Unit 10 RCC

forward market

Market for currency transactions at forward rates.

offshore financial center

Country or territory whose financial sector features very few regulations and few, if any, taxes.

interbank market

Market in which the world’s largest banks exchange currencies at spot and forward rates.

Eurocurrency market

Market consisting of all the world’s currencies that are banked outside their countries of origin.

convertible currency

Currency that trades freely in the foreign exchange market, with its price determined by the forces of supply and demand.

Interest arbitrage

Profit-motivated purchase and sale of interest-paying securities denominated in different currencies.

spot market

Market for currency transactions at spot rates

vehicle currency

Currency used as an intermediary to convert funds between two other currencies.

Interbank interest rates

Interest rates that the world’s largest banks charge one another for loans.

clearing

Process of aggregating the currencies that one bank owes another and then carrying out the transaction.

Fundamental analysis

Technique that uses statistical models based on fundamental economic indicators to forecast exchange rates.

free float system

Exchange-rate system in which currencies float freely against one another without governments intervening in currency markets.

Smithsonian Agreement

Arrangement (1971) among IMF members to restructure and strengthen the international monetary system created at Bretton Woods.

currency board

Monetary regime based on an explicit commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate.

efficient market view

View that prices of financial instruments reflect all publicly available information at any given time.

Jamaica Agreement

Arrangement (1976) among IMF members to formalize the existing system of floating exchange rates as the new international monetary system.

managed float system

Exchange-rate system in which currencies float against one another, with governments intervening to stabilize their currencies at particular target exchange rates.

fixed exchange-rate system

System in which the exchange rate for converting one currency into another is fixed by international governmental agreement.

fundamental disequilibrium

Economic condition in which a trade deficit causes a permanent negative shift in a country’s balance of payments.

special drawing right (SDR)

IMF asset whose value is based on a “weighted basket” of five currencies.

inefficient market view

View that prices of financial instruments do not reflect all publicly available information.

Technical analysis

Technique that uses charts of past trends in currency prices and other factors to forecast exchange rates.

global product structure

Organizational structure that divides worldwide operations according to a company’s product areas.

focus strategy

Strategy in which a company focuses on serving the needs of a narrowly defined market segment by being the low-cost leader, by differentiating its product, or both.

strategy

Set of planned actions taken by managers to help a company meet its objectives.

stability strategy

Strategy designed to guard against change and used by corporations to avoid either growth or retrenchment.

core competency

Special ability of a company that competitors find extremely difficult or impossible to equal.

retrenchment strategy

Strategy designed to reduce the scale or scope of a corporation’s businesses.

combination strategy

Strategy designed to mix growth, retrenchment, and stability strategies across a corporation’s business units.

value chain analysis

Process of dividing a company’s activities into primary and support activities and identifying those that create value for customers.

Planning

Process of identifying and selecting an organization’s objectives and deciding how the organization will achieve those objectives.

international area structure

Organizational structure that organizes a company’s entire global operations into countries or geographic regions.

low-cost leadership strategy

Strategy in which a company exploits economies of scale to have the lowest cost structure of any competitor in its industry.

self-managed team

Team in which the employees from a single department take on the responsibilities of their former supervisors.

cross-functional team

Team composed of employees who work at similar levels in different functional departments.

Organizational structure

Way in which a company divides its activities among separate units and coordinates activities among them.

growth strategy

Strategy designed to increase the scale (size of activities) or scope (kinds of activities) of a corporation’s operations.

global teams

Team of top managers from both headquarters and international subsidiaries who meet to develop solutions to company-wide problems.

differentiation strategy

Strategy in which a company designs its products to be perceived as unique by buyers throughout its industry.

global matrix structure

Organizational structure that splits the chain of command between product and area divisions.

primary activities

Company activities directly related to the creation of a product, its marketing and delivery to buyers, and its after-sales support and service.

international division structure

Organizational structure that separates domestic from international business activities by creating a separate international division with its own manager.

support activities

Company activities that contribute to the value-creating potential of each primary activity.

expatriates

Citizens of one country who are living and working in another.

Human resource management

Staffing a company and ensuring that employees are as productive as possible.

selection

Screening and hiring the best-qualified applicants with the greatest performance potential.

hardship pay

staffing policy

labor–management relations

Positive or negative relations between a company’s workers and its management.

labor union

Organization that represents workers’ interests in negotiating with employers.

recruitment

Identifying and attracting a qualified pool of applicants for vacant positions.

human resource planning

Forecasting a company’s human resource needs and its supply.

location economies

Economic benefits derived from locating production activities in optimal locations.

