Definitions 4.2

Question 1

Backwards vertical takeover

Answer 1

buying a business in the same industry but at an earlier stage in the supply chain e.g. bakery buys flour mill

Question 2

Joint Venture

Answer 2

a legal agreement between two businesses to work together on a specific project; in the context of this chapter its a venture between company’s from different countries

Question 3

Appreciating

Answer 3

when the value of a currency rises, i.e. it buys more of other currencies

Question 4

Capital productivity

Answer 4

the efficiency with which capital is used, e.g. output per £000 of capital investment

Question 5

Depreciation

Answer 5

when the value of a currency falls

Question 6

Poaching

Answer 6

poaching labour means hiring staff trained by others: they pay for the training but you benefit from it

Question 7

Ethnocentric

Answer 7

Centring on your own ethnicity, in other words sticking with the habits and attitudes that are common within you culture. It implies a refusal to change the product to suit local tastes

Question 8

Polycentric

Answer 8

welcoming of all cultures, and therefore willing to try t absorb new things such as food and flavours from other countries. Implies clear ambition to spread a product internationally, localising as necessary

Question 9

Price discrimination

Answer 9

charging different people different prices for the same product or service

Question 10

Aspirational pricing

Answer 10

ignoring costs and competitors in pitching a price so high as to tempt those who wish to show off their wealth

Question 11

Culture diversity

Answer 11

different interests and values of people from different national backgrounds

Question 12

Culture

Answer 12

the commonly accepted values, beliefs and behaviours within a country

Question 13

Skills transfer

Answer 13

the way that technologies and management practices used by multinationals can generate spin-off benefits locally, e.g. an IT manager for Wal-mart quits to start up her own e-commerce business in Cambodia

Question 14

Subsidery

Answer 14

a company set up to be subordinate to another, e.g. Cadbury starting a sweet shop subsidiary business

Question 15

Tax avoidance

Answer 15

legal, but perhaps not moral, ways of artificially minimising the taxes companies owe to society

Question 16

Tax havens

Answer 16

countries of districts where taxes on company profits are at close to zero. Multinationals and many other businesses artificially register their company HQ in these - often tiny - ‘homes’

Question 17

Transfer pricing

Answer 17

a way multinationals can minis their worldwide tax liabilities by transferring their profits from high-tax to low-tax countries

Question 18

Greenwash

Answer 18

the environmental equivalent o whitewash, i.e. painted on to cover the reality beneath - a business that dresses itself up to pretend to be environmentally conscious

Question 19

Footloose

Answer 19

a company that has no commitment to the countries it’s operating in, making it comfortable closing down factories and moving elsewhere, despite the unemployment left behind

Question 20

Overtrading

Answer 20

when a business expands at a rate that cannot be sustained by its capital base