Test 4 Cram

international monetary system

The institutional framework that countries use to manage exchange rates and international payments.

floating exchange rate

A system where a currency’s value is determined by supply and demand in the foreign exchange market.

pegged exchange rate

A system where a country’s currency value is fixed relative to another currency or basket of currencies.

managed-float system

A system where exchange rates are mostly market-determined but governments intervene occasionally to influence the value.

dirty-float system

A type of managed float where governments actively intervene to prevent large fluctuations in currency value.

fixed exchange rate

A system where a currency’s value is officially set and maintained by the government.

European Monetary System (EMS)

A system created to stabilize exchange rates between European countries before the adoption of the euro.

dollarization

The use of the U.S. dollar as a country’s official currency.

gold standard

A monetary system where currencies are tied to a fixed quantity of gold.

gold par value

The amount of currency needed to purchase one ounce of gold.

balance-of-trade equilibrium

A situation where the value of a country’s exports equals the value of its imports.

currency board

A system that maintains a fixed exchange rate by backing the domestic currency fully with foreign reserves.

currency crisis

A situation where a country’s currency rapidly loses value, often due to loss of investor confidence.

banking crisis

A situation where many banks face failure due to sudden withdrawals or financial instability.

foreign debt crisis

A situation where a country cannot repay its foreign loans.

moral hazard

When individuals or institutions take excessive risks because they expect to be protected from the consequences.

strategy

A plan of action designed to achieve specific long-term goals.

profitability

The ability of a company to generate profits.

profit growth

The increase in a company’s net earnings over time.

value creation

The process of increasing the value of a product or service to customers.

operations

The activities involved in producing goods or services.

core competence

A firm’s key strength that gives it a competitive advantage.

location economies

Cost advantages from performing activities in the most efficient global location.

global web

A network of interconnected production and distribution locations around the world.

experience curve

The systematic reduction in production costs as a company gains experience.

learning effects

Cost savings that come from learning by doing.

economies of scale

Cost reductions achieved through large-scale production.

universal needs

Customer needs that are the same worldwide.

global standardization strategy

A strategy focused on reducing costs by offering standardized products globally.

localization strategy

A strategy that adapts products and marketing to local markets.

transnational strategy

A strategy that combines global efficiency with local responsiveness.

international strategy

A strategy that sells products internationally with minimal local adaptation.

strategic alliances

Cooperative agreements between firms to achieve shared goals.

timing of entry

The decision of when to enter a foreign market.

first-mover advantages

Benefits gained by being the first company to enter a market.

first-mover disadvantages

Disadvantages faced by early entrants, such as high costs or uncertainty.

pioneering costs

Costs associated with entering a new market first.

exporting

Selling goods or services produced in one country to customers in another.

turnkey project

A project where a firm builds a facility and hands it over ready to operate.

licensing agreement

A contract allowing one firm to use another’s intellectual property in exchange for fees.

franchising

A system where a firm allows others to operate using its brand and business model.

joint venture

A partnership between firms to create a new, jointly owned entity.

wholly owned subsidiary

A firm that is fully owned by a parent company in a foreign market.