addtional flash cards
(250 cards)
1
Q
What is the Base of the Pyramid?
A
Economies where people make less than $2,000 per capita per year.
2
Q
What does BRIC stand for?
A
Brazil, Russia, India, and China.
3
Q
What are Emerging Economies?
A
A term that has gradually replaced the term ‘developing countries’ since the 1990s.
4
Q
What are Emerging Markets?
A
A term that is often used interchangeably with ‘emerging economies.’
5
Q
What is an expatriate manager?
A
A manager who works abroad, or ‘expat’ for short.
6
Q
What is Foreign Direct Investment (FDI)?
A
Investment in, controlling, and managing value-added activities in other countries.
7
Q
What is Global Business?
A
Business around the globe.
8
Q
What is Globalization?
A
The close integration of countries and peoples of the world.
9
Q
What is Gross Domestic Product (GDP)?
A
The sum of value added by resident firms, households, and governments operating in an economy.
10
Q
What is Gross National Income?
A
GDP plus income from non-resident sources abroad. GNI is the term used by the World Bank and other international organizations to supersede the term GNP.
11
Q
What is Gross National Product (GNP)?
A
GDP plus income from non-resident sources abroad.
12
Q
What is the Group of 20 (G-20)?
A
The group of 19 major countries plus the European Union (EU) whose leaders meet on a biannual basis to solve global economic problems.
13
Q
What is International Business?
A
(1) A business (or firm) that engages in international (crossborder) economic activities and/or (2) the action of doing business abroad.
14
Q
What is International Premium?
A
A significant pay raise when working overseas.
15
Q
What is Liability of Foreignness?
A
The inherent disadvantage that foreign firms experience in host countries because of their non-native status.
16
Q
What is a Multinational Enterprise (MNE or MNC)?
A
A firm that engages in foreign direct investment (FDI).
17
Q
What is a Nongovernmental Organization (NGO)?
A
An organization that is not affiliated with governments.
18
Q
What is Purchasing Power Parity (PPP)?
A
A conversion that determines the equivalent amount of goods and services that different currencies can purchase.
19
Q
What is Reverse Innovation?
A
An innovation that is adopted first in emerging economies and is then diffused around the world.
20
Q
What is Risk Management?
A
The identification and assessment of risks and the preparation to minimize the impact of high-risk, unfortunate events.
21
Q
What is Scenario Planning?
A
A technique to prepare and plan for multiple scenarios (either high or low risk).
22
Q
What is Semi-globalization?
A
A perspective that suggests that barriers to market integration at borders are high, but not high enough to insulate countries from each other completely.
23
Q
What is the Triad?
A
North America, Western Europe, and Japan.
24
Q
What is Absolute Advantage?
A
The economic advantage one nation enjoys that is absolutely superior to other nations.
25
What is Administrative Policy?
Bureaucratic rules that make it harder to import foreign goods.
26
What is Antidumping Duty?
Tariffs levied on imports that have been 'dumped' (selling below costs to 'unfairly' drive domestic firms out of business).
27
What is Balance of Trade?
The aggregation of importing and exporting that leads to the country-level trade surplus or deficit.
28
What are Classical Trade Theories?
The major theories of international trade that were advanced before the 20th century, which consist of (1) mercantilism, (2) absolute advantage, and (3) comparative advantage.
29
What is Comparative Advantage?
Relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations.
30
What is Dead Weight Cost?
Net losses that occur in an economy as a result of tariffs.
31
What is Export (X)?
Selling abroad.
32
What is Factor Endowment?
The extent to which different countries possess various factors of production such as labor, land, and technology.
33
What is Factor Endowment Theory?
A theory that suggests that nations will develop comparative advantages based on their locally abundant factors.
34
What is First-mover advantage?
Advantage that first movers enjoy and do not share with late entrants.
35
What is Free Trade?
The idea that free market forces should determine how much to trade with little or no government intervention.
36
What is Import (M)?
Buying from abroad.
37
What is Import Quota?
Restriction on the quantity of imports (goods bought from abroad).
38
What is Import Tariff?
A tax imposed on imports.
39
What is the Infant Industry Argument?
