Foreign Direct Investment Flashcards
(343 cards)
1
Q
What are the benefits of an international strategy?
A
- New investment and trade broadens markets, thereby increasing economic stability & resiliency
- New investment brings innovation, which strengthens and grows existing industries.
- Increased competitiveness drives growth and eventually, employment.
2
Q
What are the benefits of promoting FDI and Exporting?
A
They position a community for the long term by allowing capable firms to become more competitive, diversified and sustainable.
3
Q
True or False
Most FDI occurs through mergers / acquisitions, but doesn’t always expand jobs.
A
True.
4
Q
What is a primary difference b/w FDI and Exporting?
A
FDI focuses on attracting larger foreign firms.
Exporting focuses on knowledge of small to medium sized firms
5
Q
True or False
Foreign owned firms tend to both import and export more than their domestic peers?
A
True.
6
Q
What are some ways EDOs can promote exports in their communities?
A
- Convene - stakeholders identify SWOT
- Think Local - identify local assets and develop local brand to attract investments
- Collaboration - w/ other communities to create export plans and market globally
- Resources - utilize federal / state gov’t resources
- Plan - develop regional plan
- Educate - increase business’ understanding of exporting and gauge interest
- Improve Access - update website with current export resources available
- Support - identify export ready businesses & connect them with appropriate agencies / resources
- Leverage Global Connectivity - analyze existing business connections to foreign markets, immigrant communities
- Partner with Higher Education - to attract foreign students
- B-2-B Mentorship Program - share expertise to foster regional growth
- FTZ - designate foreign trade zone to reduce / delay duties on foreign inputs
- Organize - trade mission
- Broaden the Economic Strategy - align with exporting
7
Q
Why are foreign firms more likely to locate in an industrial cluster of similar companies?
A
Gain access to:
- specialized knowledge
- skilled workers
- dense network of customers
- access to suppliers
8
Q
What is portfolio foreign investments?
A
Where businesses purchase stocks or bonds of businesses in other countries.
9
Q
What constitutes foreign direct investment?
A
When a foreign company owns a controlling stake in the firm (technically defined as owning more than 10% of a company)
10
Q
Define FDI Stock
A
Total amount of foreign capital invested into a country at any given time.
11
Q
Define FDI Flow
A
The change in total investment over a given unit of time (calculated by subtracting total divestment from total new investment).
12
Q
What is the difference b/w vertical and horizontal investment?
A
Vertical - firm adds business functions on either side of its value chain outside of its home country (i.e. car manufacturer purchasing a dealer network abroad)
Horizontal - company expands its existing business operations into a new country
13
Q
What 3 ways can FDI take occupancy?
A
- Greenfield - new construction projects by foreign companies (i.e. manufacturing sector)
- New - occupies vacant space already constructed (i.e. service and financial sectors)
- Mergers & Acquisitions - changes in a company’s ownership
Merger occurs when a domestic corp and foreign corp combine assets / liabilities into one entity
Acquisition occurs when a firm from one country is purchased by a firm from another country
14
Q
The conventional benefits of FDI include:
A
Generate new construction projects (expenditures for equipment / materials, jobs, tax revenues)
Non-construction wages
Indirect and Induced job creation / tax revenues
New product availability in the marketplace
Increased clustering effects
More competition
15
Q
What are the unique ‘spill-over’ benefits of FDI?
A
Exposure to innovative business practices
Technology transfer (physical and intangible) (vertical and horizontal)
Access to technology leads to more firms entering the market place
More competition can reduce the price and increase productivity
Enhanced technology sharing in clusters
Diversification through increased exposure and foreign ties
Positive marketing efforts through the presence of international firms
16
Q
What is an industry cluster?
A
Regional groupings of related businesses that benefit from concentrations of research capacity, labor, logistics and capital.
17
Q
What are some of the roles economic developer’s play with regards to FDI?
A
Marketer Ambassador Organizer Technical Assistance Reference Aftercare Service Provider
18
Q
An FDI Marketing Plan identifies:
A
- Specific or regional target markets (countries/cities) and market intelligence
- Strategic connections to targets that can provide an advantage
- Budget for FDI
- Priority activities to be undertaken
- Additional marketing provided (social media)
- Timeline
19
Q
2 of the least expensive yet most effective outreach methods in FDI are what?
A
1) word-of-mouth introductions
2) endorsements from foreign investors
20
Q
What is meant by providing foreign investors with a ‘soft-landing’ in a community?
A
When economic developers make available assets, tools, resources to accommodate the needs of foreign investors so they can acclimate and succeed in an unfamiliar location / country.
21
Q
The best case scenario is for an economic developer to provide a ___-____ _____ for foreign investors to assist in relocating & assimilating into a community.
A
One-stop shop
22
Q
True or False
Welcoming foreign firms to your community is different from welcoming domestic firms to your community.
A
False.
They are both provided with current stats, info on trends, taxes, permitting or anything else they need to learn about their new environment.
Introductions should be made to service providers, chamber of commerce reps, industry associations, etc.
23
Q
What is ‘aftercare’ and what is it’s purpose?
A
Aftercare describes a range of activities from providing post-establishment facilitation services to developmental support for new foreign investors.
Its purpose is to strengthen relationships with and support the success of foreign investors. The activities create a favorable business & operating environment for foreign firms, prevents their failure or relocation and facilitates their growth.
24
Q
What is the rationale for providing ‘aftercare’?
A
Existing investors are more likely to invest further in a community than companies who have yet to invest.
It’s less expensive than attracting new investors.
25
What are some examples of 'aftercare'?
Administrative services (building permits, work permits for spouses, finding homes, enrolling in schools, introductions to service providers - banks, legal, acctg)
Operational services (training support, real estate support for expansions, supplier contacts. business or financial planning, cluster support networks)
Strategic services (longer term expansion/growth, product line development, value added services, policy advocacy, helping local suppliers meet international standards, linking mgrs to networks)
26
What knowledge is needed before starting an aftercare program?
The needs of the investors and how the EDO can best serve them.
Resources available to meet needs.
27
Why are incubators attractive to foreign investors?
They provide smaller investors with the resources, support and opportunities that might be too cost prohibitive to develop on their own.
28
Why are regional partnerships and cooperation critical for FDI and Exporting initiatives?
Partnerships with the State EDOs ensure access to funding, expertise, leadership, commitment to local initiatives.
Regional partnerships promote resource sharing, cohesive branding, infrastructure access.
Partnerships with local companies leads to stronger cluster developments, developing local capacity & building multi-sector teams.
University agreements have wider research reach that's critical in FDI attraction.
29
Name the primary services offered by SelectUSA.
