International Business & Multinational Entreprises

globalisation

shift towards a more integrated & interdependent world economy with lower barriers to trade & investment

GATT (General Agreement on Tariffs and Trade)

committed signatories to lowering barriers to the free flow of goods across national borders

WTO (World Trade Organization)

policing world trading system & making sure national states adhere to the rules laid down in trade treaties

IMF (International Monetary Fund)

maintains order in the international monetary system

World Bank

promote general economic development in the world's pooper nations

UN (United Nations)

maintains international peace and security, develops friendly relations among nations, cooperates in solving international problems, promotes respect for human rights, and is a center for harmonizing the actions of nations

G20 (Group of Twenty)

finance ministers, central bank governors of 19 largest economies, & representatives from EU and ECB

international trade

when a firm exports goods or services to consumers in another country

Foreign direct investment (FDI)

when a firm invests resources in business activities outside its home country

Multinational enterprise (MNE)

any business that has productive activities in two or more countries

Political economy

political, economic, and legal systems of a country

Political system

system of government in a nation

Collectivism

political system that emphasises collective goals as opposed to individual goals

Individualism

philosophy that an individual should have freedom in his/her economic and political pursuits

Democracy

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

Totalitarianism

form of government in which one person or political party exercises absolute control over all spheres of human life, and opposing political parties are prohibited

Communist totalitarianism

version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship

Theocratic totalitarianism

political system in which political power is monopolised by a party, group, or individual that governs according to religious principles

Tribal totalitarianism

political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolises political power

Right-wing totalitarianism

political system in which political power is monopolised by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to the rise of communism

types of totalitarianism

communist, theocratic, tribal, right-wing

Market economy

economic system in which the interaction of supply and demand determines the quantity of goods and services produced (private-owned)

Command economy

economic system where the allocation of resources, including the determination of what goods and services should be produced and in what quantity, is planned by the government (state-owned)

Mixed economy

certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant state ownership and government planning

Legal system

system of rules that regulate behaviour and the processes by which the laws of a country are enforced and through which redress of grievances is obtained

Common law

system of law based on tradition, precedent, and custom

Civil law

system of law based on a very detailed set of written laws and codes

Theocratic law

system of law based on religious teachings

United Nations Convention on Contracts for the International Sale of Goods (CISG)

set of rules governing certain aspects of the making and performance of commercial contracts between sellers and buyers who have their places of business in different nations

Property

a resource over which an individual or business holds a legal title, that is, a resource that it owns

Property rights

bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource

Foreign Corrupt Practices Act (FCPA)

U.S. law regulating behaviour regarding the conduct of international business in the taking of bribes and other unethical actions

Intellectual property

property of the mind, ideas

World Intellectual Property Organisation

international organisation whose members sign treaties to agree to protect intellectual property

Gross national income (GNI)

measures the total annual income received by residents of a nation

Purchasing power parity (PPP)

adjustment in GDP per capita to reflect differences in the cost of living

Black economy/shadow economy

share of total economic activity accounted for by transactions to avoid paying taxes

Human Development Index (HDI)

an indicator constructed by the U.N. to measure the level of development for a country through a combination of income, education, and life expectancy.

Deregulation

removal of government restrictions concerning the conduct of a business

Privatisation

transfer of the ownership of state property into the hands of private individuals

Cross-cultural literacy

understanding how cultural differences across and within countries affect the way business is practised

Culture

system of values and norms that are shared among a group of people & that when taken together, constitute a design for living

Values

abstract ideas about what a society believes to be good, right, and desirable

Norms

social rules and guidelines that prescribe appropriate behavior in particular situations

Society

a group of people who share a common set of values and norms

Folkways

routine conventions of everyday life

Mores

norms seen as central to the functioning of a society and to its social life

Social structure

the basic social organization of a society

Social strata

hierarchical social categories often based on family background, occupation, and income

Social mobility

extent to which individuals can move out of the strata into which they are born

Caste system

closed system of stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime

Class system

less rigid form of social stratification in which social mobility is possible

Class consciousness

tendency for individuals to perceive themselves in terms of their class background