The argument that if domestic firms are as young as 'infants,' in the absence of government intervention, they stand no chances of surviving and will be crushed by mature foreign rivals.
40
What is Local Content Requirement?
A requirement stipulating that a certain proportion of the value of the goods made in one country must originate from that country.
41
What is Merchandise?
Tangible products being traded.
42
What are Modern Trade Theories?
The major theories of international trade that were advanced in the 20th century, which consist of (1) product life cycle, (2) strategic trade, and (3) national competitive advantage of industries.
43
What is Nontariff Barrier (NTB)?
Trade barrier that relies on nontariff methods to discourage imports.
44
What is Opportunity Cost?
Cost of pursuing one activity at the expense of another activity, given the alternatives (other opportunities).
45
What is Product Life Cycle Theory?
A theory that accounts for changes in the patterns of trade over time by focusing on product life cycles.
46
What is Protectionism?
The idea that governments should actively protect domestic industries from imports and vigorously promote exports.
47
What is Resource Mobility?
Assumption that a resource used in producing a product for one industry can be shifted and put to use in another industry.
48
What are Services?
Intangible services being traded.
49
What is Strategic Trade Policy?
Government policy that provides companies a strategic advantage in international trade through subsidies and other supports.
50
What is Strategic Trade Theory?
A theory that suggests that strategic intervention by governments in certain industries can enhance their odds for international success.
51
What is a Subsidy?
Government payment to domestic firms.
52
What is a Tariff Barrier?
Trade barrier that relies on tariffs to discourage imports.
53
What is The Theory of Absolute Advantage?
A theory that suggests that under free trade, a nation gains by specializing in economic activities in which it has an absolute advantage.
54
What is The 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.
55
What is The Theory of Mercantilism?
A theory that suggests that the wealth of the world is fixed and that a nation that exports more and imports less will be richer.
56
What is The Theory of National Competitive Advantage of Industries?
A theory that suggests that the competitive advantage of certain industries in different nations depends on four aspects that form a 'diamond.'
57
What is Trade Deficit?
An economic condition in which a nation imports more than it exports.
58
What is Trade Embargo?
Politically motivated trade sanctions against foreign countries to signal displeasure.
59
What is Trade Surplus?
An economic condition in which a nation exports more than it imports.
60
What is Voluntary Export Constraint (VER)?
An international agreement that shows that exporting countries voluntarily agree to restrict their exports.
61
What is Agglomeration?
Clustering of economic activities in certain locations.
62
What is Bargaining Power?
Ability to extract favorable outcome from negotiations due to one party’s strengths.
63
What is Demonstration Effect?
The reaction of local firms to rise to the challenge demonstrated by MNEs through learning and imitation.
64
What is Dissemination Risk?
The risk associated with unauthorized diffusion of firm-specific know-how.
65
What is Downstream Vertical FDI?
A type of vertical FDI in which a firm engages in a downstream stage of the value chain in a host country.
66
What is Expropriation?
Government’s confiscation of foreign assets.
67
What is FDI Flow?
The amount of FDI moving in a given period (usually a year) in a certain direction.
68
What is FDI Inflow?
Inbound FDI moving into a country in a year.
69
What is FDI Outflow?
Outbound FDI moving out of a country in a year.
70
What is FDI Stock?
Total accumulation of inbound FDI in a country or outbound FDI from a country across a given period (usually several years).
71
What is Foreign Portfolio Investment (FPI)?
Investment in a portfolio of foreign securities such as stocks and bonds.
72
What is Free Market View?
A political view that suggests that FDI unrestricted by government intervention is the best.
73
What is Horizontal FDI?
A type of FDI in which a firm duplicates its home country-based activities at the same value chain stage in a host country.
74
What is Knowledge Spillover?
Knowledge diffused from one firm to others among closely located firms.
75
What is Internalization?
The replacement of cross-border markets (such as exporting and importing) with one firm (the MNE) locating and operating in two or more countries.
76
What is Intrafirm Trade?
International transactions between two subsidiaries in two countries controlled by the same MNE.
77
What is Location?
Advantages enjoyed by firms operating in a certain location.
78
What are Management Control Rights?
