Midterm IB Flashcards
International Business:
1) A business firm that engages in international (cross-border) economic activities and/or (2) doing business abroad
Multinational Enterprise:
A firm that engages in foreign direct investments and operates in multiple countries
Foreign Direct Investment (FDI):
Investments in, controlling and managing value added activities in other countries
Emerging economies (emerging markets):
Economies that only recently established institutional framework that facilitate international trade and investment, typically with low or middle level income and above average economic growth
Gross Domestic Product (GDP):
The sum of the value added by resident firms, households and governments operating in an economy.
Purchasing Power Parity (PPP):
A conversion that determines the equivalent amount of goods and services different currencies can purchase. This conversion is usually used to capture the difference in the cost of living
Expatriate Assignments:
A temporary job abroad with a multinational company
Gross National Product (GNP):
Gross Domestic Product plus income from non-resident sources abroad.
Gross National Income (GNI):
GDP plus income from non-resident sources abroad. GNI is the term used by the world bank and other international orgs to superseded the term GNP.
Institution Based View:
Formal and Informal rules of the game
Resource Based View:
Firm specific resources and capabilities
Liability of Outsidership:
The inherent disadvantage that outsiders experience in a new environment because of their lack of familiarity.
Globalization:
A process leading to greater interdependence and mutual awareness among economic, political and social units in the world and among actors in general.
Liberalization:
The removal of regulatory restrictions on business
Waves of Globalization:
The pattern of globalization arising from a combo of long term trends and pendulum swings
Triad:
Three regions of developed economies (North America, Western Europe, and Japan)
Base of the Pyramid:
The vast majority of humanity, about four billion people who make less than 1500 euros a year.
Non-governmental organizations:
Organizations, such as environmentalists, human rights activists and consumer groups that are not affiliated with governments.
Cosmopolitans:
The people embracing cultural diversity and the opportunities of globalization
Institutional Framework:
Formal and informal institutions governing individual and firm behavior
Formal Institution:
Institutions represented by laws, regulations and rules
Informal Institutions:
Rules that are not formalized but exist in for example norms and values
Regulatory Pillar:
The coercive power of governments
Normative Pillar:
The mechanism through which norms influence individual and firm behavior
Cognitive Pillar:
The internalized, taken-for-granted values and beliefs that guide individual and firm behavior.
Transaction costs:
The costs associated with economic transactions
Opportunistic behavior: .
Seeking self-interest with guile
Institutional transition:
Fundamental and comprehensive changes introduced to the formal and informal rules of the game that affect organizations as players
Political System:
A system of the rules of the game on how a country is governed politically.
Totalitarianism (dictatorship)
A political system in which one person or party exercises absolute political control over the population
Democracy:
A political system in which citizens elect representatives to govern the country on their behalf.
Political Risk:
Risk associated with political changes that may negatively impact on domestic and foreign firms
Economic System:
Rules of the game on how a country is governed economically
Market Economy:
An economy that is characterized by the invisible hand of market forces
Command Economy:
An economy in which all factors of production are government or state owned and controlled, and all supply, demand and pricing are planned by the government.
Varieties of capitalisms view:
A scholarly view suggesting that economies have different inherent logics or how markets and other mechanisms coordinate economic activity
Liberal Market Economy:
A system of coordination primarily through market signals
Coordinated Market Economy:
A system of coordinating through a variety of other means in addition to market signals.
Legal System:
The rules of the game on how a country’s laws are enacted and enforced.
Civil Law: .
A legal tradition that uses comprehensive statutes and codes as a primary means to form legal judgments
Common Law:
A legal tradition that is shaped by precedents and traditions from previous judicial decisions.
Case Law:
Rules of law that have been created by precedent of cases in court.
Legal Certainty:
Clarity over relevant rules applying to a particular situation.
