INTB 200 MID TERM notes

Ad Valorem Tariff

A tariff calculated as a percentage of the product's value; often based on FOB value, though some countries use CIF.

FOB (Free on Board)

A valuation basis excluding international shipping and insurance; used to compute ad valorem tariffs in some countries.

CIF (Cost, Insurance, and Freight)

A valuation basis including cost, insurance, and freight; some countries assess ad valorem tariffs on CIF.

Specific Tariff

A fixed charge per physical unit (e.g., per kg, drum, gallon), applied to a specific product.

Compound Tariff

A tariff that combines ad valorem and specific components.

Blocked Currency

Currency that cannot be freely converted or used for international transactions.

Differential Exchange Rates

Government sets different exchange rates for different items or transactions.

Government Approval (Monetary Barrier)

Requirement that a government must authorize certain foreign exchange or trade transactions.

International Business (definition)

Public and private enterprise activities involving movement of goods, services, and resources across national boundaries.

Globalization (markets & production)

Increasing integration via reduced trade barriers, investment changes, and global production/markets.

Political Drivers of Globalization

Progressive reduction of trade barriers; changes in foreign investment policies.

Free Trade Agreements (FTAs)

Arrangements that reduce trade barriers; can be unilateral, bilateral, or multilateral.

Unilateral FTA (example effect)

Benefits mostly accrue to partners; example: U.S. Caribbean initiative to shift production with tariff benefits.

Lower Tariffs Trend

Global average tariff rates have generally declined over time.

Rise of NGOs in Trade

Organizations like the UN, WTO, IMF, and WCO influence rules, reduce red tape, and support trade.

World Customs Organization (WCO)

International body that helps simplify and harmonize customs procedures, reducing import red tape.

DFI (Direct Foreign Investment)

Cross-border investment where a firm establishes a lasting interest and control in a foreign enterprise.

Technology as Globalization Driver

Internet, social media, and reduced transportation costs enable global operations.

Global Customers (Markets)

Firms advertise, sell, produce, hire, and pay taxes in multiple countries to serve worldwide demand.

Why Go Abroad: Saturated Domestic Market

Domestic demand is fully served, pushing firms to seek growth overseas.

Why Go Abroad: Foreign Entrants

New international competitors push domestic firms to expand abroad.

Why Go Abroad: Seasonal Differences

Offset seasonality by selling in markets with different demand cycles.

Economies of Scale

Average costs fall as output increases; key to maintaining competitive advantage.

Achieving Economies of Scale

Import inputs, build/locate factories overseas, or access nearby markets to lower costs.

Competition in Global Markets

Globalization intensifies rivalry; firms seek new buyers as products risk quicker obsolescence.

International Marketing Task

Plan and execute activities directing the flow of goods/services to foreign buyers.

4 Ps of Marketing

Product, Place, Promotion, Price.

Standardization Strategy

Sell the same product with the same communications globally (straight extension).

Adapt Communication Strategy

Keep the product the same but change advertising to fit local norms.

Product Change Only Strategy

Modify the product (e.g., to meet legal requirements) while keeping advertising consistent.

Dual Adaptation

Adapt both product and advertising for different markets and uses.

New Product Development (Global)

Create market-specific products tailored to local needs.

Benefits of Standardization

Lower costs, easier control/coordination, and faster marketing planning.

Industrial Products (Adaptation)

Often require fewer changes; adjustments may be cosmetic (size, gauge) or legal (noise, safety, pests, wood).

Consumer Products (Adaptation)

Frequently modified to fit local culture, tastes, climate, and preferences.

Advertising (definition)

Paid, non-personal presentation of ideas, goods, or services by an identified sponsor.

Direct vs. Indirect Advertising

Some cultures prefer direct, explicit claims; others respond better to indirect messaging.

Comparative Advertising

Explicitly compares your product with competitors; legality and norms vary by country.

Humor in Advertising

Humor varies widely across cultures; what's funny in one market may fall flat in another.

Gender in Advertising

Avoid insensitive or culturally inappropriate gender portrayals.

Explicitness in Advertising

Be careful with strong claims; standards vary across markets.

Sophistication in Advertising

Align message style (simple vs. refined) with the audience and culture.

Popular vs. Traditional Culture

Decide whether to anchor messaging in modern pop culture or local traditions.

Information Content vs. Fluff

Provide meaningful content—people dislike propaganda; focus on what buyers want to know.

Personal Selling

Use sales representatives to tailor messages and build relationships.

Sales Promotion

Short-term incentives: displays, trade shows, discounts, coupons, and money offers.