The rights to appoint key managers and establish control mechanisms.
79
What is Market Imperfection?
The imperfection of the market mechanisms that make transactions prohibitively costly and sometimes make transactions unable to take place.
80
What is Obsolescing Bargain?
The deal struck by MNEs and host governments, which change their requirements after the initial FDI entry.
81
What is OLI Advantage?
A firm’s quest for ownership (O) advantages, location (L) advantages, and internalization (I) advantages via FDI.
82
What is Oligopoly?
Industry dominated by a small number of players selling similar products. Market best described by the Prisoner’s Dilemma.
83
What is Ownership?
An MNE’s possession and leveraging of certain valuable, rare, hard-to-imitate, and organizationally embedded (VRIO) assets overseas in the context of FDI.
84
What is Pragmatic Nationalism?
A political view that only approves FDI when its benefits outweigh its costs.
85
What is Radical View?
A political view that is hostile to FDI in recognition of labor and environmental issues that sometimes follow FDI.
86
What is Sunk Cost?
Cost that a firm has to endure even when its investment turns out to be unsatisfactory. Any cost which is in the past and which future decisions cannot change/recover.
87
What is Technology Spillover?
Technology diffused from foreign firms to domestic firms.
88
What is Upstream Vertical FDI?
A type of vertical FDI in which a firm engages in an upstream stage of the value chain in a host country.
89
What is Vertical FDI?
A type of FDI in which a firm moves upstream or downstream at different value chain stages in a host country.
90
What is Balance of payments?
A country’s international transaction statement.
91
What is Bandwagon effect?
The result of investors moving as a herd in the same direction at the same time.
92
What is Bid rate?
The price offered to buy a currency.
93
What is Bretton Woods system?
A system in which all currencies were pegged at a fixed rate to the U.S. dollar.
94
What is Capital flight?
A phenomenon in which a large number of individuals and companies exchange domestic currencies for a foreign currency.
95
What is Clean (or free) float?
A pure market solution to determine exchange rates.
96
What is Currency board?
A monetary authority that issues notes and coins convertible into a key foreign currency at a fixed exchange rate.
97
What is Currency hedging?
A transaction that protects traders and investors from exposure to the fluctuations of the spot rate.
98
What are Currency risks?
The fluctuations of the foreign exchange market.
99
What is Currency swap?
A foreign exchange transaction in which one currency is converted into another in Time 1, with an agreement to revert it back to the original currency at a specific Time 2 in the future.
100
What is Dirty (or managed) float?
The common practice of determining exchange rates through selective government intervention.
101
What is Fixed rate policy?
Fixing the exchange rate of a currency relative to other currencies.
102
What is Floating (or flexible) exchange rate policy?
The willingness of a government to let the demand and supply conditions determine exchange rates.
103
What is Foreign exchange market?
A market where individuals, firms, governments, and banks buy and sell foreign currencies.
104
What is Foreign exchange rate?
The price of one currency in terms of another.
105
What is Forward discount?
When the forward rate of one currency relative to another currency is higher than the spot rate.
106
What is Forward premium?
When the forward rate of one currency relative to another currency is lower than the spot rate.
107
What is Forward transaction?
A foreign exchange transaction in which participants buy and sell currencies now for future delivery, typically in 30, 90, or 180 days, after the date of the transaction.
108
What is Gold standard?
A system in which the value of most major currencies was maintained by fixing their prices in terms of gold, which served as the Common denominator.
109
What is International Monetary Fund (IMF)?
An international organization of 185 member countries that was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment.
110
What is Moral hazard?
Refers to recklessness when people and organizations (including governments) do not have to face the full consequences of their actions.
111
What is Offer rate?
The price offered to sell a currency.
112
What is Peg?
A stabilizing policy of linking a developing country’s currency to a key currency.
113
What is Post–Bretton Woods system?
A system of flexible exchange rate regimes with no official common denominator.
114
What is Purchasing power parity?
A theory that suggests that in the absence of trade barriers (such as tariffs), the price for identical products sold in different countries must be the same.
115
What is Quota?
The financial contribution, capacity to borrow, and voting power of IMF member countries that is based broadly on its relative size in the global economy.
