International Management Midterm Study Guide

Vocabulary flashcards covering core foundational concepts, globalization dimensions, economic integration, environmental scanning (PESTEL), and contextual distance frameworks (CAGE and Hofstede) for International Management.

International business (IB)

Any business transactions, commercial/industrial/professional activity or movement of resources involving two or more countries; crosses national boundaries.

Foreign direct investment (FDI)

Long-term ownership (equity) investment in a foreign operation or affiliate, where the parent company gains some managerial control depending on its ownership.

Multinational company (MNC)

A company that engages in FDI and owns, controls or coordinates value-creating activities/operations in more than one country.

International management (IM)

Planning, organizing, leading and controlling business operations across countries while dealing with differences in culture, laws, politics and economics.

Greenfield-type establishment

A form of FDI that involves building new foreign facilities, plants, buildings or equipment to produce goods or services.

Mergers and acquisitions

A form of FDI involving investing in or acquiring an existing foreign business.

Horizontal integration

An MNC structure characterized by offering the same product or service in multiple countries (e.g., McDonald's and Coca-Cola).

Vertical integration

An MNC structure characterized by placing different steps of the value chain in different countries (e.g., Apple designing in the US and manufacturing in China).

Conglomerate

An MNC structure characterized by diversified operations across different industries and countries.

Research & development (R&D)

An international activity focusing on innovation, product design, technology and research (e.g., iPhone design in California).

Production / assembly

Manufacturing or assembling goods, often located where input costs are lower (e.g., iPhone assembly in China).

Distribution / logistics

Transporting and coordinating goods between production sites, warehouses and markets worldwide.

Marketing / retail

Advertising, brand communication, product adaptation and selling to local customers (e.g., Apple stores adapting campaigns to local cultures).

Exporting

A foreign market entry method of making the product in the home country and selling it abroad.

Licensing

Permitting a foreign party to use specified intellectual property such as patents, brand, technology, formula or design.

Franchising

Permitting a foreign party to operate using the wider business format/model and brand.

Non-equity entry

Foreign market entry via exporting and contractual arrangements, characterized by less ownership commitment.

Equity entry

Ownership-based international operations such as joint ventures and wholly owned foreign subsidiaries (including acquisitions).

Globalization

Growing interconnectedness and interdependence among nations, people and firms as goods, services, money, knowledge, information and culture cross borders more freely.

Economic globalization

Increasing integration and interdependence of national economies through trade, investment and capital flows, as well as the spread of goods, technology, information and jobs across borders.

Globalization of markets

The merging of previously separate national markets toward a global marketplace where tastes and preferences become more similar, addressing the question: WHERE are products sold?

Globalization of production

Sourcing inputs and services globally to exploit differences in labour, energy, land, capital, quality and cost to gain competitive advantage, addressing the question: WHERE are products made?

Globalization of innovation

Obtaining knowledge and development resources abroad to develop products faster and more cost-effectively, addressing the question: WHERE and WITH WHOM is innovation developed?

Policy uncertainty

A global economic risk involving changing taxes and international tax competition, greater scrutiny/restrictions of foreign investment on national-security or strategic-technology grounds, and changes in treaties.

Economic integration

Political, trade and monetary cooperation among countries or regions, often giving members preferential treatment to support economic recovery, stability and growth.

Global integration

Worldwide cooperation among countries, especially through the World Trade Organization (WTO).

Bilateral integration

Closer cooperation between two countries (or one country and a group), commonly including reduced tariffs and trade restrictions.

Regional integration

Cooperation among nearby or geographically related countries to expand trade within the region, reduce outside dependence and deepen links (e.g., European Union).

Free trade area

The first level of regional economic integration, where members remove trade barriers among themselves while each sets its own restrictions on non-members.

Customs union

The second level of regional economic integration: free trade among members PLUS a common trade policy/tariff toward non-members.

Common market

The third level of regional economic integration: a customs union PLUS the free movement of labour and capital among members.

Economic union

The fourth level of regional economic integration: a common market PLUS the coordination of members' economic policies.

