chapter 4

International Business

Doing business with other countries through exports, imports, or investments.

Globalization

The process where businesses and markets become connected worldwide.

Outsourcing

Hiring people or companies from other countries to do work for cheaper labor or expertise.

Import

Buying goods from another country.

Export

Selling goods to another country.

Balance of Trade

Difference between exports and imports.

Trade Surplus

More exports than imports.

Trade Deficit

More imports than exports.

Balance of Payments

Total flow of money into/out of a country.

Exchange Rates

The value of one country’s money compared to another.

Foreign Exchange Control

Governments control how much foreign currency is available.

Absolute Advantage

A country makes a product more efficiently than others.

Comparative Advantage

A country makes a product more efficiently compared to another product it could make.

Importer

Buys products from other countries.

Exporter

Sells products to other countries.

International Firm

Operates mostly from its home country.

Multinational Firm

Has offices, factories in many countries.

Independent Agent

A local salesperson in a foreign market.

Licensing Arrangement

Let another company make and sell your product.

Branch Office

Company sets up its own small office abroad.

Strategic Alliance / Joint Venture

Partnering with a local company abroad.

Foreign Direct Investment (FDI)

Company buys or builds something in another country.

Economic Differences

In some countries, the government controls the economy more than in others.

Quotas

Limits on how much of a product can be imported.

Embargo

A complete ban on trade with a country.

Tariffs

A tax on imported goods.

Revenue Tariff

A tariff intended to raise money for the government.

Protectionist Tariff

A tariff intended to protect local businesses.

Subsidies

Government money given to local companies to help them compete.

Protectionism

When a country protects its local businesses by using tariffs, quotas, or subsidies.

Local Content Laws

Laws that require part of a product to be made locally.

Business Practice Laws

Every country has its own business rules.

Dumping

When a company sells products abroad for cheaper than it costs to make them at home.

Cultural/Social Factors

Beliefs, language, customs that affect global business.

Economic Factors

Wealth, prices, government role in the economy.

Legal/Political Factors

Laws, tariffs, quotas, and restrictions that affect global business.

cartels

associations of producers that control supply and prices, also gives tremendous power to some nations

are cartels forbidden in the u.s.?

u.s. law forbids both bribery and cartels

example of cartel

OPEC - organization of petroleum exporting countries

what do business practice laws do?

host countries govern business practices with their jurisdictions

social orientation

persons beliefs about the relative importance of the individual versus groups to which that person belongs

extremes of social orientation?

individualism and collectivism

long term outlook

value dedication, hard work, and thrive

short term outlook

value traditions, social obligations

goal orientation

what motivates people to achieve different goals

aggressive goal behavior

value material possessions, money, assertiveness

passive goal behavior

value social relevance, quality of life, welfare of others

uncertainty orientation

emotional response to uncertainty and change

uncertainty acceptance

positive response to change and new opportunities

uncertainty avoidance

prefer structure and a consistent routine

power orientation

appropriateness of power/authority within organizations

power respect

authority is inherent in one’s position within a hierarchy

power tolerance

individuals assess authority in view of its perceived rightness or their own personal interests

offshoring

practice of outsourcing to foreign countries