Global Management Flashcards
What is a multinational corporation?
A corporation that owns businesses in two or more countries
What is a direct foreign investment?
A method of investment in which a company builds a new business or buys an existing business in a foreign country
Define trade barriers
Government-imposed regulations that increase the cost and restrict the number of imported goods
Define protectionism
A government’s use of trade barriers to shield domestic companies and their workers from foreign competition
Define tariff
A direct tax on imported goods
Define subsidies
Government loans, grants, and tax deferments given to domestic companies to protect them from foreign competition
What is the World Trade Organization (WTO)?
The only international organization dealing with the global rules of trade between nations; its main function is to ensure that trade flows as smoothly, predictably, and freely as possible
The successor the General Agreement on Tariffs and Trade (GATT)
Define nontariff barriers
Nontax methods of increasing the cost or reducing the volume of imported goods
Describe the five main types of nontariff barriers
> Quotas: a limit on the number or volume of imported goods
Voluntary export restraints: voluntarily imposed limits on the number or volume of products exported to a particular country
Government import standards: standards ostensibly established to protect the health and safety of citizens but, in reality, often used to restrict imports
Government subsidies: government loans, grants, and tax deferments given to domestic companies to protect them from foreign competition
Customs valuation/classification: a classification assigned to imported products by government officials that affects the size of the tariff and the imposition of import quotas
What is the North American Free Trade Agreement (NAFTA)?
A regional trade agreement among the United States, Canada, and Mexico
Define local adaptation
Modifying rules, guidelines, policies, and procedures to adapt to differences in foreign customers, governments, and regulatory agencies
Define exporting
Selling domestically produced products to customers in foreign countries
Define strategic alliance
An agreement in which companies combine key resources, costs, risks, technology, and people
Define joint venture
A strategic alliance in which two existing companies collaborate to form a third, independent company
What are the benefits of an attractive business climate?
> Positions the company for easy access to growing markets based on purchasing power (the relative cost of a standard set of goods and services in different countries) and foreign competitors (the number and quality of companies that already compete in a foreign market)
Is an effective but cost-efficient place to build an office or manufacturing facility
Minimizes the political risk to the company based on political uncertainty (the risk of major changes in political regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events) or policy uncertainty (the risk associated with changes in laws and government policies that directly affect the way foreign companies conduct business)
