Global Business Perspectives Exam 2

Regional Economic Integration

Process by which countries in a geographic region cooperate to reduce or eliminate barriers to the international flow of products, people, or capital

Trading bloc

Agreement between governments where barriers to international trade are eliminated or reduced

Free trade zone/area

Economic integration by which countries remove all barriers to trade among themselves but where each country determines its own barriers against nonmembers

Trade creation

Increase in the level of trade between nations that results from regional economic integration

NAFTA

North American Free Trade Agreement > allows open trade with US, Mexico, and Canada

USMCA

United States-Mexico-Canada Agreement

Maastrict Treaty

Three aims:

• Banking in a single common currency

• Set up monetary and fiscal targets for countries in the union

• Political union of the member nations

Economic union

Economic integration by which countries remove barriers to trade and the movement of labor and capital among members, set a common trade policy against nonmembers, and coordinate their economic policies

Capital Market

System that allocates financial resources in the form of debt and equity according to their most efficient uses

Bonds

A fixed-income security representing a loan made by an investor to a borrower for a specific period, with a promise to repay the principal amount and pay interest at a predetermined rate

Equities

The value of the shares issued by a company

Exchange rate

Rate at which one currency is exchanged for another

Spot rate

Exchange rate requiring delivery of the traded currency within two business days

Purchase Power Parity

A theory that suggests exchange rates between two currencies should adjust to equalize the price of a basket of goods and services in both countries

Devaluation

Intentionally lowering the value of a nation’s currency

Efficient vs. Inefficient market view

Efficient: view that prices of financial instruments reflect all publicly available information at any given time

Inefficient: view that prices of financial instruments do not reflect all publicly available information

Managed Float

Exchange-rate system in which currencies float against one another, with government intervening to stabilize their currencies at particular target exchange rates

Law of one price

Principle that an identical item must have an identical price in all countries when the price expressed in a common currency

Gold standard

International monetary system in which nations link the value of their paper currencies to specific values of gold

Par value

Value of a currency expressed in terms of gold

Bretton woods agreement

Arrangement among nations to create a new international monetary system based on the value of the US dollar

Mission statement

Written statement of why a company exists and what it plans to accomplish

Vision statement

A long-term, aspirational description of what an organization aims to become and achieve in the future, typically 5-10 years down the road

Values statement

A brief declaration that communicates an organization’s or individual’s core beliefs and guiding principles, informing stakeholders about what is most important to the business or person

Value chain

Dividing a company’s activities into primary and support activities and identifying those that create value

Multinational strategy

Adapting products and their marketing strategies in each national market to suit local preferences

Global strategy

Offering the same products using the same marketing strategy in all national markets

Retrenchment

Strategy designed to reduce the scale or scope of a corporation’s businesses

Low-cost leadership

Strategy in which a company exploits economies of scale to have the lowest cost structure of any competitor

Foreign direct investment

Purchase of physical assets or a significant amount of the ownership of a company in another country to gain a measure of management

Government regulation

Refers to rules and standards established by government agencies to control or guide the actions of individuals, businesses, or organizations, often to promote public safety, protect the environment or ensure fair practices

Cultural difference

Variations in beliefs, values, customs, behaviors, and practices that distinguish one group from another, encompassing aspects like language, religion, traditions, and social norms

Primary data

Process of collecting and analyzing original data and applying results to current research needs

Secondary data

Process of obtaining information that already exists within the company of that can be obtained from outside sources

Trade show

Exhibition at which members of an industry or group of industries showcase their latest products, study activities of rivals, and examine recent trends and opportunities

Exporting

Goods and services sold abroad and sent out of country

Importing

Goods and services purchase abroad and brought into a country

Licensing

One company owning intangible property grants another business the right to use that property for a limited period of time

Joint venture

Separate company that is created and jointly owned by two or more independent entities to achieve a common business objective

Buy-back

Export of industrial equipment in return for products produced by that equipment

Distributors

The way in which a direct exporter can sell in a target market

Documentary collection

Export/import financing in which a bank acts as an intermediary without accepting financial risk

Advance payment

Export/import financing in which an importer pays an exporter for merchandise before it is shipped

Adaptation

The process of adjusting or modifying a product, service, marketing strategy, or business model to better suit the needs and preferences of a specific market or target audience

Standardization

Establishing and implementing consistent methods, procedures, and processes across an organization to achieve consistency, efficiency, and quality

Counterfeit goods

Imitation products passes off as legitimate trademarks, patents, or copyrighted works

Promotion

Activities designed to reach distribution channels and target customers through communications, such as personal selling, advertising, public relations, and direct marketing

Product invention

The initial creation of a new product or process, marking its first occurrence, and is the foundation for potential innovation

Pull strategy

Promotional strategy designed to create buyer demand that will encourage distribution channel members

Push strategy

Promotional strategy designed to pressure distribution channel members to carry a product and to promote

Channel length

Refers to the number of intermediaries between the producer and the buyer

Value-density ratio

The ratio of a product’s value to its weight or volume

Worldwide pricing

A product has the same in all international markets

Dual pricing

A product has a different price in exports markets than it has in the home market

Capacity planning

Assessing a company’s ability to produce enough output to satisfy market demand

Centralized production

Refers to the concentration of production facilities in one location

Vertical integration

When a company extends its controls over a stage of production that provides an input or received an output

What is the international capital market, and what are the benefits they provide to companies?

Briefly describe how exchange rates influence business strategies.

Differentiate between a multinational and global strategy. What are the main benefits and drawbacks of each?

How can an advance payment help exporters reduce financial risk?

Differentiate between worldwide and dual pricing. Which one is more difficult to achieve and why?

Discuss the standardization versus adaptation decision for managers when considering production.