Globalization and International Business - Vocabulary Flashcards (Chapter 1)

A vocabulary set covering globalization, international business concepts, drivers, criticisms, operating modes, and key terms from Chapter 1.

Globalization

The process by which countries become more interconnected through trade, investment, technology, information, and people flows.

International Business (IB)

All commercial transactions between two or more countries, including sales, investments, and transportation.

Forces driving globalization and IB

Factors that push firms toward cross-border activity and market integration.

Rise in and application of technology

Advances in information, communication, and transportation technologies that enable global operations.

Liberalization of cross-border trade and resource movements

Policy changes that reduce barriers to international trade and the movement of capital and resources.

Development of services that support IB

Growth of service sectors (e.g., logistics, finance, IT) that facilitate international business.

Growth of consumer pressures

Increasing demand from consumers for global brands and products, driving global competition.

Increase in global competition

Rising rivalry among firms worldwide, encouraging firms to compete internationally.

Changes in political situations and government policies

Policy shifts that open or restrict markets, influencing IB activity.

Expansion of cross-national cooperation

More international agreements and collaborations that ease global business.

Sovereignty (criticism)

The idea that globalization can erode a nation’s authority to govern itself.

Environment (criticism)

Concerns that globalization can impact environmental sustainability negatively.

Reasons to engage in IB

Motivations for international activity: sales expansion, resource acquisition, and risk reduction.

Sales expansion

Growing revenue by entering new geographic markets.

Resource acquisition

Gaining access to materials, technology, or capabilities not readily available domestically.

Risk reduction

Spreading operations across countries to lessen country-specific risks.

IB Operating Modes

The methods firms use to pursue international objectives (exports/imports, services, asset use, investments).

Merchandise Exports and Imports

Trade of tangible goods across borders.

Service Exports and Imports

Trade of services across borders (e.g., tourism, transportation, service performance).

Asset Use

Utilizing foreign assets or capabilities (e.g., licensing, franchising) to generate income.

Foreign Direct Investment (FDI)

Investment in a foreign country that gives the investor control or significant influence.

Portfolio Investment

Investment in foreign securities (stocks, bonds) without gaining control of the enterprise.

MNE (Multinational Enterprise)

A firm that operates in multiple countries, often via foreign subsidiaries and investments.

Collaborative Arrangements

Partnerships with foreign firms, such as joint ventures, licensing, or strategic alliances.

Physical factors

Geography, climate, infrastructure, and natural resources affecting abroad operations.

Institutional factors

Legal, political, economic, and social institutions (laws, regulations, property rights) influencing business.

Competitive factors

Market structure, competition intensity, and rivalries in host markets.

What is culture?

A learned set of values, beliefs, and norms shared by a group of people.

What does bicultural or multicultural mean?

Belonging to or identifying with more than one culture.

What is cultural collision?

When divergent cultures come into contact, causing issues for companies and employees.

What are Deal-focus (DF) vs Relationship-focus (RF) cultures?

DF = task-oriented, RF = people/relationship-oriented.

What are dangers of cultural awareness research?

Outdated data, variations within a country, relying on what people say.

What are two main sources of cultural change?

Change by choice (adopting alternatives) and change by imposition (cultural imperialism).

What is cultural diffusion or creolization?

The blending of elements from outside cultures into a local culture.

What are two determinants of social stratification?

1) Individual achievement and qualifications 2) Group memberships.

What are types of group membership?

Ethnic/racial, gender, age, family-based.

What factors influence work motivation?

Materialism, productivity vs. leisure, success/reward systems, masculinity-femininity index.

What are two main relationship preferences?

Power distance, Individualism vs. Collectivism.

What are common risk-taking behaviors?

Uncertainty avoidance, trust, future orientation, fatalism.

What are cultural differences in task processing?

High vs. low context, monochronic vs. polychronic, holistic vs. parts, idealism vs. pragmatism.

What are challenges in cross-cultural communication?

Language translation, silent language (colors, distance, time, body language, prestige).

What factors affect cultural adjustment?

Host society acceptance, cultural differences, personal adaptability, management orientation (polycentrism, ethnocentrism, geocentrism).

What are strategies for successful cultural change?

Align with values, reduce resistance, involve participation, share rewards, use opinion leaders, timing, bicultural employees, learning abroad.

What is a political system?

The set of institutions and rules that govern a nation.

What is political freedom?

The degree to which individuals have political rights and civil liberties.

What is individualism?

A belief that people should be free to pursue their economic and political interests.

What is collectivism?