116
What is Spot transaction?
The classic single-shot exchange of one currency for another.
117
What is Spread?
The difference between the offered price and the bid price.
118
What is Strategic hedging?
Spreading out activities in a number of countries in different currency zones to offset the currency losses in certain regions through gains in other regions.
119
What are Target exchange rates?
A limited policy of intervention, occurring only when the exchange rate moves out of the specified upper or lower bounds.
120
What is Acquisition?
A wholly owned subsidiary is created through direct foreign investment.
121
What is Agglomeration?
Beyond geographic advantages, location-specific advantages also arise from the clustering of economic activities in certain locations.
122
What is Build-operate-transfer (BOT) agreement?
A nonequity mode of entry used to build a longer-term presence.
123
What is Co-marketing?
Refers to efforts among a number of firms to jointly market their products and services.
124
What is Country-of-origin effect?
The positive or negative perception of firms and products from a certain country.
125
What is Cultural distance?
The difference between two cultures along some identifiable dimensions.
126
What is Direct export?
Represents the most basic mode of entry, which capitalizes on economies of scale in production concentrated in the home country and affording better control over distribution.
127
What is Efficiency seeking?
Firms often single out the most efficient locations featuring a combination of scale economies and low-cost factors.
128
What is Equity mode?
A mode of entry (JVs and wholly owned subsidiaries) that is indicative of relatively larger, harder to reverse commitments.
129
What are First-mover advantages?
Defined as the advantages that first movers obtain and that later movers do not enjoy.
130
What is Greenfield operation?
A wholly owned subsidiary is created by building new factories and offices from scratch.
131
What is Indirect export?
A strategy of exporting through domestically based export intermediaries.
132
What is Innovation seeking?
Firms target countries and regions renowned for generating world-class innovations.
133
What is Institutional distance?
The extent
134
What is equity mode?
A mode of entry (JVs and wholly owned subsidiaries) that is indicative of relatively larger, harder to reverse commitments.
135
What are first-mover advantages?
The advantages that first movers obtain and that later movers do not enjoy.
136
What is a greenfield operation?
A wholly owned subsidiary created by building new factories and offices from scratch.
137
What is indirect export?
A strategy of exporting through domestically based export intermediaries.
138
What does innovation seeking refer to?
Firms targeting countries and regions renowned for generating world-class innovations.
139
What is institutional distance?
The extent of similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries.
140
What is a joint venture?
A new corporate entity given birth and jointly owned by two or more parent companies.
141
What are late-mover advantages?
Advantages that include free ride on first mover investments, resolution of technical and market uncertainty, and exploiting first mover difficulties.
142
What is licensing/franchising?
An agreement in which the licensor/franchisor sells the rights to intellectual property such as patents and know-how to the licensee/franchisee for a royalty fee.
143
What are LLL advantages?
A firm’s quest of linkage (L) advantages, leverage (L) advantages, and learning (L) advantages, typically associated with multinationals from emerging economies.
144
What are location-specific advantages?
Favorable locations in certain countries that may give firms operating there an advantage.
145
What is market seeking?
Firms going after countries that offer strong demand for their products and services.
146
What are modes of entry?
The format of foreign market entries, with managers unlikely to consider all of them at the same time.
147
What is natural resource seeking?
The pursuit of certain resources tied to particular foreign locations.
148
What is a non-equity mode?
A mode of entry (exports and contractual agreements) that tends to reflect relatively smaller commitments to overseas markets.
149
What is an R&D contract?
Outsourcing agreements in R&D between firms.
150
What does scale of entry involve?
The decision as to whether it should be large or small scale.
151
What are stage models?
A school of thought that believes firms will enter culturally similar countries first and gain confidence to enter culturally distant countries later.
152
What is a turnkey project?
Projects in which clients pay contractors to design and construct new facilities and train personnel.
153
What are wholly owned subsidiaries (WOS)?
Overseas business operations totally owned and obtained by either starting from scratch or acquiring a local company.
154
What is antidumping law?
Law that makes it illegal for an exporter to sell goods below cost abroad with the intent to raise prices after eliminating local rivals.
155
What is antitrust law?