1. Promote FDI in US
2. Coordinate with state/local officials to improve & implement FDI strategies
3. One-stop shop for resources
4. Provide searchable list of funding FDI projects
30
What are the 5 categories of strategic investment according to EDA?
1. brainpower
2. innovation & entrepreneurship networks
3. quality, connected places
4. branding experiences
5. civic collaboration
31
True or False
Governor's have found that strengthening their states' connections to the international economy through trade and investment affects the state's economic success.
True.
32
How can Governor's best position their states as top FDI destinations?
Analyze and capitalize on their state assets (workforce, infrastructure, business climate, education, geography, etc.)
Offer sustained support to foreign firms interested in locating in their state
Prioritize FDI and adopt strategies that align with the state's overall economic development plan
33
True or False
| Ports are major logistics hubs and significant players for economic development and FDI.
True.
34
How do ports act as 'funnels' to economic development?
1. Direct via ports and transportation services (revenues from port activities)
2. Indirect via import/export activity and benefits (cost savings for services that would otherwise not be offered)
3. Induced (economic multipliers and oppys around the port)
35
How do economic developers attract FDI to their local communities?
Through effective marketing, regional branding and targeting industry sectors that match local strengths and clusters.
36
What is the core skill of economic developers?
Relationship building
37
Before establishing a new eco-devo initiative, an economic developer must first...
- Study the history of growth/decay of the community
- Identify the SWOT
- Understand existing business assistance programs
- Determine if existing programs can be leveraged, expanded to meet needs
- Understand obstacles for private sector growth
- Develop relationships with key stakeholders to create vision for the community
38
What is a location consultant's primary goal in assisting companies invest abroad?
To eliminate the communities with the most disadvantages for the client.
39
What is the location consultants role in assisting foreign investors?
Ensure company success in new location
Explain project so EDO's understand needs
Gather data to allow effective evaluation
Eliminate communities with most disadvantages
40
When considering new investment endeavors, investors tend toward places that:
1. They've invested in before
2. Competitors have invested in
3. Customers/Suppliers have a presence in
4. Rank high in location attractiveness
5. Positive reports in business press
6. They've visited on business or vacas
7. Have family roots in
41
List 4 reasons companies invest abroad.
1. Gain direct access to foreign markets
2. Improve access to export markets
3. Acquire technology or learn business processes only available abroad
4. Diversify
5. Enter new lines of business
6. Integrate foreign suppliers into the supply chain
7. Acquire competitors
8. Access financing only available abroad
9. Avoid instability of home market
42
What are some factors in determining how much a firm will invest?
1. Global economic conditions
2. Growth oppys at home
3. Economic conditions in target country
4. State of competition w/in an industry
5. Characteristics of the investing firm (size, access to capital, previous investing experience, corp. goals)
43
Most companies invest abroad with the goal of?
Controlling Assets.
44
There are numerous factors in deciding on an FDI location. Name 6
1. Efficient regulatory environment
2. Corporate tax rates
3. Quality of education
4. Workforce skills, wages, productivity
5. Entrepreneurship support and risk-taking
6. Quality of transportation, communications, infrastructure
7. Availability / Cost of natural resources
8. Size of consumer markets
9. Access to export markets (transportation and trade agreements)
10. Political stability
11. Access to innovation & technology
12. Energy costs
13. Degree of industry clustering
14. Commonalities b/w host & home country
15. Economic growth rates
16. Protectionist policies / restrictions on foreign equity
45
The growth of FDI since 1990 is attributable to what?
```
Deregulation
Trade liberalization
Technological advances in transport / communications
Political changes
Innovation as a source of growth
```
46
True or False
| The primary goal of FDI is to increase technology transfer.
False.
| The primary goal is to create new jobs.
47
True or False
| Firms headquartered in emerging markets are responsible for a large share of mergers & acquisitions.
True.
These firms buy established firms in industrialized countries to acquire new technology and sell products in those markets.
48
How will 'dry powder' impact the future of FDI?
Dry Powder is the large amounts of cash that some large companies hold. It's viewed as a major potential source of FDI in the future.
49
How are national competitiveness rankings used?
To compare countries on various metrics / factors against each other with regard to FDI, business climate, ease of doing business, economy, etc.
50
True or False
| Today, most foreign capital is invested in the US through free-standing, foreign owned firms.
False.
| Today, most foreign capital is invested in the US through domestic subsidiaries of multinational firms.
51
List the contributing factors to the strength of the US as a destination market for FDI.
```
World's largest consumer market
Strong, consistent economic growth
Established industry clusters
Strong capital markets
Quality, comprehensive infrastructure
Culture of innovation & entrepreneurship
Effective Institutions
```
52
True or False
| The US workforce is 30% more productive than the German Workforce and twice as productive as the S. Korean workforce.
True.
53
What does the American Free Trade Agreement allow?
It offers barrier-free trade with other countries. Foreign foreign firms can build facilities in the US and export tariff-free to other countries.
54
Why is the US considered the most innovative country in the world?
When measured by the top universities, research and development spending, patents and availability of elete engineers and scientists, UP ranks 1st.
The US is home to 75% of the top 20 and 50% of the top 100 world universities.
These universities train elite engineers and scientists for the workforce, and produce academic research that can be commercialized.
55
What are the challenges to foreign investment in the US?
Corporate income tax rates are higher in the US
Balance of trade (UP imports more than exports)
National Security concerns
High business costs from crime / violence
Complex gov't regulations
High federal debt
Underperforming primary education system
Strained relationships with several countries
Ineffective federal gov't
Underfunded infrastructure
Inadequate financial sector regulation
Complex tax code
Stringent protections for workers
Rigorous environmental standards
56
True or False
| The United Kingdom was the largest cumulative source of inward FDI to the US in 2013.
True
| UK invested $519B in the US in 2013, ~1/5 of total US investment.
57
Which industries provide the majority of FDI in the US?
Manufacturing
Wholesale Trade
Finance / Insurance
Make up more than 50% of the foreign owned capital invested in the US
58
True or False
| There has been a growing shift of FDI toward services.
True
59
Once a company decides to locate in the US, what are the determining factors in deciding on a location?
1. Regulatory environment
2. Workforce skills
3. Suppliers / Competitors / Clustering
4. Local / State taxes
5. Infrastructure quality
6. Local incentives
60
Although the US ranks high in international competitiveness rankings, US cities rarely place in the top 10. Why?
FDI in the US is diffused across many metro regions across the country
US cities rank low on quality of life factors compared to foreign cities
61
List the emerging trends economic developers should be prepared for?