A belief that the group’s interests prevail over individual interests.

What is democracy?

Government by the people where citizens are politically equal and enjoy freedoms.

What is totalitarianism?

A system where political power is monopolized and individual interests are subordinated to the state.

What trend was seen in the 20th century?

A global diffusion of democracy ("third wave of democratization").

What is political risk?

The risk that political decisions/events negatively affect business operations or investment value.

What are classes of political risk?

Systemic, procedural, distributive, catastrophic.

What is a legal system?

A mechanism for creating, interpreting, and enforcing laws.

What are the components of a legal system?

Constitutional law, criminal law, civil and commercial law.

What are the two bases of rule?

Rule of Man (authority rests in one leader) vs Rule of Law (no one above the law).

What are operational legal concerns for IB?

Starting a business, contracts, employment rules, bankruptcy/closure.

What are strategic legal concerns for IB?

Product regulation/safety, jurisdiction, intellectual property rights.

What are the main types of legal systems worldwide?

Common law, civil law, religious law, mixed systems.

What is factor mobility?

The movement of capital technology and people across countries

What questions does trade theory address?

What to import/export how much to trade and with whom

What is mercantilism?

The belief that a nation’s wealth is measured by its treasure (usually gold) and governments should run trade surpluses

What is neomercantilism?

Using trade surpluses to achieve social or political objectives

What is a natural advantage?

Production based on climate resources or labor force availability

What is an acquired advantage?

Production based on product or process technology

What is absolute advantage?

When a country produces a good more efficiently than others

What is comparative advantage?

Countries benefit by specializing in goods they produce most efficiently even if they lack absolute advantage

What assumptions do free trade theories make?

Full employment efficiency fair division of gains low transport costs sufficient demand static models focus on goods not services

What does the theory of country size say?

Larger countries depend less on trade due to self-sufficiency and higher transport costs

What is the factor-proportions theory?

Countries export goods using abundant cheaper production factors and import those using scarce factors

What is the country-similarity theory?

Most trade occurs among similar high-income countries with cultural and economic similarities

What is the product lifecycle (PLC) theory?

Products move from introduction to growth to maturity to decline shifting production globally

Why do companies shift production abroad under PLC?

To reduce costs reach new demand and adapt to competition

What are limitations of PLC theory?

Non-tradable goods rapid innovation luxury goods differentiation strategies need for skilled personnel

What is Porter’s Diamond of National Advantage?

A model explaining national competitiveness based on factor conditions demand conditions related industries and firm strategy

What is the factor mobility theory?

Explains why production factors (capital labor) move internationally and their impact on trade

What are pros and cons of labor mobility?

Home country gains remittances but loses talent through brain drain Host country gains skills and capacity but faces infrastructure strain

How does foreign investment stimulate trade?

Through demand for components equipment and complementary products

What is protectionism?

Governmental actions to influence international trade

What are economic rationales for trade restrictions?

Fight unemployment protect infant industries build industrial base manage trade relationships

What are risks of import restrictions for jobs?

Can trigger retaliation reduce jobs in trade sectors lower exports

What is the infant industry argument?

New industries need temporary protection until they become competitive

Why develop an industrial base?

Manufacturing absorbs surplus labor attracts FDI reduces reliance on unstable agricultural or commodity exports

What are key trade relationship objectives?

Balance-of-trade adjustments reciprocal access bargaining price control

What are noneconomic rationales for trade restrictions?

Maintain essential industries promote acceptable practices abroad preserve influence protect culture

What are tariffs?

Taxes on imports exports or transit goods

What are types of tariffs?

Specific duty (per unit) ad valorem (percentage) compound (both)

What are non-tariff barriers?

Subsidies aids/loans quotas embargoes buy-local laws standards and labels licenses administrative delays

What is a subsidy?

Government support to boost competitiveness common in agriculture

What is tied aid or loans?

Aid that must be spent in the donor country allowing noncompetitive exports

What is a quota?

A limit on the quantity of imports or exports in a time period

What is an embargo?

A complete ban on trade with a country

What is buy-local legislation?

Government preference for domestic products in purchases

What are administrative delays?

Bureaucratic slowdowns used to restrict imports

What are effects of tariffs?

Raise prices reduce consumer surplus increase producer surplus provide government revenue cause deadweight loss

What are effects of import quotas?

Similar to tariffs but create quota rents welfare impact depends on who captures rents

How can companies respond to trade restrictions?

Move abroad seek new markets strengthen competitiveness or lobby governments

Do all companies support protectionism?

No globally competitive firms often prefer free trade