IB 300

International business

Business that is carried out across national borders.

Multinational Enterprise (MNE)

An enterprise made up of entities in more than one nation, operating under a decision-making system that allows a common strategy and coherent policies.

Environment

All the forces influencing the life and development of the firm.

Domestic Environment

All the uncontrollable forces originating in the home country that surround and influence the life and development of the firm.

Foreign Environment

All the uncontrollable forces originating outside the home country that surround and influence the firm.

Self-Reference Criterion (SRC)

Unconscious reference to one's own cultural values, experiences, and knowledge as a basis for decisions.

Foreign Direct Investment (FDI)

Direct investment in business operations in a foreign country.

Technological Drivers

Advances in computers and communications technology permit an increased flow of ideas and information across borders.

Market Drivers

Frequently, a firm will go abroad to protect its home market.

Cost Drivers

Going abroad can frequently lower the cost of goods sold.

Political Drivers

Preferential trading agreements that group several nations into a single market have presented firms with significant marketing profits.

Competitive Drivers

New firms have entered world markets; companies are defending their home markets.

Economical Globalization

The tendency toward international integration and interdependency of goods, technology, information, labor, and capital, or the process of making this integration happen.

Volume of International Trade

More than 60% of global output is now destined for international trade.

Direction of trade

A major portion of the exports from developing nations go to developed countries.

The Increasing Regionalization of Trade

This regionalization of trade is being reinforced by the development of expanded regional trade associations and agreements.

Major Trading Partners of the United States

Canada, Mexico.

Mercantilism

An economic philosophy under which nations sought to increase their wealth and power by obtaining large amounts of gold and silver and by selling more goods than they bought.

Absolute advantage

A nation's ability to produce more of a good or service than another country for the same or lower cost of inputs.

Theory of Comparative Advantage

Ricardo's theory that specialization and free trade will benefit all trading parties, even those that may be 'absolutely' more efficient producers.

Exchange rate

The price of one currency in terms of another.

Resource endowment

The land, labor, capital, and related production factors a nation possesses.

Overlapping demand

The existence of similar preferences and demand for products and services among nations with similar levels of per capita income.

Product Differentiation

A strategy that firms use to achieve market power, accomplished by producing products that have distinct positive identities in consumers' minds.

International Trade Theory

Shows that nations will attain a higher level of living by specializing in goods for which they possess a comparative advantage and importing those for which they have a comparative disadvantage.

Portfolio Investment

Investment in a foreign country via the purchase of stocks (equities), bonds, or other financial instruments. Portfolio investors do not exercise managerial control of the foreign operation.

Direct investment

The purchase of sufficient stock in a firm to obtain significant management control.

Monopolistic Advantage Theory

Theory that foreign direct investment is made by firms in industries with relatively few competitors, due to their possession of technical and other advantages over indigenous firms.

Oligopolistic Industry

An industry with a limited number of competing firms.

Internalization Theory

Theory that to obtain a higher return on its investment, a firm will transfer its superior knowledge to a foreign subsidiary that it controls, rather than sell it in the open market.

Dynamic Capabilities Theory

Theory that for a firm to successfully invest overseas, it must have not only ownership of unique knowledge or resources, but also the ability to dynamically create, sustain, and exploit these capabilities over time.

Eclectic Theory of International Production

Theory proposing that for a firm to invest in facilities overseas, it must have three kinds of advantages: ownership specific, location specific, and internalization.

Cultural Framework

International managers can quickly build a general sense of what to expect by using analytical frameworks developed by researchers.

Hofstede's Cultural Dimensions

Individualism-Collectivism, Power Distance, Uncertainty Avoidance, Masculinity-Femininity, and Long-Term--Short-Term Orientation.

Universalist

Condition in which concepts apply to all.

Communitarianism

Belief that the group is the beneficiary of actions.

Neutral vs Affective

Neutral: When members of a culture tend to keep their emotions in check. Affective: When members of a culture tend to share their emotions, even in the workplace.

Global mindset

Involves an openness to diversity along with an ability to synthesize across diversity.

Cultural Paradox

Contradictions in a culture's values.

Rules of Thumb for Managers Doing Business Across Cultures

1. Be prepared. 2. Slow down. 3. Establish trust. 4. Understand the importance of language. 5. Respect the culture. 6. Understand the components of culture.

Environmental Sustainability

State in which the demands placed upon the environment by people and commerce can be met without reducing the capacity of the environment to provide for future generations.

Life Cycle Assessment

An evaluation of the environmental effects of a product or service throughout its life cycle.

United Nations Global Compact

A voluntary reporting scheme for businesses that covers critical areas affecting the conduct of international business—human rights, labor, the environment, and anticorruption efforts.

Carbon Footprint

Measure of the impact human activities have on the environment in terms of the amount of greenhouse gases produced, measured in units of carbon dioxide.

Natural Capital

The resources of the planet, such as air, water, and minerals.

Renewable Energy

Wind, solar, and geothermal sources of energy.

Waste Management

Strategies implemented in businesses to reduce waste output.

Biodiversity

The variety of life in the world, and the ecosystems that support it.