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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)
Forces of globalization; 2. International business environment; 3. Many national business environments; 4. International firm management.
Globalization of markets benefits (5)
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)
Access lower-cost workers; 2. Access technical expertise; 3. Access production inputs.
Forces driving globalization
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)
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
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)
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
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.
