Global Insights Chapter 1, 1.1, 2, and 3

Globalization

The process by which national economies are increasingly woven together worldwide.

World Trade Organization (WTO)

A negotiating forum (for agreements related to regulation of the flow of trade and commerce among its members. 166 members as of 2026.

Tariff

A government-imposed tax on imports.

Over-regulation, increased international competition, and currency fluctuations.

What are the top three things that keep international CEOs up all night?

Foreign Direct Investment (FDI)

Capital and managerial knowledge that flows into a country from outside its borders.

BRIC Countries

Brazil, Russia, India, and China—emerging economic powers.

The Triad

Traditional economic powerhouses—the United States, the European Union (EU), and Japan.

GDP

The total value of economic activity in a country. Fastest rates observed in developing countries. GDP in developing countries will capture greatest GDP in future. Small companies fuel growth in international business.

USMCA (replaced NAFTA)

Trade agreement linking Canada, Mexico, and the US.

Free Trade Area of the Americas (FTAA)

Proposed free-trade zone covering 800 million people in 34 countries in the Western hemisphere.

Central American—Dominican Republic—United States Free Trade Agreement (CAFTA-DR)

Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the U.S. Removed tariffs and other barriers to make trade easier and cheaper.

Maastricht Treaty

Provided the basis for formation of the EU—a single, integrated economic market using one currency (euro) and guided by a central bank.

EU Challenges

Power differences and other disputes (movement of labor, corporate tax rates, farm reform) in its complex governance structure. Economic growth and development disparities among members exacerbated by global economic slowdown.

Multinational Enterprise (MNEs)

Enterprises that engage in FDI and own or control value-adding activities in more than one country.

Characteristics of MNEs

Have multiple facilities around the globe. A firm must own a majority stake in plants in the three key regions of North America, Europe, and the Pacific Rim. Derive a substantial portion of revenues from foreign operations. Run subsidiaries that possess a common strategic vision and draw from a common pool of resources. Place foreign nationals or expatriates at the board level and/or in senior management posts.

Important facts about MNEs

There are many different types of international companies and multiple definitions of a multinational firm. While the MNE is not a new phenomenon, recent decades have seen a significant growth in the number and reach of such firms.

Walmart and Amazon by revenue. Microsoft and Apple by Market Capitalization.

Which 2 companies are the largest by revenue and market capitalization.

Civil (Code) Law

Uses pre-existing codes and is the most frequently used legal system in the world.

Common Law

Relies on the balance of previous cases or precedent to resolve legal disputes.

Islamic Law

Relies upon religious stipulations in the Quran—also known as Sharia (God’s rules).

Communist/Socialist Law

Based on ideology. Based on bureaucracy and minimal private rights.

Countries that use common law have more lawyers and the US has the most tort costs as a percent of GDP.

Number of lawyers and tort costs in various countries.

Denmark and many other European countries are seen to be fair, while African, some Asian, and South American countries are not.

Ratings of Fair Administration of Justice in Various Countries.

Civil Rights Act of 1964 (and the 1990/91 amendment)

Forbids U.S. firms from discriminating against employees at home and in foreign countries. Foreign multinationals are also subject to the Civil Rights Act while operating in the United States.

General Agreement on Tariffs and Trade Organization (GATT)

Purpose was to extend fair and similar trading and tariff policies to all other GATT members. Membership conferred ‘most-favored-nation’ status.

World Trade Organization (WTO)

The successor to GATT. Requires members to harmonize tariffs and business laws with WTO guidelines. Conducts negotiations to set major agreements among members.

Political Risk

The extent to which actions of a country or its people may affect the viability of a firm.

Types of Political Risk

Changes in the political/economic environment. Changes in prevailing domestic economic conditions. Changes in external economic relations.

Nationalization

Occurs when a government forces the transfer of ownership from private to state control.

Expropriation

Occurs when a government compensates a company after nationalizing its assets.

Sovereign Immunity

The principle that no nation has the right to challenge the internal actions of another state, if that state has proceeded justly.

Confiscation

When nationalization of foreign firms occurs with little or no compensation offered.

Tariffs

Feeds paid by an exporter to the country of import that increases the price of a foreign product or services relative to the domestic counterpart.

Export Controls

Restrictions imposed by governments on what can be exported from a country.

Sanctions

Sets of specific restraints imposed by governments on international trade.

Embargo

Government-imposed unilateral prohibition of trade with another country.

Diversion

Using an export license to provide materials to a third party not included on the license.

Boycott

Collaborative effort among countries to prohibit international trade with another nation.

Patents

A government authority or license conferring a right or title for a set period, especially the sole right to exclude others from making, using, or selling an invention.

Trademarks

a symbol, word, or words legally registered or established by use as representing a company or product.

Piracy

the unauthorized use or reproduction of another's work.

Counterfeiting

imitate fraudulently.

Copyrights

the exclusive legal right, given to an originator or an assignee to print, publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same.

Ethical Values

Individuals’ moral judgments about what is right or wrong.

Universalism

An ethical perspective that widespread and objective sets of ethical guidelines exist across countries.

Cultural relativism

An ethical perspective that ethical behavior in a country is determined by its own unique culture, laws, and business practices.

Corporate Social Responsibility (CSR)

The deliberate inclusion of public interest into corporate decision-making. The attention paid by firms to the triple bottom line: people, planet, and profit. Becoming more mainstream.

Ethical Gray Area

situations where the distinction between right and wrong behavior is unclear, ambiguous, or not covered by existing rules.