Law that outlaws cartels (trusts).
156
What is antitrust policy?
Government policy designed to combat monopolies and cartels.
157
What is an attack in competitive strategy?
An initial set of actions to gain competitive advantage.
158
What is blue ocean strategy?
Strategy that focuses on developing new markets and avoids attacking core markets defended by rivals.
159
What is capacity to punish?
Sufficient resources possessed by a price leader to deter and combat defection.
160
What is a cartel?
An output- and price-fixing entity involving multiple competitors.
161
What is collusion?
Collective attempts between competing firms to reduce competition.
162
What is collusive price setting?
Price setting by monopolists or collusion parties at a level higher than the competitive level.
163
What is competition policy?
Government policy governing the rules of the game in competition.
164
What are competitive dynamics?
Actions and responses undertaken by competing firms.
165
What is competitor analysis?
The process of anticipating rivals’ actions to revise a firm’s plan and prepare for rivals’ responses.
166
What is concentration ratio?
The percentage of total industry sales accounted for by the top four, eight, or twenty firms.
167
What is a contender strategy?
Strategy that centers on a firm engaging in rapid learning and then expanding overseas.
168
What is a counterattack?
A set of actions in response to an attack.
169
What is cross-market retaliation?
Retaliatory attacks on a competitor’s other markets if this competitor attacks a firm’s original market.
170
What is a defender strategy?
Strategy that centers on local assets in areas where MNEs are weak.
171
What is a dodger strategy?
Strategy that centers on cooperating through joint ventures with MNEs and sell-offs to MNEs.
172
What is dumping?
An exporter selling goods below cost.
173
What is explicit collusion?
Firms directly negotiate output and pricing and divide markets.
174
What is an extender strategy?
Strategy that centers on leveraging homegrown competencies abroad.
175
What is game theory?
A theory that studies the interactions between two parties that compete and/or cooperate with each other.
176
What is market commonality?
The overlap between two rivals’ markets.
177
What is multimarket competition?
Firms engaging the same rivals in multiple markets.
178
What is mutual forbearance?
Multimarket firms respect their rivals’ spheres of influence, leading to tacit collusion.
179
What is predatory pricing?
An attempt to monopolize a market by setting prices below cost to eliminate rivals.
180
What is a price leader?
A firm that has a dominant market share and sets acceptable prices in the industry.
181
What is the prisoner's dilemma?
A type of game in game theory where the outcome depends on two parties deciding whether to cooperate or defect.
182
What is resource similarity?
The extent to which a competitor possesses strategic endowment comparable to those of the focal firm.
183
What is tacit collusion?
Firms indirectly coordinate actions by signaling their intention to reduce output and maintain pricing above competitive levels.
184
What is the Beijing Consensus?
A view that questions the Washington Consensus’ belief in the superiority of private ownership over state ownership in economic policy making.
185
What is bounded rationality?
The necessity of making rational decisions in the absence of complete information.
186
What is civil law?
A legal tradition that uses comprehensive statutes and codes as a primary means to form legal judgments.
187
What is the cognitive pillar?
The internalized values and beliefs that guide individual and firm behavior.
188
What is a command economy?
An economy characterized by government ownership and control of factors of production.
189
What is common law?
A legal tradition shaped by precedents and traditions from previous judicial decisions.
190
What is copyright?
Exclusive legal right of authors and publishers to publish and disseminate their work.
191
What is democracy?
A political system in which citizens elect representatives to govern the country on their behalf.
192
What is an economic system?
Rules of the game on how a country is governed economically.
193
What are formal institutions?
Institutions represented by laws, regulations, and rules.
194
What are informal institutions?
Institutions represented by cultures, ethics, and norms.
195
What is the institutional framework?
Formal and informal institutions governing individual and firm behavior.
196
What are institutional transitions?
Fundamental changes introduced to the formal and informal rules of the game that affect firms.
197
What are institutions?
Formal and informal rules of the game.
198
What is the institution-based view?
A perspective suggesting that the success and failure of firms are enabled and constrained by institutions.
199
What is intellectual property?
Intangible property that is the result of intellectual activity.
200
What are intellectual property rights?
Rights associated with the ownership of intellectual property.
