Untitled Flashcards Set

International Business

Any commercial transaction that crosses the borders of two or more nations.

Imports

Goods and services purchased from other countries and brought into a country.

Exports

Goods and services sold abroad and sent out of a country.

Investments

Deals with financial assets such as stocks and bonds (direct investments and portfolio investments).

Multinational Corporation

A business that has direct investments abroad in multiple countries.

Born Global Firm

A company that adopts a global perspective and engages in international business from or near its inception.

Globalization

The trend toward greater economics, cultural, political, and technological interdependence among national institutions and economies.

Sustainability

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

General Agreement on Tariffs and Trade (GATT)

A treaty designed to promote free trade by reducing both tariffs and non-tariff barriers to international trade.

World Trade Organization (WTO)

An international organization that enforces the rules of international trade.

World Bank

An agency created to provide financing for national economic development efforts.

International Monetary Fund (IMF)

An agency created to regulate fixed exchange rates and to enforce the rules of the international monetary system.

Gross Domestic Product (GDP)

The value of all goods and services produced by the domestic economy during a one-year period.

Gross National Product (GNP)

The value of all goods and services produced by a country's domestic and international activities over a one-year period.

E-business

The use of computer networks to purchase, sell, or exchange products and services to customers, and to collaborate with partners.

Multinational Corporations generate

Significant jobs, investments, and tax revenue for regions/nations they enter.

Direct Investment

When a foreign company buys foreign assets that it is directly involved with to make money.

Portfolio Investment

When a foreign company buys foreign assets just to make money and is not directly involved, but participates in meetings.

Market Globalization

The process through which the world's national economies become integrated into a single global exchange system organized by market principles.

NAFTA

North American Free Trade Agreement; allows open trade with the US, Mexico, and Canada.

Globalization Business Environment elements (4)

1. Forces of globalization; 2. International business environment; 3. Many national business environments; 4. International firm management.

Globalization of markets benefits (5)

1. Reduces marketing costs; 2. Creates new market opportunities; 3. Levels uneven income streams; 4. Local buyers' needs; 5. Global sustainability.

Globalization of Production benefits (3)

1. Access lower-cost workers; 2. Access technical expertise; 3. Access production inputs.

Forces driving globalization

1. Falling barriers to trade and investments; 2. Technological innovation.

European Union (EU)

An economic association of 28 Western European countries to promote free trade among its members.

GDP/GNP per capita

A nation's GDP or GNP divided by its population.

Globalization benefits for company (3)

1. Expand markets; 2. Increase sales; 3. More risk.

Is domestic business like international business? Why?

No, because of differences in the external business environment factors of foreign markets.

Example why domestic and international business are different

Disney does not have the same customs in Disney World in Florida compared to Disney in Japan.

Regional Economic Integration (REI)

Also called Regionalism; a process whereby countries in a geographic region cooperate to reduce/eliminate barriers to the international flow of products, people, and capital.

Regional trading bloc

A group of nations in a geographic region undergoing economic integration.

Levels of national integration

1. Free Trade Area; 2. Customs Unions; 3. Common Market; 4. Economic Union; 5. Political Union.

Free Trade Area

Economic integration whereby countries seek to remove all barriers to trade among themselves.

Customs Union

Economic integration whereby countries remove all barriers to trade among themselves and set a common trade policy against nonmembers.

Common Market

Economic integration whereby countries remove all barriers to trade and the movement of labor and capital among themselves.

Economic Union

Economic integration where countries remove barriers to trade and coordinate economic policies.

Political Union

Economic and political integration whereby countries coordinate aspects of their economic and political systems.

Economic Union requirements

Requires member nations to harmonize their tax, monetary, and fiscal policies and create a common currency.

EU

European Union.

EFTA

European Free Trade Association.

CAN

Andean Community.

MERCOSUR

Southern Common Market.

CARICOM

Caribbean community and common market.

ASEAN

Association of Southeast Asian Nations.

APEC

Asia Pacific Economic Cooperation.

CER

Closer Economic Relations Agreement.

AU

African Union.

Trade Creation

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

Trade Diversion

Diversion of trade away from nations not belonging to a trading bloc and toward member nations.

European Monetary Union

EU plan that established its own central bank and currency.

Geopolitics

A foreign policy based on the strategic locations or products of other lands.

Geo-economics

Geographic distribution of wealth.

Single European Act

Act that aimed to create a single internal market within the EU.

Maastricht Treaty

A treaty that established the European Union and introduced a common currency.

EU governing bodies (3)

1. European Commission; 2. European Parliament; 3. European Council.

Court of Justice of the European Union

Court of appeals of the EU, composed of one judge from each member nation.

Court of Auditors of the European Union

Assists the European Commission, audits EU accounts and implements the budget.

Certificate of Origin (COO)

NAFTA requires that every product have a certificate to move from Mexico to the USA to Canada.

BRICS

Five major emerging national economies: Brazil, Russia, India, China, and South Africa.

NAFTA value to get through countries

A percentage of the product's total value must originate in a NAFTA country.

Subsidy

Financial assistance to domestic producers in various forms.

Foreign Trade Zone (FTZ)

Designated geographic region through which merchandise is allowed to pass with lower customs duties.

Tariff

Government tax levied on a product as it enters or leaves a country.

Ad Valorem Tariff

Tariff levied as a percentage of the stated price of an imported product.

Specific Tariff

Tariff levied as a specific fee for each unit of imported product.

Compound Tariff

Tariff calculated partly as a percentage and partly as a specific fee.

Quota

Restriction on the amount of a good that can enter or leave a country.

Voluntary Export Restraint (VER)

Export quota that a nation imposes on its exports usually at the request of an importing nation.

Tariff-Quota

Lower tariff rate for a certain quantity of imports and a higher rate for quantities that exceed the quota.

Embargo

Complete ban on trade in one or more products with a particular country.

Administrative Delays

Regulatory control designed to impair the flow of imports.

Currency Controls

Restrictions on the convertibility of a currency.

Normal Trade Relations

WTO requirement that members extend the same favorable terms of trade to all members.

Dumping

Exporting a product at a price lower than its domestic market price or cost of production.

Antidumping Duty

Additional tariff on an imported product believed to be dumped on the market.

Countervailing Duty

Additional tariff on an imported product believed to be receiving an unfair subsidy.

Three types of tariffs

1. Import tariffs; 2. Export tariffs; 3. Transit tariffs - when transit tariffs are eliminated in the world.

Import Tariffs

Levied by the government of a country that is importing a product.

Export Tariffs

Levied by the government of a country that is exporting a product.

Transit Tariffs

Levied by a government of a country the product is passing through.

Reasons governments intervene in trade (3)

Political objectives; economic objectives; cultural objectives.

Political Objectives

Government intervention to protect jobs and national security, and to respond to unfair trade practices.

Economic Objectives

Government intervention to protect young industries and promote strategic trade policies.

Cultural Objectives

Government intervention to protect national identity.

Calculating tariffs

AD - dollar amount times the rate; Specific - weight times the cents; Compound - both specific and AD added together.

Import Example Calculation

The US imported 5,000 lbs of fruit costing $10,000, with harmonized tariffs of 3% and $0.12 per lb. AD = $300, Specific = $600, Compound = $900.