```
Additive Manufacturing (3-D Printing)
Big Data
Digitization
Energy Dynamics
E-Commerce
```
62
How could emerging trends impact economic development?
Technology improvements could decentralize manufacturing and impact where industries locate
Big data allows companies to better understand customer needs and alter processes to accommodate them
Robotics and digitization will result in more efficient production processes and could impact manufacturers to locate closer to customer base
Price, availability, sources and uses of energy will impact FDI
Online sales will impact supply chains, infrastructure and location of retail and supply firms
63
To best position a community for FDI, what 3 key items should economic developers stay apprised of?
1. Changing patterns of foreign investment
2. Competitive position of US
3. Characteristics of top-performing US cities
64
What are the 4 general initiatives that will continue to be winning strategies for attracting FDI?
1. Human capital development
2. Strategic cluster development
3. Innovative capacity development
4. Entrepreneurship promotion
65
What are the 3 main factors determining America's competitiveness in the global economy?
1. Skilled workforce
2. Research & Development (R&D)
3. Infrastructure
66
What is the 'middle skills gap'?
Middle Skills are needed for jobs that require more education than a high-school degree but less than a 4-yr college degree. Vacancies are found in fields such as computer technology, nursing, high-skill mfg, etc.
67
True or False
| The US educational system has been able to keep up in teaching the skills necessary for today's technology companies.
False
The skills that companies desire from employees have changed so significantly and rapidly, the education system has not been able to keep pace.
68
True or False
| The majority of R&D is undertaken overseas.
True
R&D within the US is largely funded by private organizations due to the growing federal debt and pressure on research budgets
69
The first step in attracting foreign investment is to ensure a community has the ___________ to make it happen,
Capacity
70
What can an economic developer do to determine their target market in pursuit of FDI?
1. Understand local community and ability to provide resources for specific industries
2. Conduct industry analysis (what industries best fit community based on existing businesses, gaps, suppliers and customers)
3. Know factors involved in location decision making process
4. Know needs / preferences of industries that are compatible with local economy
5. Know your competition for these same industries and your competitive advantages
71
With regard to marketing why is it important to identify a target market?
Targeted marketing efforts are more effective when focused on a market that is more likely to respond.
72
What can local gov't improve to create an investment-friendly environment for foreign investment?
1. Improve effective use of buildings / space
2. improve productivity of workforce
3. improve efficient use of financial resources
73
What factors affect a community's business climate?
```
Attitudes towards economic growth
Public-private cooperations
Gov't responsiveness
Gov't efficiency
Gov't regulations
Labor relations
Eco-Devo resources and experience
```
74
Access to _______________ determines the capacity to move goods / people efficiently.
Transportation
75
Why is it important to understand your community's access to the global economy through transportation?
Transportation is how a company accesses their suppliers, vendors, customers, market, technology
Transportation capacity will identify ability to handle increases in demand, size of customer market, speed to market
76
What are some of the criteria an economic developer should include in their community inventory?
```
Federal Gov't Data
Business Climate
Economic Structure
Labor Market / Workforce
Transportation
Infrastructure
Taxes
R&D access
Education / Training
Financial Capital availability
Qualify of Life
Sites / Facilities
```
77
In a SWOT analysis, what are the internal factors?
Strengths - are assets or factors that give a community its competitive advantage and make the area an attractive place to be.
Weaknesses - are factors or trends that are obstacles or constraints that make it difficult for businesses to develop, operate profitably or grow.
78
In a SWOT analysis, what are the external factors?
Opportunities - conditions external to the community that make it easier or possible to develop competitive advantage.
Threats - unfavorable trends or developments external to the economy that lead to loss or decline in a community's competitive advantage.
79
Regarding FDI, what will a SWOT analysis tell an economic developer?
Which industry sectors are most primed for foreign investment.
Those sectors will have the largest # of employees, have attracted the largest amount of investment or growing the fastest.
Additional factors include:
if the sector aligns with the strength of the location;
has potential for foreign investment;
can make the largest impact on the economy
80
What is a trade mission?
Overseas trips of public / private delegates to seek opportunities to develop personal relationships with foreign investors looking to expand in the US
81
What determines if a trade mission is productive?
If it generates leads for FDI in the delegation's home jurisdiction.
82
What are the typical considerations involved in planning pre- and post- trade missions?
1. What is the purpose
2. Reasonable costs / budget
3. Where will the mission go (identify markets)
4. Who will go (local delegates)
5. Pre-planning (marketing / recruitment / orientation)
6. What activities to attend
7. Follow-up (debrief delegates / maintain relationships with foreign contacts)
83
What are the legal entities for foreign firms to consider when entering into the US market?
1. Branch (extension of foreign firm)
2. Subsidiary (separate legal entity w/ 80% control)
3. International Joint Venture
4. Mergers / Acquisitions
84
Why do experts discourage foreign firms establishing a branch operation when entering the US market?
Foreign companies are exposed to high legal liabilities, intellectual property risks and greater taxation.
85
What are the options for a foreign firm in establishing a subsidiary in the US and which is the preferred method by experts?
1. Corporation
2. General or Limited Liability Partnership (GP or LLP)
3. Limited Liability Company (LLC)
Corporation is preferred for liability and tax reasons.
86
How can an economic developer assist a foreign firm in establishing a subsidiary?
Assist in incorporation process / procedures;
Assist with trademark protection for name, brands and logo;
Build local supply chain & get involved in innovation ecosystem;
Build relationships with R&D institutions, cluster associations and networking
87
What is an International Joint Venture (IJV)?
Strategic alliance of 2+ partner companies where one of the partners is a foreign company
The purpose is to share resources, risks, rewards and management
Temporary partnerships for a specific purpose (usually 5 years)
Partners decide how partnership will be organized
88
What are the 3 principal functions for an International Joint Venture (IJV)?
1. Distribution of a foreign company's products in US
2. Joint production in US
3. Research & Development to develop new products
89
The advantages of an International Joint Venture (IJV) include:
1. Synergy, collaboration & economies of scale (sharing facilities / resources, pooling risk and capital)
2. Market access for the foreign partner (existing customer base & distribution channels, experience with gov't rules / regs)
3. Benefits to US firm (access to technology, exporting platform)
90
The disadvantages of an International Joint Venture (IJV) include:
1. Differences in business culture, mgmt, leadership
2. Disputes over control, sales, intellectual property
3. Challenges in capitalizing the venture due to temporary nature of IJV
91
True or False
| In a Limited Liability Partnership, the partners pay taxes on the partnership's disbursements.
True
| LLP's are tax pass-throughs where the company does not pay any taxes, but the partners do.