201
What is the legal system?
The rules of the game on how a country’s laws are enacted and enforced.
202
What is a market economy?
An economy characterized by the 'invisible hand' of market forces.
203
What is a mixed economy?
An economy that has elements of both a market economy and a command economy.
204
What is moral hazard?
Recklessness when people and organizations do not face the full consequences of their actions.
205
What are norms?
Values, beliefs, and actions of relevant players that influence individuals and firms.
206
What is the normative pillar?
The mechanism through which norms influence individual and firm behavior.
207
What is opportunism?
The act of seeking self-interest with guile.
208
What is a patent?
Exclusive legal right of inventors of new products or processes to derive income from such inventions.
209
What is piracy?
Unauthorized use of intellectual property.
210
What is political risk?
Risk associated with political changes that may negatively impact domestic and foreign firms.
211
What is a political system?
The rules of the game on how a country is governed politically.
212
What are property rights?
The legal rights to use an economic property and to derive income and benefits from it.
213
What is the regulatory pillar?
The coercive power of governments.
214
What is a sovereign wealth fund (SWF)?
A state-owned investment fund composed of financial assets funded by foreign exchange assets.
215
What is a state-owned enterprise (SOE)?
A firm owned and controlled by the state (government).
216
What is theocratic law?
A legal system based on religious teachings.
217
What is totalitarianism?
A political system in which one person or party exercises absolute political control over the population.
218
What is a trademark?
Exclusive legal right of firms to use specific names, brands, and designs to differentiate their products.
219
What are transaction costs?
The costs associated with economic transactions or the costs of doing business.
220
What is the Washington Consensus?
A view centered on the belief in the superiority of private ownership over state ownership in economic policy making.
221
What is a budget constraint?
The limit on the consumption bundles that a consumer can afford.
222
What is an indifference curve?
A curve that shows consumption bundles that give the consumer the same level of satisfaction.
223
What is the marginal rate of substitution?
The rate at which a consumer is willing to trade one good for another.
224
What are perfect substitutes?
Two goods with straight-line indifference curves.
225
What are perfect complements?
Two goods with right-angle indifference curves.
226
What is a normal good?
A good for which an increase in income raises the quantity demanded.
227
What is an inferior good?
A good for which an increase in income reduces the quantity demanded.
228
What is the income effect?
The change in consumption that results when a price change moves the consumer to a higher or lower indifference curve.
229
What is the substitution effect?
The change in consumption that results when a price change moves the consumer along a given indifference curve.
230
What is a Giffen good?
A good for which an increase in the price raises the quantity demanded.
231
What is total revenue?
The amount a firm receives for the sale of its output.
232
What is total cost?
The market value of the inputs a firm uses in production (fixed plus variable costs).
233
What is profit?
Total revenue minus total cost.
234
What are explicit costs?
Input costs that require an outlay of money by the firm.
235
What are implicit costs?
Input costs that do not require an outlay of money by the firm.
236
What is economic profit?
Total revenue minus total cost, including both explicit and implicit costs.
237
What is accounting profit?
Total revenue minus total explicit cost.
238
What is the production function?
The relationship between quantity of inputs used to make a good and the quantity of output of that good.
239
What is marginal product?
The increase in output that arises from an additional unit of input.
240
What is diminishing marginal product?
The property whereby the marginal product of an input declines as the quantity of the input increases.
241
What are fixed costs?
Costs that do not vary with the quantity of output produced.
242
What are variable costs?
Costs that vary with the quantity of output produced.
243
What is average total cost?
Total cost divided by the quantity of output.
244
What are average fixed costs?
Fixed cost divided by the quantity of output.
245
What are average variable costs?
Variable cost divided by the quantity of output.
246
What is marginal cost?
The increase in total cost that arises from an extra unit of production.
247
What is efficient scale?
The quantity of output that minimizes average total cost.
248
What are economies of scale?
The property whereby long-run average total cost falls as the quantity of output increases.
249
What are diseconomies of scale?
The property whereby long-run average total cost rises as the quantity of output increases.
250
What are constant returns to scale?
The property whereby long-run average total cost stays the same as the quantity of output changes.
