international business

business ethics

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

Ethical Strategy

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

Foreign Corrupt Practices Act (FCPA)

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

Convention on Combating Bribery of Foreign Public Officials

An OECD convention that establishes legally binding standards to criminalize bribery of foreign public officials in international business transactions and provides for a host of related measure that make this effective.

ethical dilemma

a situation in which there is no ethically acceptable solution

organizational culture

the values and norms shared among an organization's employees

cultural relativism

the belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate

Righteous Moralist

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

Naive Immoralist

a person who believes they are justified in abandoning ethical standards if others are also not following them

Utilitarian Approaches to Ethics

the morally right action is the one that produces the greatest overall good, or "utility," for the greatest number of people

Kantian Ethics

the belief that people should be treated with value within themselves and not used to gain value somewhere else

Rights Theories

Twentieth-century theories that recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures.

Universal Declaration of Human Rights

A United Nations document that lays down the basic principles of human rights that everybody should adhered to

Just Distribution

a distribution of goods and services that is considered fair and equitable

Code of Ethics

A business's formal statement of ethical priorities

Stakeholders

any person, group, or organization that has an interest in, or can affect or be affected by, a project, business, or other course of action

Internal Stakeholders

individuals or groups who are directly involved in and affected by a company's activities

External Stakeholders

individuals, groups, or organizations outside of a company that have an interest in or are affected by its activities

Corporate Social Responsibility (CSR)

The idea that business people should consider social consequences of economic actions when making business decisions and that decisions that have both good economic and social consequences  should be favored

Sustainable Strategies

Stratagies that balance economic viability with social and economic prosperity

Free Trade

The absence of barriers to the free flow of goods and services between countries

New Trade Theory

A theory that says countries trade because some industries can produce goods more efficiently when they grow large, and the first companies to enter those industries gain lasting advantages in global markets.

Mercantilism

an economic philosophy advocating that countries should simultaneously encourage exports and discourage imports

zero-sum game

a situation in which an economic gain by one country results in an economic loss by another

absolute advantage

A country has a _______ in the production of a product when it is more efficient than any other country at producing it.

Constant Returns to Specialization

The units of resources required to produce a good are assumed to remain constant regardless of the quantity produced. This means that as production increases, the efficiency remains stable.

Factor Endowments

A country's natural resources

Economies of Scale

Cost advantages associated with large-scale production.

First-Mover Advantages

advantages accruing to a company to the first to enter a market

Current Account

shows whether a nation is earning more from the world (surplus) or spending more on the account(deficit).

Current account deficit

The current account when a country imports more goods and services than it exports.

current account surplus

The current account when a country exports more goods and services than it imports.

capital account

record one-time changes in assets or liabilities. Tracks changes in ownership of assets

Financial Account

in balance of payments

Product Life-Cycle

as products mature both the location of sales and the optimal production location will change affecting the flow and direction of trade

General Agreement on Tariffs and Trade (GATT)

International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO

Tariff

a tax levied on imports

specific tariff

tariff levied as a fixed charge for each unit of good imported

Ad Valorem Tariff

a tariff levied as a proportion of the value of an imported good

subsidy

Government financial assistance to a domestic producer

import quota

a direct restriction on the quantity of a good that can be imported into a country

Tariff rate quota

lower tariff rates applied to imports within the quota than those over the quota

Voluntary Export Restraint (VER)

A quota on trade imposed from the exporting country's side

quota rent

extra profit producers make when supply is artificially limited by an import quota

Export tariff

a tax placed on the export of a good

Export ban

a policy that partially or entirely restricts the export of a good

Local Content Requirement (LCR)

a requirement that some specific fraction of a good be produced domestically

Administrative trade polices

administrative policies

Dumping

Selling goods in a foreign market for less than their cost of production or below their "fair" market value.

Antidumping Policies

designed to punish foreign firms that engage in dumping and thus protect domestic producers from unfair foreign competition

countervailing duties

antidumping duties

infant industry argument

New industries in developing countries must be temporarily protected from international competition to help them reach a position where they can compete on world markets with the firms of developed nations.

Strategic Trade Policy

Government policy aimed at improving the competitive position of a domestic industry and/or domestic firm in the world market

Multilateral or Bilateral Trade Agreements

reciprocal trade agreements between two or more partners

Flow of FDI

The amount of foreign direct investment undertaken over a given time period (normally one year)

Stock of FDI

the total accumulated value of foreign-owned assets at a given time

Outflows of FDI

Flow of foreign direct investment out of a country

Inflows of FDI

Flow of foreign direct investment into a country

Greenfield investment

Establishing a new operation in a foreign country

Eclectic Paradigm

Argument that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI; it requires the firm to establish production facilities where those foreign assets or resource endowments are located.

Exporting

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

Licensing

Occurs when a firm (the licensor) licenses the right to produce its product

Internalization Theory

Marketing imperfection approach to foreign direct investment

Market Imperfections

imperfections in the operation of the market mechanism

Oligopoly

An industry composed of a limited number of large firms

Multipoint Competition

arises when two or more enterprises encounter each other in different regional markets

location-specific advantages

Advantages that arise from using resource endowments or assets that are tied to a particular foreign location and that a firm finds valuable to combine with its own unique assets (such as the firm's technological

Externatlities

knowledge spillovers

balance of payments accounts

national accounts that track both payments to and receipts from foreigners

current account

in the balance of payments

offshore production

FDI undertaken to serve the home market