92
How can an economic developer assist a foreign firm in establishing an International Joint Venter (IJV)?
1. Matchmaking b/w local & international partners
2. Assist with due diligence
3. Provide info on potential partner countries legal / tax systems
4. Provide financing for IJVs
5. Connect IJVs with professional services
6. Assist dispute resolutions
93
Once a foreign firm is established in a community, how can economic developers assist in their success?
1. Provide access to professional services
2. Connect them to professional service providers
3. Connect them to R&D institutions
4. Assist with workforce development needs (assist in hiring locally)
5. Offer data on local economy
6. Assist with personal needs (schools, housing, banking, language learning, etc.)
7. Connect them to local suppliers
8. Encourage involvement in local philanthropy
94
True or False
| Failure to obtain a visa is the most common factor preventing entrepreneurs who want to come to the US
True
95
What are the 2 visa classes especially for foreign investors?
Treaty Investor E-2 Visa
| Immigrant Investor EB-5 Visa
96
What is the difference b/w the E-2 and EB-5 Visas?
E-2 - Treaty Investor is a non-immigrant visa for those who plan to invest in a commercial enterprise in the US; used for the purpose of developing & directing an investment; valid for 2 years; does NOT provide a way to permanent residency; unlimited extensions.
EB-5 - Immigrant Investor is an immigrant visa for those seeking permanent resident status and who have invested or committed to invest in a commercial enterprise; includes a job creation component; includes a minimum investment requirement; 10,000 allocated per year
97
What challenges do immigrant entrepreneurs often face in starting & operating businesses in the US?
Unfamiliar with American institutions
Difficulty in accessing credit
Lack of financial literacy or mgmt skills
Language barriers
Access to business support services
Lack of awareness on benefits of workforce training
Poor business networks
98
How does 'protectionism' challenge FDI in the US?
It protects inbound flows of foreign investment or restricts conditions on outbound investment.
Inward protectionism include measures to prevent or discourage foreign investors from coming to, or staying in a host country.
99
In screening a potential FDI prospect, what information should an economic developer review?
```
History of investing abroad
Prior merger / acquisitions
Employment trend (increasing?)
Financial resources to invest
Current export activity
```
Compare industries to their own sector and not to the overall market
100
Name 4 of the value dimensions and how they shape the international business environment?
1. Time orientation - how a culture values past, present and future when it comes to punctuality and project deadlines
2. Space orientation - how a culture views personal space and comfort levels in personal space, touching and seating arrangements
3. Activity orientation - how accomplishments are valued (doing - tangible accomplishments and measurable achievements are valued; being - relationships and social structures are valued)
4. Relationship orientation - how a culture relates to others, make decisions and work w/in a group. Cultures that value relationships will seek consensus and try to arrive at win-win solutions
101
What are some of the challenges in negotiating through FDI projects?
1. Attitudes / Styles - (win-win solutions, exchanging info, cooperation VS. aggressive debates, persuasive arguments, based on contingencies)
2. Gathering / Sharing Information - (time spent gathering and amount of info shared differs; info sharing viewed as creating bargaining advantages or building trust)
3. Pace of Negotiations - (depends on a country's view of time; work style impacts pace also; monochronic styles address actions / goals methodically and sequentially; polychronic styles pursue multiple actions and goals at the same time)
4. Bargaining - (attitudes toward bargaining and haggling vary)
5. Decision Making - (influenced by hierarchy and authority dependent on value of consensus; foreign firms typically work within clearly established lines of authority; they rarely delegate authority so important to establish relationships with top execs)
6. Agreements / Contracts - (keep written correspondence of meetings and key negotiation stages; contracts may not be seen as binding; don't bring an attorney to the negotiation table)
102
What factors have lead to the surge in cross-border trade over the past 20 years?
- Trade Agreements
- Trade promotion by international agencies w/ clearer goals, rules and penalties
- Convergence in incomes b/w developed and developing countries
- Decreasing costs of transportation & communication
- Innovation & deregulation in financial products & markets
- Opening of trade in previously isolated markets
103
True or False
| Services now account for 1/5 of global exports.
True
104
True or False
Multinational mfg companies are the largest exporters due to cross-border movements of intermediate goods in the course of their manufacturing and production processes.
True
105
True or False
| In 2015, merchandise trade was growing about 50% faster than income.
True
106
Why are long-term prospects for commodities trading difficult to predict?
Probable changes and volatility in technology, policy and population dynamics make it difficult to predict.
107
______________ presents a major opportunity to export critical infrastructure techology, (i.e. equipment for power generation, telecommunication, oil/gas, in addition to the services to install and maintain them).
Urbanization
108
How can services be exported?
1. Service producer travels to the consumer (consulting)
2. Producer delivers the service remotely (call centers)
3. Consumer travels to the producer (tourism)
109
Why is the current pattern of global trade changing?
1. Demand from industrialized countries is slowing
2. Demand from emerging countries is increasing
3. Challenges in national economies and politics
4. Population, Labor force and demographic changes
5. Income and wage growth in developing countries
6. Natural resources availability and price
7. Volatility in financial markets
8. National security issues
110
What is the importance of understanding countries' trade balances?
Trade surpluses (exports exceed imports) and trade deficits (imports exceed exports) have a corresponding effect on capital flows. Exports bring in $$; Imports send out $$
111
What are trade barriers?
Policies that intentionally or inadvertently restrict trade.
112
How can international trade be restricted?
- Import Tariffs
- Quotas (value, volume or number of units)
- Subsidies (i.e. agricultural products)
- Technical Barriers (regulations such as size, shape, design, function to protect consumers and environment)
113
Define a Trade Agreement.
A treaty b/w sovereign countries that establishes the terms of trade.
114
What is the difference b/w Preferential Trade Agreements (PTAs) and Free Trade Agreements (FTAs)?
PTAs - give preferential treatment through reduced barriers / tariffs
FTAs - parties agree to eliminate tariffs and quotas
115
Since the Recession of 2008/09, the pace of trade growth has ___________.
Slowed
116
True or False.
| According to estimates, the majority of global economic growth will occur outside of US borders.
True.
117
Only 4% of US firms export, of which 98% are __________.
SMEs (small / medium-sized enterprises)
| SMEs account for 35% of total export revenue
118
Which industrial sector is driving export growth in the US?
Manufacturing (transportation equipment, computers, electronics, chemicals, machinery, petroleum, coal)
Growth spurred by emerging markets characterized by high urbanization and infrastructure development
119
What criteria must be met for a product to be marketed as "Made in America"?
1. Final assembly / processing done in the US
2. Negligible foreign mfg costs (materials / labor)
3. Negligible foreign content
4. Negligible % of final product made overseas
120
Where are the top 10 export markets for the US?
