Module 1: The Challenging Context of International Business

Vocabulary flashcards covering key concepts, environmental forces, drivers of internationalization, and historical trends from Module 1 of International Business.

International Business

Business that is carried out across national borders.

Foreign Business

Denotes the operations of a company outside its home or domestic market.

International Company

A company with operations in multiple nations.

Environment

All of the forces influencing the life and development of the firm.

Uncontrollable Forces

External forces that management has no direct control over.

External Environmental Forces

The 11 forces outside management control: competitive, distributive, economic, socioeconomic, financial, legal, physical, political, sociocultural, labor, and technological.

Controllable Forces

Internal forces that management administers to adapt to changes in uncontrollable forces, such as marketing, personnel, finance, and production.

Domestic Environment

All the uncontrollable forces originating in the home country that surround and influence the life and development of the firm.

Foreign Environment

All the uncontrollable forces originating outside the home country that surround and influence the firm.

International Environment

Includes interactions between domestic and foreign environmental forces and between the foreign environmental forces of two countries.

International Business Environments Diagram

A representation showing how a domestic environment with controllable forces is surrounded by foreign affiliates in an international environment under foreign and domestic uncontrollable forces.

Bottom of the Pyramid

A term popularized by Professor C.K. Prahalad referring to the approximately 3 billion people who survive on less than $2 per day, representing a large market with untapped purchasing power.

Self-Reference Criterion

Unconscious reference to your own cultural values when judging behaviors of others in a new and different environment.

Age of Mercantilism

The 17th and 18th centuries when the power of nations depended directly on the sponsorship and control of merchant capital operating internationally.

Evolution of the World's Economic Center of Gravity

The historical shift of the world's economic center from Asia around AD 1, moving west to Iceland by 1950, and shifting back east toward Asia (projected near Mongolia by 2025).

Transnational Corporation

An enterprise made up of entities in more than one nation, operating under a decision-making system that allows a common strategy and coherent policies.

Foreign Direct Investment (FDI)

Direct investments in equipment, structures, and organizations in a foreign country at a level sufficient to obtain significant management control.

Exporting

The transportation of any domestic good or service to a destination outside a company or region.

Importing

The transportation of any good or service into a country or region, from a foreign origination point.

Drivers of Internationalization

Five major change-based factors that lead firms to internationalize: political, technological, market, cost, and competitive drivers.

Political Drivers

Drivers of internationalization involving global economic unification, reduction of trade and investment barriers, and privatization of industry in formerly communist nations.

Technological Drivers

Advances in computers and communications technology that allow increased flow of ideas across borders and enhance virtual integration.

Market Drivers

Drivers of internationalization where firms go abroad because customers become global, to protect relationships from foreign suppliers, or to tap growing GDP per capita and population.

Cost Drivers

Drivers of internationalization aimed at lowering the cost of goods sold, reducing development and production costs, or benefiting from government incentives.

Competitive Drivers

Strategic motives for internationalization, including defending home markets, guaranteeing raw material supplies, or entering downstream markets.

Economic Globalization

The tendency toward an international integration and interdependency of goods, technology, information, labor, and capital, or the process of making this integration happen.