purchased in the future

Direct Quotation

American: value of foreign currency in domestic currency

Indirect Quotation

European: value of domestic currency in foreign currency

Variable interest rate loan

Where the borrower and lender share the interest rate risks

Forward Discount

The difference between a spot rate and a forward rate

Convertible currencies

Currencies that can easily be exchanged for other currencies

Revaluation

upward change in the currency's value

Law of one price

similar goods in different countries should remain at the same price after conversion of currencies

Floating exchange rate

Freely determined by the interaction of supply and demand

Spot rates

exchange rate of one currency in units to another currency immediately

Arbitrage

Buying a commodity when its price is low and then reselling it after prices rise in order to make a profit.

Fixed exchange rates

Government/central bank ties the official exchange rate to another country's currency or price of gold

foreign exchange market

currency of one country is exchanged for currency in another country

OTC market

Decentralized market of securities not listed on an exchange market

Hedging

Measures taken to protect from loss that may occur due to exchange rate of currency fluctuation

Preferential trade areas

country reduce/remove tariff/non-tariff barriers to trade between other members; decide own barriers for non-members

ACP

Africa, Pacific, Caribbean Pact; Lome Convention

Mercosur

A preferential Trade Area that includes Africa, the Pacific, and the Caribbean

Trading bloc

Most advanced form of regional economic integration

NAFTA

Was signed by the presidents of Mexico, U.S., and Canada in 1992

Free trade area

U.S.- chile agreement of 2003

ASEAN

A regional agreement that includes countries of Brunei Darussalam, Cambodia, Laos, Philippines, and Thailand

Four Tigers

South Korea, Hong Kong, Singapore, and Taiwan

CACM

Unified external tariffs, removed duties on products, increased trade between Central American countries

The schengen agreement

Abolished passport and border controls within the European Union

Regional economic integration

Committed to officiate and develop trade activities for signatory nations

Economic Union

European Union

ECJ

Decides on claims brought by the European Commission regarding noncompliance with EU laws

Custom Union

Mercosur

Common market

Includes all elements of a customs union and freedom of movement of the 4 factors of production

Customs delay

Established in 1991 to promote free trade and the fluid movement of goods, people, and currency

European central bank

Is responsible for monetary policy of Euro

Council of Europe

Passes EU law on the recommendations of the European Commission and the European Parliament

Political Union

Bureaucratic formalities; slow down imported product from entering the domestic market

OPEC

Helps member countries coordinate oil production to help stabilize the oil maker

National regulations

When a firm incurs unanticipated costs from underestimating foreign regulations

Proactive

Quest for profit, competitive advantage, market opportunities, economies of scale, tax benefits

Expanding into the global marketplace

Gaining access to resources, cutting cost, capitalizing on special feature location, expanding markets

Market Orientation

Contributor to the positional advantage of the company and long-term, overall firm performace

Competitor knowledge competence

Knack to acquire, interpret, and integrate information regarding the global competitive environment

license

Allows one party to use a property right in exchange for payment to the other party

Political constraints

Antitrust laws, tax programs, minimum wage, legislation, pollution, and pricing policies

Global managers

Tend to possess experiential/knowledge to many cultures

Successful international expansion

Commitment from management across the organization

Reactive

Competitive pressure, excess capacity, overproduction, declining home market

Strategic alliance

Voluntary arrangement between companies

Low-intensity entry

There is no investment into the new market

Market Dynamism

The rate of change of the consumer preferences, market segments, and demand patterns

Intermediaries

Act as facilitator for a potential supplier and consumer

Small Business Administration (SBA)

Provide corporate services including financing, trade, counseling, commodity brokerage for small business

Turnkey projects

Common when developing with infrastructure projects or other complex subtracting

Wholly owned subsidiaries

Corporate entity needs complete control over every detail in the host country

Public sector facilitator

United States Department of Commerce

Joint Venture

New firm created, owned by the alliance partners

High intensity entry

Financial, marketing, distribution, and possibly executive investment

ISO 9000

Set of guidelines for quality management and standards

Decentralized organizational structure

Decisions controlled by home officer or in foreign location

Configuration

Various versions of products manufactured and distributed by a company

Supply chain management

Constraint management, concurrent planning, global insight, advance warning, built-in business optimization

Operations level decision

Demand forecasting, inventory management, production, procurement, transportation, warehousing

Network level decision

Degree of centralized/decentralized, hierarchy, and number of echelons

Just-in-time productions or systems

Business should hold slight or zero inventory outside what is necessary for immediate production/distribution

Product layout

Groups machines according to their roles in the production process

The value chain

The acquisition of raw material, finished goods manufacturing, and distribution channels

Productivity

Ratio of output as it relates to input

Total quality management (TQM)

Tool used in managing of the total production process to generate an exceptional product or service

Global outsourcing/KANBAN clusters

Means to enhance the effectiveness of the value chain

Principles pf total equity

Customer Focus, Participation, and Teamwork, Continuous Improvements and learning

Locus of decisions

Allows decision making authority to occur where the decisions are to be made

Cross functional teams

Include experts in each technical area within an organization are at a horizontal in nature

Operational bottleneck

The slowest process in a multistep production process that limits total output

Capacity

Total amount of products that can be produced by the entire operation in a given amount of time

Theory of constraints

Greater gain comes from identifying which part of the process is a constraint to the whole

3PLs

Manage noncritical process within an organization and can contribute to nearly all aspects of an organization

MRP

Compromises the inventory planning and ordering category of inventory control

Mixed Economy

System that allows for the simultaneous operation of public/private owned enterprises

Subsidies

Government provide business funding to operate successfully

Collectivism

Emphasis on sharing, cooperation, and group harmony

Local Content Requirement

Governments block open trade within a country's borders.

Human Development Index

Assessment of nations based upon certain achievements

Trade Deficit

Country imports more than its exports.

Developed Nation

Greatest wealth and resources; HDI of 0.8 or higher.

Gross National Product (GNP)

Total market value of goods/services produced by a nation in a year.

Export-Import Bank

Official export credit agency of the United States.

Individualism

Emphasis on self-sufficiency, control; self-orientation.

Developing Nation

Lowest Economic Status; HDI less than 0.5

Suppliers Credit

Loan: Exporter is covered; value of cover

Centrally Planned Economy

Comprehensive control/regulation by a government in accordance with the plan of economic development.

Gross Domestic Product (GDP)

Total market value of goods/services produced within a nation in a ear

Foreign-Trade Zones (FTZ) Programs

Alleviate some of the cost associated with free trade

Newly Industrialized Nation

Transitioning from developing to developed nation

Buyer's Credit

Closely associated with long-term notes

Purchasing Power Parity

Goods in one country should \= the price in the domestic

Protectionism

A nation reducing number of imports it receives.

Market Economy

Production/Distribution of goods/services that take place through mechanics of free market.