1. Canada
2. Mexico
3. China
4. Japan
5. United Kingdom
6. Germany
7. Brazil
8. South Korea
9. Netherlands
10. Hong Kong
121
Which of the top 10 US export markets export more services than goods?
United Kingdom
122
Export growth is driven primarily by what?
The increasing economic growth of the trading country.
123
True or False
| The US exports the same % of goods and services.
False.
| US exports are 30% services and 70% goods
124
What is driving the increase in service exports from the US?
Tourism, Travel, Education
125
Why are more companies exporting?
1. Improvements in trade
2. Reductions in shipping costs
3. Innovations in e-commerce
4. Elimination of trade barriers
126
List a few of the benefits of exporting.
1. Access to new customers (95% of world's population)
2. Entry to promising markets (less competition; reputation of UP products)
3. Mitigate risks (diversification reduces susceptibility to downturns in market)
4. Moderate seasonal fluctuations in sales (different cultural or climate patterns will smooth seasonal variability)
5. Keep up with competition (gain insight into competition)
6. Encourage innovation (access to new technology and overcome challenges leading to new innovation & business)
127
What are the 3 key attributes a company needs in order to export?
1. Demand for their product abroad
2. Have organizational readiness for export
3. Have ability to compete in the foreign market
128
What does a company need to be "export ready"?
- financial security
- market ready products/services and be prepared to modify if necessary
- resources available for exporting
- commitment from mgmt
- ability to fill orders quickly
- awareness of cultural pitfalls
- experience in marketing (market analysis, distribution and customer service)
- have realistic expectations of ROI
129
True or False
| An international / export business plan is the same as a domestic business plan.
False
Export plans are similar to domestic business plans but also include info specific to exporting:
- how international trade fits into long-term goals
- best foreign markets to pursue
- entry strategy for each market
- steps to carry out the strategy
- action plan to implement the strategy
130
What are some considerations in selecting a target export market?
1. Economic factors (political, financial, environmental, business climate)
2. Competitive environment (price, origin, competitors)
3. Regulatory obstacles (duties, quotas, tariffs)
4. Product modifications (language, cultural variations & differences, technical regulations)
5. Demand factors (age, income, volume, cultural factors, projected demand growth)
6. Distribution (promotional media, prevailing distribution methods)
131
What are the 4 primary means for goods in entering the export market?
1. Licensing design or technology
2. Indirect Exporting (selling through agents or distributors)
3. Direct Exporting (selling B2B, e-commerce, etc.)
4. Establishing overseas joint venture
132
What are the advantages / disadvantages of Indirect and Direct Exporting?
Indirect Exporting:
- Adv - leverages experience of intermediary; customers prefer to buy through intermediaries; admin tasks are taken care of; commissioned based; cost effective, low-risk
- DisAdv - little control over products; lower profits, less intel gained on consumers / competitors
Direct Exporting:
- Adv - more control over product and pricing; less intermediary costs; greater profit potential
- DisAdv - greater risk in service & profit potential; more time & expense in preparation, selling
133
What are the 3 modes for service entry into the export market?
1. Consumer travels to the exporter (tourism)
2. Exporter travels to the consumer (consulting)
3. Services delivered online / phone (call centers)
134
What are "Incoterms" and what are the 2 most common forms?
Incoterms (International Commercial Terms) define shipping terms in international trade.
Ex-Works (EXW) specifies a buyer is responsible for the goods once they leave the warehouse.
Free-On-Board (FOB) specifies the exporter is responsible for getting the goods onto a vessel at the port.
135
Why do many companies contract with freight forwarders for their shipping responsibilities?
Complex documentation is required for shipping and the requirements change based on product and destination country.
136
Why is Credit Insurance purchased?
To decrease the risk of payment method such as Letters of Credit; to protect the investments of US exporters when foreign buyers default.
137
What risks do exporters face that those selling in the domestic market do not?
1. Payment (not prompt or paid at all)
2. Political instability (impose new tariffs; sanctions imposed)
3. Economic fluctuations (downturns impact energy prices, inflation, product demand)
4. Currency variations (req't payment in US dollars)
5. Intellectual property (not protected in many countries)
138
True or False
When the US dollar depreciates against foreign currencies, prices for American exports abroad decrease and demand for American exports generally increases.
True
139
What are the 2 primary roles of the federal government in helping US firms export?
1. Trade Policy - eliminate barriers & unfair trading practices to make American products more competitive
2. Promotion - export assistance, market development, financing, insurance, advocacy
140
How can trade agreements help US firms sell internationally?
- Eliminate barriers to foreign markets
- Lower tariffs
- Raise level of safety & quality
- Influence labor and environmental standards
141
Which federal gov't office is responsible for conducting the negotiations and enforcement of US trade agreements?
Office of the US Trade Representative (USTR)
142
True or False
| When FTAs first come into force, the tariffs are immediately eliminated.
False
Tariffs are slowly taken away or reduced through a staging 'basket' approach, where certain baskets are given a timeframe for when products will no longer be subjected to tariffs in the importing country.
143
Which trade agreement was one of the first to address trade in services and include side agreements for environmental protection and labor laws?
North American Free Trade Agreement (NAFTA)
144
Who are the main federal agencies offering direct export assistance?
1. US Dept of Ag (USDA) - services; grants; financing
2. US Dept of Commerce - market access; match-making; project advocacy
3. US Dept of State - commercial advocacy; trade promotions
4. Small Business Administration (SBA) - working capital; business counseling
5. US Trade and Development Agency (TDA) - reverse trade missions; feasibility studies; conferences
145
Who are the main federal agencies offering finance and insurance for exporters?
1. Export-Import Bank (Ex-Im Bank) - export loan guarantees; credit insurance; direct loans to foreign buyers
2. Small Business Administration (SBA) - working capital; business counseling
3. Overseas Private Investment Corp (OPIC) - US investment in foreign markets; project finance; political risk insurance
146
The US Commercial Service offers a fee-based service to US based companies to introduce their products to potential markets through arranged business meetings. What is this service called?
Gold Key Services
147
Which organization is comprised of local business leaders, appointed by the US Secretaries of Commerce, whose knowledge of international business can provide professional advice for local firms?
District Export Councils (DECs)
148
Which program provides a continuously updated, searchable database to information about global customers seeking to buy US food and ag products?
Trade Lead System (TLS) through the USDA
149
What is the purpose of the Export-Import Bank?
To assist in financing the export of US goods / services to international markets.
They provide gap financing; assume credit & country risks the private sector is unwilling to take on.