Property Rights:
The legal rights to use an economic property (resource) and to derive income and benefits from it
Intellectual Property Rights:
Rights associated with the ownership of intellectual property
Patents:
Legal rights awarded by government authorities to inventors of new technological ideas, who are given exclusive (monopoly) rights to derive income from such inventions
Copyrights:
Exclusive legal rights of authors and publishers to publish and disseminate their work
Trademarks:
exclusive legal rights of firms to use specific names, brands and designs to differentiate their products from others
Corporate Governance:
Rules by which shareholders and other interested parties control corporate decision makers
Informal Institutions:
Rules that are not formalized but exist in for example norms, values and ethics
Ethnocentrism:
A self centered mentality by a group of people who perceive their own culture, ethics, and norms as natural, rational, morally right
Culture:
The collective programming of the mind that distinguishes the members of one group or category of people from another
Artifacts of culture:
The visible surface of culture
Context:
The underlying background upon which interaction takes place
Low-Context Culture:
A culture in which communication is usually taken at face value without much reliance on unspoken context
High Context Culture:
A culture in which communication relies a lot on the underlying unspoken context, which is as important as the words used.
Cluster:
Countries that share similar cultures together
Civilization:
The highest cultural grouping of people and the broadest level of cultural identity people have
Power Distance:
The extent to which less powerful members within a country expect and accept that power is distributed unequally.
Individualism:
The perspective that the identity of an individual is fundamentally his or her own
Collectivism:
The idea that the identity of an individual is primarily based on the identity of his or her collective group
Masculinity:
Values traditionally associated with male role, such as assertive, decisive and aggressive
Femininity:
Values traditionally associated with female role such as compassion, care and quality of life
Uncertainty Avoidance:
The extent to which members in different cultures accept ambiguous situations and tolerate uncertainty
Long-Term Orientation:
A perspective that emphasizes perseverance and savings for future betterment
Corporate Language:
The language used for communication between entities of the same MNE in different countries
Lingua Franca:
The dominance of one language as a global business language
Holy:
An item or activity that is treated with particular respect by a religion
Taboo:
An item or activity considered unclean by a religion
Secular Society:
A society where religion does not dominate public life
Ethics:
The principles, standards and norms of conduct governing individual and firm behavior
Code of Conduct:
A set of guidelines for making ethical decisions
Ethical Relativism:
A perspective that suggests that all ethical standards are relative
Ethical Imperialism:
The absolute belief that ‘there is only one set of Ethics (with the capital E), and we have it’
Corruption:
The abuse of public power for private benefits, usually in the form of bribery
In-Group:
Individuals and firms regarded as part of “us”
Out Group:
Individuals and firms not regarded as part of “us”
Cultural Intelligence:
An individuals ability to understand and adjust to new cultures
Resource-based view:
A leading perspective in global business that posits that firm performance is fundamentally driven by firm specific resources.
Primary Resources:
The tangible and intangible assets as well as human resources that a firm uses to choose and implement as strategies.
Capability:
Firm-specific abilities to use resources to achieve organizational objectives.
Tangible Assets:
Assets that are observable and easily quantified.
Intangible Assets:
Assets that are hard to observe and difficult (or sometimes impossible) to quantify
Human Resources:
Resources embedded in individuals working in an organization.
Organizational Culture:
Employees’ shared values, traditions and social norms within an organization.
Value Chain:
A chain of activities vertically related in the production of goods and services
VRIO Framework:
The resource-based framework that focuses on the value creation (v), rarity (r), imitability (i), and organizational (o) aspects of resources.
Casual Ambiguity:
The difficulty of identifying the casual determinants of successful firm performance.
Social Complexity:
The socially complex ways of organizing typical of many firms.
Appropriability:
The ability of the firm to appropriate the values for itself
Benchmarking:
An examination of resources to perform a particular activity compared against competitors.
Outsourcing:
Turning over an organizational activity to an outside supplier that will perform it on behalf of the firm.
Offshoring:
Moving an activity to a location abroad.
Offshore Outsourcing:
Outsourcing to another firm doing the activity abroad.
