International Business and Global Economics Vocabulary

Vocabulary flashcards covering key international business, trade, macroeconomic, structural, marketing, and financial terms based on lecture notes.

Globalization

Trend away from distinct national economic units into one huge global market.

Globalization of markets

Moving away from an economic system in which national markets are distinct entities, isolated by trade barriers, distance, time and culture, and toward a system where national markets are merging into one global market.

Globalization of production

Trend by individual firms to disperse parts of their production-processes around the globe to take advantages of differences in cost and quality of factors of production.

Factors of production

Inputs in the production-process of a firm. This can be labor, management, land, capital and technological know-how.

Moore's law

The power of microprocessor technology doubles and its cost of production falls in half every 18 months.

Stock of FDI

The total accumulated value of foreign-owned assets in a country.

Political economy

The political, economic and legal systems of a country.

Collectivism

A political system that emphasizes collective goals as opposed to individual goals.

Individualism

The emphasis on individual goals, freedom and expression as opposed to collective goals.

Right-wing totalitarianism

A political system in which political power is monopolized by a group, party or individual that permits economic freedom but restricts political freedom. Restricts free speech, often claiming it would otherwise lead to communism.

Common law

A political system based on tradition, precedent and custom. Flexible.

Civil law system

A system of law based on a very detailed set of written laws and codes. Not very flexible.

CISG

United Nations Convention on Contracts for the International Sale of Goods. A set of rules governing aspects of making and performance of commercial contracts between buyers and sellers who have their places of businesses in different nations.

FCPA

Foreign Corrupt Practices Act. U.S. law regulating behavior regarding international business and unethical actions such as bribes.

PPP

Purchasing Power Parity. An adjustment of GDP pr. capita to reflect differences in the cost of living.

HDI

Human Development Index. An attempt by UN to assess the impact of a few factors on the quality of human life in a country.

Culture

A system of values and norms shared by a group of people.

Folkways

Routine conventions of everyday life within a culture. Is considered being polite.

Mores

Norms seen as central to the functioning of society and social life.

Power distance

Theory of how a society deals with the fac that people are unequal in physical and intellectual capabilities. High power distance lets inequality grow over time into inequalities in power and wealth. Low power distance cultures try to lower the effect of inequalities.

Ethnocentrism

Behavior that is based on the belief in the superiority of one's own ethnic group or culture, often with contempt for the culture of other countries.

Cultural relativism

The belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate.

Righteous moralist

One who claims that a multinational's home-country standards of ethics are the appropriate ones to follow in foreign countries as well.

Naïve immoralist

One who asserts that is a manager of a multinational sees that firms from other nations are not following ethical norms in a specific host nation, that manager shouldn't either.

Utilitarian ethics

The moral worth of actions or practices is purely determined by their consequences.

Kantian ethics

The belief that people should be treated as ends (goals) and never as means (tools) to the ends of others.

Mercantilism

An economic philosophy advocating that countries should encourage exports and discourage imports.

Absolute advantage

A country that has an absolute advantage in the production of a product is a country that produces that product more efficient than any other country.

Specific tariff

A tariff that is a fixed amount charged for each unit of good imported.

Ad volarem tariff

A tariff that is a proportion (%) of the value of an imported good.

VER

Voluntary export restraint. A quota on trade imposed from the exporting country's side, usually imposed as a request of the importing country's government.

LCR

Local content requirement. A requirement that some % of a good has to be produced domestically.

Greenfield investment

Establishing a new operation in a foreign country.

Internalization theory

Market imperfection approach to foreign direct investment.

Free trade area

A group of countries committed to removing all barriers to the free flow of goods and services between each other, while still having separate external trade policies.

Customs union

A group of countries committed to (1) removal of all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy.

Common market

A group of countries committed to (1) removal of all barriers to the free flow of goods and services AND factors between each other and (2) the pursuit of a common external trade policy.

Economic union

A group of countries committed to (1) removal of all barriers to the free flow of goods and services AND factors between each other and (2) the pursuit of a common external trade policy and (3) the harmonization of tax rates and (4) adoption of a common currency.

Carry trade

A kind of speculation that involves borrowing in one currency with low interest rates and then investing in another currency with high interest rates.

Fisher effect

Nominal interest rates ($i$) in each country is equal to the required real rate of interest ($r$) and the expected rate of inflation over the period of time for which the funds are to be lent ($l$), $i = r + l$.

IFE

International Fischer Effect. For any two countries, the spot exchange rate should change in an equal amount, but in the opposite direction, to the difference in nominal interest rates between countries.

Lead strategy

Collecting foreign currency receivables early when a foreign currency is expected to depreciate (diminish in value over time) and paying foreign currency payables due when a currency is expected to appreciate (rise in value over time).

Lag strategy

Delaying the collection of foreign currency receivables if that currency is expected to appreciate and delaying payables if that currency is expected to depreciate.

Floating exchange rate

A system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.

Dirty-float system

A system under which a country's currency is normally allowed to float freely against other currencies but in which the government will intervene, buying and selling, if it believes that the currency has deviated too far from its fair value.

Moral hazard

Arises when people behave recklessly because they know they will be saved (by institutions) if things go wrong.

Global standardization strategy

Strategy focus on increasing profitability by repeating cost reductions from experience curve and location economies.

Localization strategy

Plan focusing on increasing profitability by customizing the goods or services to match tastes of national markets.

Transnational strategy

Plan to exploit experience-based cost and location economies, transfer core competencies within the firm and pay attention to local responsiveness.

Organizational architecture

Totality of a firm's organization.

Pioneering costs

Costs an early entrant bears that late entrants avoid, such as the time and effort in learning the rules, failures due to ignorance, and the liability of being a foreigner.

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.

Bill of lading

A document issued to an exporter by a common carrier transporting merchandise. It serves as a receipt, a contract and a document of title.

Counterpurchase

A mutual buying agreement.

Minimum efficient scale

The level of output at which most plant-level scale economies are exhausted.

Push strategy

A marketing strategy emphasizing personal selling rather than mass media advertising.

Pull strategy

A marketing strategy emphasizing mass media advertising as opposed to personal selling.

Ethnocentric staffing policy

A staffing approach within the multinational enterprise in which all key management positions are filled by parent-country nationals.

Polycentric staffing policy

A staffing policy in a multinational enterprise in which hose-country nationals are recruited to manage subsidiaries in their own country, while parent-country nationals occupy key positions at corporate headquarters.

Geocentric staffing policy

A staffing policy where the best people are sought for key jobs throughout a multinational enterprise, regardless of nationality.

Multilateral netting

A technique used to reduce the number of transactions between subsidiaries of the firm, thereby reducing the total transaction costs arising from foreign exchange dealings and transfer fees.

Deferral principle

Parent companies are not taxed on the income of a foreign subsidiary until they actually receive a dividend from that subsidiary.