United Nations (UN)

An intergovernmental organization established in 1945 after the San Francisco conference with 193 member states and 2 observers, comprising bodies such as the Security Council, General Assembly, ICJ, ECOSOC, Trusteeship Council, and Secretariat.

International Monetary Fund (IMF)

An international organization that promotes financial stability, supports recovery after financial/economic crises, and provides loans, projects and policy frameworks to help developing countries.

World Bank

An international organization focused on poverty reduction, helping achieve sustainable development goals (SDGs), and promoting long-term economic development.

World Trade Organization (WTO)

An international body that facilitates and regulates trade between nations, reduces tariffs and other obstacles, administers GATT, and monitors compliance with WTO treaty commitments.

Tariff

A government tax levied on goods moved internationally, acting as a trade barrier because it affects prices.

United States–Mexico–Canada Agreement (USMCA)

Trade agreement signed 30 November 2018 and effective 1 July 2020 that replaced NAFTA to reduce transaction costs and uncertainty, modernizing trade with labour, environmental, digital trade, and IP rules and a joint review every six years.

Static effects

Effects of economic integration where trade barriers fall and resources shift from less efficient to more efficient firms.

Dynamic effects

Effects of economic integration where larger markets encourage production growth, investment, and economies of scale.

Economies of scale

A production condition where the average cost per unit decreases as output volume increases.

Bilateral investment treaty (BIT)

A treaty between two countries designed to promote and protect investors' investments in each other's territory.

PESTEL framework

A framework identifying external Political, Economic, Social, Technological, Environmental and Legal factors that affect a single country environment, business operations, and long-term strategy.

Home-country effect

The phenomenon where a company's country of origin influences its behaviour regardless of its foreign destination (e.g., home anti-corruption laws shaping overseas subsidiaries' practices).

Host-country effect

The phenomenon where the destination country influences firm behaviour regardless of its home country (e.g., local FDI laws constraining foreign entry or location options).

Home–host contextual distance effect

The phenomenon where the differences between the home and destination countries themselves influence how hard cross-border business becomes.

Psychic distance

A manager's subjective perception of differences that make foreign markets difficult to understand or operate in, rather than purely physical distance or GDP.

CAGE framework

Ghemawat's (2001) framework comparing country distance across four dimensions: Cultural, Administrative, Geographic, and Economic.

Cultural distance (CAGE)

Differences in language, ethnicities, religions, values, social norms, and work systems (or country-level insularity and traditionalism) that create difficulty for cross-border operations.

Administrative distance (CAGE)

Differences in legal and political systems, absence of colonial ties, lack of shared currency or regional trade blocs, weak legal institutions, corruption, or closed economies.

Geographic distance (CAGE)

Physical separation, absence of shared land borders, differing time zones, climates, terrain, or poor transport and communications infrastructure.

Economic distance (CAGE)

Differences in consumer income, purchasing power, resource costs/quality, infrastructure, economic size, monetization, and knowledge availability.

Kogut–Singh (KS) index

A 1988 formula used to calculate a composite measure of cross-country cultural distance based on Hofstede's national cultural scores.

Individualism vs. collectivism

A cultural dimension contrasting loose ties and individual self-reliance ('I') against strong in-groups, loyalty, group harmony, and shared responsibility ('we').

Power distance

The extent to which less powerful members accept unequal power; high power distance accepts hierarchy and authority, while low power distance emphasizes equality.

Uncertainty avoidance

A cultural dimension describing comfort with ambiguity and uncertainty, where high avoidance indicates less comfort and greater anxiety or expressiveness.

Masculinity vs. femininity

A cultural dimension contrasting an emphasis on assertion, achievement, competition, and success (masculine) against modesty, quality of life, and care (feminine).

Long-term orientation

A cultural dimension contrasting a focus on future rewards and forward-looking persistence (long-term) against tradition, social obligations, and the present (short-term).

Liability of foreignness

The added difficulty and cost that a company incurs from being a foreign entrant rather than a local firm in a market.

Comparative advantage

The ability of a country to produce specific goods more cheaply or easily than other countries.