150
True or False
| Ex-Im Bank offers loans to foreign entities for the importation of US goods.
True
For medium term (1-5 yrs) deals for capital items and long term (10+ yrs) deals for major projects
151
What types of programs does Ex-Im Bank offer to export firms?
- credit insurance
- loans for buyers of US products
- financing for small business (women, minority, veteran owned)
- direct loans for developing exports / working capital
- loan guarantees for US bank loans to export businesses
152
True or False
| SBA export programs require participation from an eligible bank.
True
153
What types of programs does the SBA offer to export firms?
- loans to expand export markets
- loans for export working capital
- lines of credit for inventory, labor, working capital
- loans for facilities in expanding to new export markets
154
OPIC (Overseas Private Investment Corp) promotes economic development in developing and emerging countries how?
1. providing investment insurance
2. project financing
3. support of US foreign policy goals
4. mitigating risk
155
How can economic developers assist SMEs in exporting?
1. Develop export awareness
2. Develop export network
3. Facilitate information exchange
156
Name some ways in which economic developers can promote exports in their communities:
- Think Local - identify assets; understand local strengths; develop brand to attract investments
- Collaborate Regionally - with nearby communities to create export plans & market globally
- Know Resources - Local / State / Federal programs for export assistance
- Educate - increase understanding of exporting; determine is local products / services are right for exporting
- Support Export Pipeline - identify export ready businesses & connect them to resources
- Leverage Existing Global Community - identify immigrant community and determine connections to export markets
- Partner with R&D - colleges, universities in attracting foreign students; collaborating with businesses in technology transfer
- Designate a FTZ - build a foreign trade zone that delays or reduces duties on foreign inputs, thereby building more competitive firms
- Organize Trade Mission - with state assistance
157
How will a SWOT analysis assist a business prior to exporting?
- evaluate current position within the broader business environment
- evaluate the product being considered for export to ensure it satisfies an unmet consumer need
- highlights shortcomings to be addressed or improved
- identify potential opportunities
- improve competitiveness
158
True or False
| Having access to useful market research can make or break a firm's exporting success.
True
Foreign markets can be very different than the US market. Access to the right market research is essential to export success.
159
List 4 common mistakes of 1st-time exporters:
Failure to:
1. seek advice from qualified export professionals
2. develop an export strategy
3. research target markets / risks
4. develop a marketing plan
5. assess product's export potential
6. of mgmt to commit to overcome difficulties
7. assess actual capability to export
8. secure adequate financing
9. select overseas representative (agent / distributor)
10. secure intermediary agreement
11. understand intellectual property rights
12. understand market technique in each country
160
What is a 'carnet'?
It's a merchandise passport or international customs document that allows for the temporary transportation of various types of goods.
161
Why can financing be needed by SMEs when exporting?
A company may experience delays b/w a customer's order and its payment. Liquidity crunches are common and require either short or long-term financing.
162
What are the primary sources of financing for export?
Private Sector (banks, venture capitalists, export-specific financiers)
Federal Gov't (Ex-Im bank, SBA, USDA, OPIC, ITA)
Multilateral Development Banks (MDBs - member organizations for sovereign gov'ts to increase intn'l trade in lesser developed nations)
163
What is the difference b/w a Certificate of Origin and a Certificate of Free Sale?
Certificate of Origin - attest that a product was manufactured in the US
Certificate of Free Sale - attests an item is approved by the US regulatory authorities & legally sold in the open market w/o restriction
164
Accelerator (business)
Offer guidance mentorship & capital to develop start-ups with the intention of helping them grow in national & global markets.
165
Accession (treaties)
The process of entering into an existing treaty that has already been signed and enacted by the other parties. Has the same legal binding effect of ratification.
166
Ad valorem
A tax levied in proportion to the value of a taxed item. For example, local property taxes are generally ad valorem taxes. Many export duties are also ad valorem taxes. More generally rates according to value rather than weight or number or units.
167
Advance against documents
A loan secured by turning over shipment documents of title to the creditor; an alternative to acceptance financing.
168
Aftercare
Activities that create a more favorable business and operating environment for foreign businesses; range from providing post-establishment facilitation services to developmental support for new foreign investors.
169
Angel Investor
An investor who provides equity investment to start-up businesses.
170
Appreciation
The increase in value of an asset.
171
ASEAN
The Association of Southeast Asian Nations is a political and economic organization of 10 countries: Indonesia, Malaysia, the Philippians, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam.
172
Asian Development Bank (ADB)
Bank that fosters economic growth and cooperation and accelerates economic development in the region of Asian and the Far East.
173
Asset
Business property acquired at a measurable costs, the use of which is related to the business operations.
174
Backward vertical transfer
Occurs when a foreign firm seeks local companies to supply parts.
175
Benchmark
A quantifiable measure of economic competitiveness and quality of life collected on a regular basis. Used to measure a region's economic status and progress against comparable regions.
176
Bilateral
Between 2 countries.
177
Bill of Exchange
Aka foreign buyers check. Negotiable form of payment from the seller/exporter to the buyer/importer.
178
Bill of Lading (BOL)
A document issued by a carrier that details a merchandise shipment and assigns title of the merchandise to some party.
179
Branch
A site operated as part of a foreign parent corp's operations, rather than as a separate entity.
180
BRE Surveys
Business Retention and Expansion surveys are used to determine the concerns, plans and community relations of businesses.
181
Business environment ranking
Ranking from the Economist Intelligence Unit, designed to replicate the main criteria major corps use in deciding where to invest.
182
Business Climate
The aggregate of local gov't, labor and business attitudes toward business.
183
Business recruitment and attraction ("smokestack chasing")
Traditional approach to economic development, in which companies are enticed to relocate or set up a new branch operation in a place.
184
Business retention and expansion (BRE)
Systematic effort to keep local companies operating at their present locations. Includes assisting companies to cope with changing economic conditions.
185
Capacity building
The act of developing an organization's ability to effectively undertake a project. This can be accomplished with technical assistance, networking, conferences and workshops.
186
Capital
Property, both financial and physical, from which income is derived, and which can be used to produce additional wealth.
187
Capitalization
The total funding of an organization, consisting of debt, stock and retained earnings, used to finance operations and meet debt obligations.
188
Cargo insurance
A financial instrument protecting an exporter against loss or damage to property incurred in shipping.
189
Carnet
A customs document that permits duty-free and tax-free temporary trade in goods including commercial samples, professional equipment and good for presentation at trade fairs. The best-known is the ATA Carnet
190
Cash (finance)
Currency instruments and highly liquid short-term investments, such as money market funds and Treasury bills.