Domestic Outsourcing:
Outsourcing to a firm in the same country.
Captive offshoring:
Setting up subsidiaries abroad-the work done is in house but the location is foreign.
Nearshoring:
Offshoring to a nearby location, i.e within Europe.
Original Equipment Manufacturer:
(OEM) A firm that executes the design blueprints provided by other firms and manufactures such products.
Original Design Manufacturer:
(ODM) A firm that both designs and manufacturers products.
Original Brand Manufacturer:
(OBM) A firm that designs, manufacturers and markets branded products.
Dynamic Capabilities:
Higher level capabilities that enable an organization to continuously adapt to new technologies and changes in the external environment.
Exporting:
Selling Abroad
Importing:
Buying from abroad
Trade Deficit:
An economic condition in which a nation imports more than it exports
Trade Surplus:
An economic condition in which a nation exports more than it imports
Balance of trade:
The aggregation of importing and exporting that leads to the country level trade surplus or deficit.
Classical Trade Theories:
The major theories of international trade that were advanced before the 20th century, which consists of mercantilism, absolute advantage and comparative advantage
Modern Trade Theories:
The major theories of international trade that were advanced in the 20th century which consist of product life cycle, strategic trade and national competitive advantage.
Theory of Mercantilism:
A theory that holds the wealth of the world (measured in gold and silver) is fixed and that a nation that exports more and imports less would enjoy the net inflows of gold and silver and thus becoming richer.
Protectionism:
The idea that governments should actively protect domestic industries from imports and vigorously promote exports
Free Trade:
Trade uninhibited by trade barriers
Theory of absolute advantage:
A theory suggesting that under free trade, each nation gains by specializing in economic activities in which it has absolute advantage
Absolute Advantage:
The economic advantage one nation enjoys that is absolutely superior to other nations
Theory of Comparative Advantage:
A theory that focuses on the relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations
Comparative Advantage:
Relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations
Opportunity Cost:
Given the alternatives (opportunities), the cost of pursuing one activity at the expense of another activity.
Resource (Factor) Endowments:
The extent to which different countries possess various resources (factors) such as labor, land and technology.
Factor endowment theory (or Heckscher-Ohlin Theory):
A theory that suggests that nations will develop comparative advantage based on their locally abundant factors.
Product Life Cycle Theory:
A theory that accounts for changes in the patterns of trade over time by focusing on product life cycles.
Strategic Trade Theory:
A theory that suggests that strategic intervention by governments in certain industries can enhance their odds for international success.
First mover advantage:
Advantage that first entrants enjoy and do not share with late entrants.
Strategic Trade Policy:
A trade policy that conditions or alters a strategic relationship between firms
Theory of national competitive advantage of industries (or ‘diamond’ model):
A theory that suggests that the competitive advantage of certain industries in different nations depends on four aspects that form a diamond.
Resource Ability:
The ability to move resources from one part of a business to another
Trade barrier: .
Trade barriers that rely on tariffs to discourage imports
Nontariff barrier (NTB):
Trade barriers that rely on nontariff means to discourage imports.
Import Tariff:
A tax imposed on imports
Deadweight loss:
Net losses that occur in an economy as the result of tariffs.
Subsidy:
Government payments to (domestic) firms
Import Quote:
Restrictions on the quantity of imports
Voluntary export restraint (VER):
An international agreement in which exporting countries voluntarily agree to restrict their exports.
Local Content Requirement:
A requirement that a certain proportion of the value of the goods made in one country originate from that country.
Administrative Practices:
Bureaucratic rules that make it harder to import foreign goods.
Antidumping duty:
Costs levied on imports that have been ‘dumped’ (selling below costs to ‘unfairly’ drive domestic firms out of business)
Infant Industry argument:
The argument that temporary protection of young industries may help them to attain international competiveness in the long run.
Trade embargo:
Politically motivated trade sanctions against foreign countries to signal displeasure.