Public Relations

Manage communications with the public and governments to shape reputation.

Culture (definition)

Sum of beliefs, techniques, institutions, rules, and artifacts of a human population.

Values (cultural)

Abstract ideas of what is good, right, and desirable in a society.

Norms (cultural)

Rules prescribing and proscribing appropriate behavior in specific situations.

Culture Is Learned

It is not innate; it defines group boundaries and its aspects are interrelated and shared.

Self-Reference Criterion (SRC)

Inadvertent reference to one's own cultural values to judge situations in other cultures.

Ethnocentrism

Belief in the superiority of one's own culture and ethics; can hinder cross-cultural understanding.

Aesthetics

Shared notions of beauty and good taste; influence design, packaging, and branding.

Implicit vs. Explicit Culture

Implicit: decision-making norms; Explicit: dance, music, folklore, literature, dress.

Color Meanings

Colors can symbolize luck, mourning, or other values; meanings vary by culture.

Achievement & Work

Cultural attitudes toward success, effort, and recognition affect business behavior.

FCPA (Foreign Corrupt Practices Act)

U.S. law prohibiting bribery of foreign officials; impacts global sales practices.

Social Mobility

Extent to which individuals can move out of the strata into which they are born.

Caste System

Rigid strata with no mobility; intermarriage across castes is typically restricted.

Class System

Mobility is possible through luck and hard work.

Religion (business context)

Shared beliefs and rituals; affect consumer behavior and business norms.

Material Culture

What people make, want, and use; shaped by technology and economics.

Technological Factors

Assess whether the market has needed tech; determines investment viability.

Raw Materials & Energy

Supply conditions affect feasibility and cost of production.

Transportation Technology

Ability to move goods safely and affordably; weight/fragility matter.

Education (market analysis)

Be cautious with published literacy rates; consider female education and brain drain.

Brain Drain

Loss of a country's best and brightest to opportunities abroad.

PPP (Purchasing Power Parity)

Compares incomes/costs across countries to gauge affordability of products.

Big Mac Index

Informal PPP measure comparing Big Mac prices across countries.

Language (business impact)

Shapes thought and filters messages; language capabilities can confer advantage.

Corporate Culture: Formality

How people greet and interact; degree of formality expected.

Corporate Culture: Status

Power distance and hierarchy—who holds decision authority.

Corporate Culture: Dignity

Show respect; avoid behavior that undermines others' dignity.

Corporate Culture: Humility

Avoid bragging about status or accomplishments; be humble.

Corporate Culture: Priority (Time)

Personal obligations may take precedence over business in some cultures.

Corporate Culture: Image

Dress and speak professionally to maintain credibility.

Country Risk

Political and legal risks of operating in a nation (e.g., policy shifts, instability).

Currency Risk

Economic risks from exchange rates, loans, and banking conditions.

Company (Commercial) Risk

Credit, market, and competitive risks specific to the firm.

Technological Dualism

Coexistence of advanced and primitive production systems in an economy.

First-Mover Advantage

Strategic benefits from entering a market or industry early.

Free Trade (definition)

Government refrains from quotas, duties, or tariffs affecting citizens' import/export choices.

Macropolitical Risk

Political actions/events that affect all firms in a country (e.g., civil war, revolution).

Micropolitical Risk

Political actions/events targeting specific firms or industries.

Democracy vs. Totalitarianism

Spectrum of political systems from pluralistic to centralized control.

Individualism vs. Collectivism

Cultural-political dimension; U.S. tends toward individualism; Japan toward collectivism.

Political System (definition)

The form and structure of government in a country.

Communism (economic system)

Central planning; state owns means of production; government decides production and allocation.

Capitalism (economic system)

Private/corporate ownership; markets allocate resources via supply and demand; competition drives production.

Socialism (economic system)

Mix of public and private ownership; emphasis on societal welfare over profit for some sectors.

Government View of Free Trade

Degree of interference in citizens' buying/selling from/to foreigners.

Privatization

Government sells state-owned enterprises to private owners.

Nationalism (economic)

Strong preference for domestic interests and culture; can affect trade policy.

Nationalization

Government takes private property into public ownership.

Expropriation

Government takes private assets with compensation.

Confiscation

Government takes private assets without compensation.

Government Stability

Likelihood that policy will change drastically after political transitions.

Traditional Hostilities

Armed conflicts governed by laws of war and international humanitarian law.

Terrorism (business impact)

Unlawful violence aimed at political objectives; causes instability and raises risk.