Key terms unit 4

Cash Flow

the total amount of cash that remains in a company after it has paid taxes and other cash expenses

Investment incentives

benefits such as cash grants, tax credits, accelerated depreciation, and low interest - bearing loans, which are sponsored by national or local authorities to attract foreign investment

Exclusive Distributor

An independent sales agent who is given the sole right, under contract, to sell a foreign manufacturer’s products

Multiple Distributor

a sales agent who represents more than one manufacturer

Royalty Payments

the payments made by a foreign manufacturer to a company that has licensed the manufacturer to produce its products

Foreign Portfolio Investment

the purchase of shares and long-term debt obligations from a foreign entity. Portfolio investors do not aim to take control of a corporation. They can liquidate their investment at market value any time

Foreign Direct Investment

the establishment of a plant or distribution network abroad. Investors can acquire part or all of the equity of an existing foreign corporation either to control or share control over sales, production, and research and development

Strategic Approach

Foreign direct investment decisions based on business strategies. Investors seek access to raw materials, markets, product efficiency

A merger

happens when 2 firms agree to go forward as a single new company rather than remain separately owned and operated

Horizontal merger

Two companies making the same products combined

Vertical merger

A company either acquires or merges with another company in an immediately-related stage of production and distribution

Diversification

A company acquires another company in an entirely different sphere

International Division Structure

A system of reporting and communication between a foreign subsidiary and a head office through an international department at the parent company

Decentralization

A system in which foreign subsidiaries have a significant voice in making crucial decisions

Centralization

A system whereby a parent company retains decision-making lower, maintains direct and tight control over subsidiaries, and establishes nearly all policies

An acquisition

when one company takes over another and clearly establishes itself as the new owner

A raid

Buying as many of a company’s stocks as possible on the stock market

A takeover bid

A public offer to a company’s stockholders to buy their stocks at certain price during a limited period of time

Buyout

The purchase of a company’s shares in which the acquiring gains controlling interest of the targeted firm

Global structure

an organizational structure in which the entire top management of a parent company is involved in international as well as domestic matters. There is no separate international division

The Greenfield investment

refers to building a subsidiary abroad from the ground up

Joint Venture

a subsidiary formed by two or more corporations.

Multinational Corporation (MNC)

a corporation controlling production and marketing system in several countries besides its own