International Business Review Flashcards

This set of vocabulary flashcards covers essential concepts for International Business, including globalization, cultural frameworks, political and economic systems, trade theories, and global strategic management.

Globalization of markets

The process where national markets integrate into a larger marketplace, potentially leading to cultural homogenization and increased economies of scale.

Globalization of production

A trend where companies conduct production activities in locations deemed most appropriate for specific tasks to optimize costs and quality, making it difficult to distinguish an item's country of origin.

Drivers of Globalization

Key factors propelling global integration, including the reduction of trade barriers, advancements in transportation technology, and developments in information and communication technology.

Culture in International Business

A system including language, religion, values, attitudes, customs, and ethical standards that influences leadership styles, organizational structures, recruitment, and contract negotiations.

Hofstede's Cultural Dimensions

A framework for cross-cultural communication consisting of four primary dimensions: Power Distance, Uncertainty Avoidance, Individualism versus Collectivism, and Masculinity versus Femininity.

Collectivism

A political system that emphasizes the primacy of collective goals over individual goals, often characterized by a socialist or authoritarian tendency.

Individualism

A political philosophy stressing the importance of individual freedom and self-expression, usually associated with democratic systems and free market economics.

Democracy

A political system in which government is by the people, exercised either directly or through elected representatives.

Representative Democracy

A system where citizens periodically elect individuals to represent them in government decision-making.

Totalitarianism

A form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties.

Market Economy

An economic system where the interaction of supply and demand determines the quantity and price of goods and services produced.

Socialism

A political and economic theory of social organization rooted in the work of Karl Marx, emphasizing state or collective ownership of the means of production.

Gross National Income ($GNI$)

An assessment of a nation's economic activity measured by the total annual income of its residents.

Purchasing Power Parity ($PPP$)

An adjustment in gross domestic product per capita to reflect differences in the cost of living between countries.

Human Development Index ($HDI$)

A United Nations metric used to evaluate quality of life based on life expectancy, knowledge (literacy and education rates), and standard of living (per capita $GNI$ at $PPP$).

Mercantilism

An economic theory promoting the idea that a nation's wealth is increased through a trade surplus, viewing international trade as a zero-sum game.

Zero-sum game

A situation in which an economic gain by one country results in an equivalent loss by another.

Absolute Advantage

A theory proposed by Adam Smith stating that a country should produce only those goods it can produce most efficiently and trade for others.

Comparative Advantage

A theory by David Ricardo suggesting countries should specialize in goods they can produce relatively more efficiently, even if they lack an absolute advantage.

Product Life Cycle Theory

Raymond Vernon's theory stating that new products are initially developed in advanced industrial nations and production eventually shifts to developing countries as the product matures.

Location-Specific Advantages

John Dunning's theory explaining FDI based on utilizing resources or assets tied to a specific foreign location.

Foreign Direct Investment ($FDI$)

An international investment in which a company establishes production facilities, acquires existing businesses, or undertakes projects like B.O.T in a foreign country.

Horizontal FDI

An investment where a company establishes or controls foreign operations that produce products similar to those it produces at home.

Vertical FDI

An investment where a company controls foreign operations that are either inputs for its domestic processes (backward) or distribution outlets (forward).

Pragmatic Nationalism

A political philosophy toward $FDI$ that suggests it should only be encouraged if the benefits to the host country outweigh the costs.

Transfer Pricing

The practice where multinational corporations set internal prices for goods or services traded between subsidiaries to minimize corporate income tax liabilities.

Free Trade Area

A form of regional economic integration where all barriers to the trade of goods and services among member countries are removed, such as the initial stage of the ASEAN Economic Community ($AEC$).

Customs Union

A level of economic integration that eliminates trade barriers between member countries and adopts a common external trade policy.

Common Market

A stage of integration that has no barriers to trade between members, a common external trade policy, and allows the free movement of the factors of production (labor and capital).

Economic Union

The highest level of regional integration, involving a common currency, harmonization of tax rates, and a common monetary and fiscal policy.

Strategy

The actions managers take to attain the goals of the firm, typically focused on maximizing firm value and long-term objectives.

Differentiation Strategy

A business strategy focused on increasing the attractiveness of a product to create higher perceived value for the customer.

Low-Cost Strategy

A strategy centered on reducing production costs to compete for market share through pricing.

Value Chain

The categorization of a firm's activities into primary functions (R&D, Production, Marketing, Service) and support functions (Information Systems, HR, Infrastructure, Logistics).

Experience Curve

The systematic reduction in production costs that occurs over the life of a product as cumulative output increases.

Learning Effects

Cost savings that come from learning by doing, which increases labor productivity and efficiency over time.

Global Standardization Strategy

A strategy focusing on increasing profitability by reaping the cost reductions that come from economies of scale and location economies.

Localization Strategy

A strategy focused on increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets.

Transnational Strategy

An ambitious strategy that attempts to simultaneously achieve low costs through economies of scale and local responsiveness.

Exporting

A common initial entry mode into international markets involving the sale of products produced in one country to residents of another.

Turnkey Project

A project in which a firm agrees to set up an operating plant for a foreign client and hand over the "key" when the plant is fully operational.

Licensing

An agreement whereby a licensor grants the rights to intangible property to another entity for a specified period in exchange for a royalty fee.

Franchising

A specialized form of licensing where the franchisor not only sells intangible property but also insists that the franchisee agree to abide by strict rules as to how it does business.

Joint Venture

A form of entry into a foreign market where a new enterprise is jointly owned by two or more otherwise independent firms.

Wholly Owned Subsidiary

A foreign enterprise 100% owned by the parent company, established either through a greenfield investment or an acquisition.

Pioneering Costs

The costs an early entrant must bear that a later entrant can avoid, such as the costs of failure or business promotion to educate consumers.