191
Cash flow
A financial statement that shows all cash receipts and disbursements of an entity for a specified period of time.
192
Certified development company (CDC)
The originating and administrating body for SBA 504 loans. The program provides long-term, fixed-rate financing to small businesses to acquire real estate, machinery, and equipment for the expansion of business or modernization of facilities.
193
Cluster
Aka agglomerations or industry clusters. Regional groupings of related firms; often identified as prime targets for marketing and development efforts.
194
Collateral
Assets that a borrower pledges to secure a debt against default.
195
Commodity
A raw material, usually further refined and manufactured (i.e copper, eggs, rubber, silk)
196
Community development corporation (CDC)
1) 501(c)(3) organizations that can obtain federal and private support. Some perform only economic development services, but most work only on housing issues.
2) "Bank CDC" are a way for banks to invest in local businesses and real estate investment projects. Bank CDCs can purchase, construct or rehab property.
197
Competitiveness
The set of institutions and policies that determine the productivity of a place.
198
Confirming house
Buying agents that represent foreign firms.
199
Consular invoice
A required document in some countries, describes the shipment of goods and shows information such as the consignor, consignee, and value of the shipment. Certified by the consular official of the foreign country, it's used by the country's customs officials to verify the value, quantity and nature of the shipment.
200
Corporation
A legally independent company with shareholders.
201
Credit risk
The chance that the return on investment will be less than expected or that the borrower will not meet the terms of the loan or investment and that secondary repayment resources such as collateral will be insufficient to cover the losses.
202
Cumulative foreign direct investment
The total amount invested in a country. Aka 'FDI stock'
203
Customs
The national agency responsible for controlling the passage of goods in and out of the country and for collecting tariffs.
204
Customs broker
The profession which clears goods through customs.
205
Customs union
An agreement b/w sovereign states to allow free trade b/w them and administer a common tariff on imports.
206
Default
Failure to pay financial obligations.
207
Depreciation
A decrease in value through age, wear, or deterioration It's important for tax assessments. The rate of depreciation determines tax due on the value of an asset.
208
Developed country
A relative designation for nations with more developed economies and infrastructure.
209
Developing country
A relative designation for nations with less developed economies and infrastructure.
210
Direct mail
A form of advertising in which a message is sent to pre-selected targets.
211
Direct financing
The provision of own funds by a lender to a borrower w/o going through another organization, tupically used in terms of gov'ts, foundations and non-profits.
212
Divestment
The opposite of FDI (i.e the closing of a foreign owned plant or the purchasing of a foreign asset by a domestic firm).
213
Dock receipt
Document given from the domestic carrier to the port of embarkation upon moving exports to the shipping line; transfers accountability.
214
Dumping (pricing)
A business practice wherein a company exports a product and sells it for less than the price it charges in its own market.
215
Due diligence
Evaluation of an entity's financial statements or portfolio of loans to determine its credit worthiness and other risk factors.
216
Ease of Doing Business Index
Prepared by the World Bank, ranks how costly and complex it is for businesses to navigate a country's regulatory environment.
217
Economic Development Administration (EDA)
A part of the Commerce Department created by the Public Works and Economic Act of 1965. The EDA's main goals are to alleviate unemployment and diversity the economy as well as assist urban areas with planning and emergency public works programs.
218
Economic Freedom Index
Prepared by the Heritage Foundation and the Wall Street Journal, measures 10 indicators of economic liberty.
219
Economic and monetary union
A trade bloc consisting of a common market, a customs union, and a monetary union. Allows for free trade or goods, common external trade policies adn a common currency.
220
Economic integration
Coordination of trade policies b/w states.
221
Economic union (politics)
The combination of a customs union with common market policies.
222
Economies of Scale
The phenomenon of production where the average cost of production declines as more of the product is produced.
223
Emerging market
Fast growing markets that do not yet meet the standard of a developed market.
224
ExWorks
A rule for any mode of transport; the seller fulfills obligations by means of making goods available to buyer at a location designated by the seller.
225
Export control
Policy used to regulate exported materials, either to address domestic scarcity or to limit the supply of another nation.
226
Export documentation
Any number of documents necessary to conduct export trade.
227
Export license
A gov't authorization to export certain goods to certain places. May or may not be necessary depending on the goods and the country.
228
Export packing list
A comprehensive inventory of a shipment, listing the goods, the type of packaging and their weight.
229
Export plan
A written plan, similar to a business plan, that discusses the resources needed, and strategies that will be employed for each element of the process of exporting.
230
Expropriation (trade)
The taking of foreign property by a gov't w/o adequate compensation. A distinct risk for both exporters and foreign direct investors.
231
Equity joint venture
Parties contribute assets toward a legal entity, either by forming a new entity or investing more equity in an existing one. The business entity could take the form of a partnership, corporation or LLC.
232
European Union
The political and economic union of 28 European member states.
233
Factoring
A transaction where an insuring bank purchases accounts receivables from an exporter.
234
Federal Trade Commission (FTC)
The US agency tasked with consumer protection and the prevention of anticompetitive business practices.
235
Foreign Direct Investment (FDI)
When a company invests enough, through the purchasing of stocks or bonds, that it owns a controlling stake in the foreign enterprise.
236
FDI Confidence Index
Prepared by A.T. Kearney, a proprietary index based on the weighted results of an investor survey.
237
Forward vertical transfer
When local suppliers intentionally and explicitly learn business processes from the foreign supplier in order to better supply goods and services.
238
FDI stock
The total amount of foreign capital invested into a country at a given time.
239
FDI flow
Measures the change in total investment over a given unit of time (usually by year); calculated by subtracting total divestment from total new investment within a given timeframe.
240
Foreign Exchange
A market for trading currencies.
241
Forfeiting
A transaction where a forfeiter purchases receivables from an exporter.
242
Free Trade Agreement (FTA)
An agreement to reduce trade barriers b/w 2 nations.
243
Free Trade Area (FTA)
A region with a Free Trade Agreement.
244
Free Trade Zone (FTZ)
A specialized economic zone where customs duties are only collected when the goods are moved to the final consumer.
245
Freight forwarder
A firm that consolidates cargo but that does not own any vessels and thus does not itself ship cargo. Issues bills of lading.
246
General Agreement on Tariffs and Trade (GATT)
The multilateral agreement on trade that was replaced by the World Trade Organization in 1995.
247
Geographic Information Systems (GIS)
Computer programs that integrate social, economic, and demographic information and mapping; used for market studies, transportation analysis, crime studies and housing impact studies.
248
Global Livability Report
Compiled by the Economic Intelligence Unit; ranks cities across the world based on the quality of living conditions.
