international business midterm

globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale, leading to increased interconnectedness among countries and cultures.

home/source country

The country in which a multinational corporation is headquartered and from which it originates its business operations.

target/destination country

The country where a multinational corporation directs its business operations or seeks to establish its presence, often through market entry strategies.

output vs input

Output refers to the goods or services produced by a business, while input refers to the resources used to create those outputs, including raw materials, labor, and capital.

supply chain (upstream vs. downstream)

The supply chain encompasses all processes involved in the production and distribution of goods, where upstream refers to the stages of production prior to product creation and downstream refers to activities post-production leading to the consumer.

foreign direct investment (FDI)

A long-term investment by a company in one country in business interests in another country, involving the establishment of business operations or acquiring assets.

manufacturing vs. service industries 

Manufacturing industries focus on the production of tangible goods, while service industries provide intangible services to consumers, emphasizing value creation and customer experience.

proactive drivers of internationalization

Factors that encourage companies to expand their operations globally, such as market expansion opportunities, cost advantages, and the need for innovation.

reactive drivers of internationalization

Factors that compel companies to respond to external pressures, such as competitive threats, market saturation, and economic changes.

economies of scale

Cost advantages gained by increasing production levels leading to lower average cost per unit

bargaining powers of buyers

The ability of customers to pressure businesses to lower prices, improve quality, or provide better service, determined by factors such as buyer concentration, purchase volume, product differentiation, and switching costs. One of Porter's Five Forces in competitive analysis.

tax breaks

Reductions in tax liability provided by governments to individuals or businesses, often to encourage specific economic activities or investments.

cost of capital

The required return necessary to make a capital budgeting project worthwhile, representing the cost a company pays to finance its operations through debt and equity.

fixed costs vc variable costs

Fixed costs remain constant regardless of production volume (e.g., rent, salaries), while variable costs change in direct proportion to production levels (e.g., raw materials, labor hours).

tax incentives

Special tax provisions offered by governments to encourage particular business activities, such as investment in certain regions, industries, or research and development.

risk diversification

he strategy of spreading investments or business operations across different markets, products, or regions to reduce overall risk exposure.

gordon moore’s law

The observation that the number of transistors on a microchip doubles approximately every two years, leading to exponential increases in computing power and decreases in relative cost.

cost per unit

The total cost incurred to produce one unit of a product, calculated by dividing total production costs by the number of units produced.

overcapacity 

A situation where a company or industry can produce more goods than market demand requires, often leading to price reductions and lower profitability.

seasonal products

Goods or services that experience predictable fluctuations in demand based on the time of year, weather, or calendar events.

psychic distance

The perceived differences between a home country and a foreign market in terms of culture, language, business practices, and institutional environment that affect business decisions.

liability of forgiveness

The inherent disadvantages and additional costs that foreign firms face when competing against local firms in a host country due to unfamiliarity with local conditions.

discrimination hazard

The risk that foreign firms will be treated unfairly or disadvantaged by host country governments, regulations, or market participants compared to domestic firms.

depreciation vs appreciation (currency)

Depreciation is the decrease in a currency's value relative to other currencies, while appreciation is the increase in a currency's value, affecting international trade competitiveness.

floating exchange rate

A currency valuation system where exchange rates are determined by market forces of supply and demand without direct government intervention.

fixed exchange rate

A currency system where a government or central bank pegs its currency's value to another currency or basket of currencies, maintaining it within a narrow band.

triad

The three major economic regions that dominate global trade and investment: North America, Europe, and Asia (particularly Japan, though now often expanded to include China).

PEST analysis

A strategic framework examining Political, Economic, Social, and Technological factors in the external environment that affect business operations.

nationalization

The process by which a government takes ownership or control of private assets or industries, typically with or without compensation to the original owners.

international centre for settlement of investment disputes (ICSID) 

a world bank instiution that provides facilities for arbitration and conciliation of investment disputes between countries and foreign investors 

consumer behavior

mercantilism

free trade policy

absolute advantage

general agreement on tariffs and trade (GATT)

An international treaty (1947-1995) designed to promote free trade by reducing tariffs and other trade barriers; predecessor to the World Trade Organization.

trade barriers

Government-imposed restrictions on the free exchange of goods and services between countries.