Religion

system of shared beliefs and rituals that are concerned with the realm of the sacred

Ethical system

set of moral principles, or values, that are used to guide and shape behaviour

Power distance

theory of how a society deals with the fact that people are unequal in physical and intellectual capabilities

Uncertainty avoidance

extend to which cultures socialise members to accept ambiguous situations and to tolerate uncertainty

Ethics

accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organisation

Business ethics

accepted principles of right or wrong governing the conduct of business people

Ethical strategy

strategy/course of action that does not violate a company's business ethics

Straw men

approaches that either deny the value of business ethics or apply the concept in a very unsatisfactory way

Friedman doctrine

"the social responsibility of business is to increase profits," so long as the company stays within the rules of law

Cultural relativism

belief that ethics are nothing more than the reflection of a culture and that firms should adopt the ethics of the cultures in which they operate

righteous moralist

a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries

native immoralist

if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either

Utilitarian approach

the moral worth of actions or practices is determined by their consequences

Kantian ethics

belief that people should be treated as ends and never as means to the ends of others

Rights theories

20th-century theories that recognise that human beings have fundamental rights and privileges that transcend national boundaries and cultures

Corporate social responsibility (CSR)

idea that businesspeople should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favour of decisions that have both good economic and social consequences

Sustainable strategies

strategies that not only help the multinational firm make good profits, but that also do so without harming the environment while simultaneously ensuring that the corporation acts in a socially responsible manner with regard to its stakeholders

Profitability

rate of return that the firm makes on its invested capital (ROIC)

Profit growth

percentage increase in net profits over time

Value creation

performing activities that increase the value of goods or services to consumers

Increase profitability

reduce costs, add value and raise prices

Increase profit growth

sell more in existing markets, enter new markets

Low-cost strategy

a firm has high profits when it creates more value for its customers and does so at a lower cost

Differentiation strategy

focuses on increasing the attractiveness of a product

Efficiency frontier

all different positions that a firm can adopt with regard to adding value to the product (V) and low cost (C), assuming that its internal operations are configured to support a particular position

Primary activities

R&D, production, marketing and sales, customer service

Support activities

company infrastructure: information systems, logistics, HR

Organisational architecture

totality of a firm's organisation, including formal organisational structure, control systems and incentives, organisational culture, processes, and people

Organisational structure

three-part structure of an organisation, including its formal division into subunits such as product divisions, its location of decision-making responsibilities within that structure, and the establishment of integrating mechanisms to coordinate the activities of all subunits

Organisational culture

norms and value systems that are shared among the employees of an organisation

Location economies

cost advantages from performing a value creation activity at the optimal location for that activity

Experience curve

systematic reductions in production costs that occur over the life of a product

Learning effects

cost savings from learning by doing

Economies of scale

cost advantages associated with large-scale production

Global standardisation strategy

focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies

Localisation strategy

focuses on increasing profitability by customising the firm's goods or services so that they provide a good match to tastes and preferences in different national or regional markets

Transnational strategy

trying to simultaneously achieve low costs through location economies, economies of scale, and learning effects; differentiate their product offering across geographic markets to account for local differences; and foster a multidirectional flow of skills between different subsidiaries in the firm's global network of operations

International strategy

taking products first produced for their domestic market and selling them internationally with only minimal local customisation

Strategic alliances

cooperative agreements between potential or actual competitors

modes to enter a foreign market

exporting, turnkey project, licensing, franchising, joint ventures, wholly-owned subsidiaries

Exporting

sale of products produced in one country to residents of another country

Turnkey project

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

arrangement in which a licensor grants the rights to intangible property to a licensee for a specified period and receives a royalty fee in return

Franchising

specialised form of licensing in which the franchiser not only sells intangible property (trademark) to the franchisee but also insists on rules to conduct the business

Joint ventures

cooperative undertaking between 2 or more firms

Wholly owned subsidiaries

subsidiary in which the firm owns 100% of the stock

Acquisitions

the incorporation of one firm into another through purchase