ISO 9000

Series of individual standards that a company is certified as achieving when it meets the highest quality standards in its industry.

fixed assets

Physical items that a company plans to use over the long term to help generate income.

venture capital

Financing from investors who take part ownership in a business that is expected to experience rapid growth.

facilities location planning

Selecting the location for production facilities.

facilities layout planning

Deciding the spatial arrangement of production processes within production facilities.

capital structure

Mix of equity, debt, and internally generated funds used to finance a company’s activities.

capacity planning

Assessing a company’s ability to produce enough output to satisfy market demand.

revenue

Money earned from the sale of goods and services.

process planning

Deciding the process that a company will use to create its product.

back-to-back loan

Loan in which a parent company deposits money with a host-country bank, which then lends the money to a subsidiary located in the host country.

American Depository Receipts (ADRs)

Certificate that trades in the United States and that represents a specific number of shares in a non–US company.

Outsourcing

Buying from another company a good or service that is part of a company’s value-added activities.

push strategy

Promotional strategy designed to pressure distribution channel members to carry a product and to promote it to final users.

Promotion mix

Activities designed to reach distribution channels and target customers through communications, such as personal selling, advertising, public relations, and direct marketing.

marketing communication

Process of sending promotional messages about products to target markets.

Brand name

Name of one or more items in a product line that identifies the source or character of the items.

arm’s length price

Free-market price that unrelated parties charge one another for a specific product.

morphemes

Semantic elements, or language building blocks, such as the van in advantage.

pull strategy

Promotional strategy designed to create buyer demand that will encourage distribution channel members to stock a company’s product.

waterfall strategy

Sequential introduction of a product into new markets abroad one at a time.

transfer price

Price charged for a good or service transferred among a company’s headquarters and its subsidiaries.

dual pricing

A product has a different price (typically higher) in export markets than it has in the home market.

price controls

Upper or lower limits placed on the prices of products sold within a country.

worldwide pricing

A product has the same price in all international markets.

letter of credit

Export/import financing in which the importer’s bank issues a letter pledging to pay the exporter when the exporter fulfills the terms listed in the letter.

bill of lading

Contract between an exporter and a shipper that specifies merchandise destination and shipping costs.

turnkey (build–operate–transfer) project

A company designs, constructs, and tests a production facility for a client.

documentary collection

Export/import financing in which a bank acts as an intermediary without accepting financial risk.

management contract

A company supplies another with managerial expertise for a specific period of time

export management company

Company that exports products on behalf of indirect exporters.

Barter

Exchange of goods or services directly for other goods or services without the use of money.

Offset

Agreement that a company will offset a hard-currency sale to a nation by making a hard-currency purchase of an unspecified product from that nation in the future.

agent

Individual or organization that represents one or more indirect exporters in a target market.

Counterpurchase

Sale of goods or services to a country by a company that promises to make a future purchase of a specific product from that country.

Buyback

Export of industrial equipment in return for products produced by that equipment.

draft (bill of exchange)

Document ordering an importer to pay an exporter a specified sum of money at a specified time.

wholly owned subsidiary

Facility entirely owned and controlled by a single parent company.

open account

Export/import financing in which an exporter ships merchandise and later bills the importer for its value.

advance payment

Export/import financing in which an importer pays an exporter for merchandise before it is shipped.

Switch trading

One company sells to another its obligation to make a countertrade purchase in a country.

Cross licensing

Companies use licensing agreements to exchange intangible property with one another.

export trading company

Company that provides services to indirect exporters in addition to activities related directly to clients’ exporting activities.

freight forwarder

Specialist in export-related activities such as customs clearing, tariff schedules, and shipping and insurance fees.

Logistics

Management of the physical flow of products from the point of origin as raw materials to end users as finished products.

environmental scanning

Ongoing process of gathering, analyzing, and dispensing information.

trade show

Exhibition at which members of an industry or group of industries showcase their latest products, study activities of rivals, and examine recent trends and opportunities.

Market research

Collection and analysis of information used to assist managers in making informed decisions.

consumer panel

Research in which people record in personal diaries information on their attitudes, behaviors, or purchasing habits.