249
Global Competitiveness Index
Prepared by the World Economic Forum; ranks countries based on indictors grouped under 3 principal categories and 12 sub-categories.
250
Great Recession
The recessionary economic period of 2008-09, characterized by layoffs, low inflation, a housing price bubble, and a major reduction in stock prices adn international investment.
251
Greenfield
New construction projects undertaken by foreign companies. Particularly prevalent in the manufacturing sector, as foreign manufacturers often must build new facilities according to their site and production process needs.
252
Gross domestic product (GDP)
Often thought of as the size of the economy; the monetary value of all goods and services produced within a country; often measured on a yearly basis.
253
Harmonized Commodity Description and Coding System (Harmonized System) (HS)
The Harmonized System is an international standard of names to classify goods, International trade statistics are frequently presented according to HS classifictions.
254
Horizontal spillover
When local competitors observe a foreign corp and are able to imitate its technology.
255
Image (marketing)
The sum total of all the perceptions others have about a community or entity.
256
Incentives
Benefits offered to firms as part of an industrial attraction strategy. A few incentives are tax abatements and credits, low interest loans, infrastructure improvements, job training and land grants.
257
Incubator
Entity that nurtures and supports young companies until they become viable, providing them with affordable space, technical and management support, equity and long-term debt financing and employment.
258
Industry sector model
Model that states that rather than attuning our educational system to the desire of students, the US should consider changing to a system that trains students for the jobs that industries need most urgently.
259
Inflation
An increase in the price level, or general prices in an area.
260
Infrastructure bank
Lending facilities that target the public sector, financed through a combination of bond issues, gov't funds and external donor support. They mobilize domestic funds, and create an attractive vehicle for donor funding.
261
Innovation
Creating new ideas, devices or processes.
262
Insolvency
The inability to pay ones' debts when they come due.
263
Insurance Certificate
Used to assure the consignee that insurance will cover the loss of or damage to the cargo during transit.
264
Intellectual property
Property that is a creative invention, such as design, for which the inventor has the rights and can apply for copyrights, patents and trademarks
265
International commercial terms (INCO terms)
Internationally accepted trading terms; create a common set of rules and define transaction costs and responsibilities b/w buyer and seller.
266
International joint venture (IJV)
JVs where at least one of the partners is a foreign company. IJVs often evolve from non-equity licensing or distribution relationships.
267
International Standards Organization (ISO)
Specifications for products, services and systems, put together collaboratively by various international organizations to ensure quality, safety and efficiency; vital in facilitating international trade.
268
Joint Venture (JV)
Or strategic alliance, is the temporary joining together of 2 or more partner companies to share resources. Formed for a specific purpose; once this objective has been achieved, the JV is usually disolved.
269
Junket
When a trade mission is poorly executed, does not generate FDI leads, and is perceived simply as a luxurious and expensive foreign trip that benefits only the participants.
270
Letter of Credit (L/C)
A versatile document usually issued by a commercial bank verifying that the client has credit for a specified amount, against which drafts can be drawn.
271
Leverage
1) The relation of debt to equity; the use of borrowed funds by an entity.
2) The use of incentives to induce private sector lenders, individuals or businesses to invest capital in a designated area, project or business.
272
Licensing (intellectual property)
Granting the right to use certain intellectual property for commercial purposes; permits manufacturing or producing products or components for sale in agreed upon territories and explicated time periods. Typically includes payment to licensor for these purposes.
273
Limited Liability
When a shareholder's liability (i.e in the case of a lawsuit or bankruptcy) is held to the amount of their investment.
274
Limited liability corporation (LLC)
Combine features of corporations and partnerships. LLCs are generally not recommended as an effective investment vehicle for foreign investors, for tax and liability reasons.
275
Liquidity
The ability to convert assets to cash quickly w/o loss of market value. It also refers to the ability of an entity to meet its current obligations.
276
Loan guarantee
A promise by a 3rd party to cover a loan in case of default.
277
Logistics
Flow mgmt from the point of origin to the point of consumption.
278
Made in America
A consumer movement to purchase American made goods.
279
Market
The set of existing and prospective users of a product or service.
280
Market segment
A distinct or definable subset of a market, also target market.
281
Marketing
The process of analyzing, planning and executing and controlling messages and programs designed to influence the level, timing and character of demand in selected target markets for the purpose of achieving an organizations's objectives.
282
Maturity
The amount of time before an investment or debt comes due.
283
Mercer Quality of Living Survey
Survey used by human resources professionals and location consultants to determine adequate compensation.
284
Merchandise (trade)
Tangible products that are the traditional objects of trade, such as commodities and manufacturers. Often contrasted with Service.
285
Mergers and Acquisitions (M&A)
Changes in company ownership. In the context of inward flow of FDI, M&A means that facilities or assets shift from domestic ownership to foreign ownership.
286
Microenterprise
A business that is "smaller than small". Operated by a person on a full or part-time basis, usually out of a home (i.e carpenters, day-care providers, crafts persons, caterers)
287
Middle skills gap
Middle skills are needed for jobs that require more education than a HS degree but less than a 4-yr college degree. Vacancies are found in fields such as computer technology, nursing, high-skill manufacturing and others.
288
Monochronic work style
When a culture's actions and goals are approached sequentially. These cultures tend to have a linear view of time. Americans, Germans and Britons generally prefer this style.
289
Most-favored Nation (MFN)
In international trade, an MFN is a country whose firms receive the lowest tariff and tax rates.
290
Multilateral
B/w 3 or more countries.
291
Net worth
The amount by which total assets (typically measured by their fair market value) exceed total liabilities.
292
Opportunity cost
The revenue forgone by choosing one use of money and resources over another (i.e the oppy cost of investing in the stock market is the interest that the money could have earned while sitting in the bank).
293
Option
An agreement that permits the purchase or sale of something within a specified period of time according to specified terms.
294
Organization for Economic Cooperation and Development (OECD)
International forum for developing global understanding and seeking solutions for common economic development issues
295
Outsourcing
Hiring or contracting an outside firm to perform a process or operation.
296
Overseas Private Investment Corporation (OPIC)
A federal agency that provides assistance to US companies that assists American companies investing in other countries.
297
Partnerships
Tax pass-throughs, meaning that the company itself pays no tax. Instead, partners pay tax on the partnership's disbursements.
298
Patent
The exclusive right of the patent owner to use a certain technology.
299
Polychronic work style
Cultures that pursue multiple actions in tandem and may bargain on several items at once or revisit discussions about items that had already been agreed upon. Asians, Arabs, some Southern Europeans and most Latin Americans prefer this style.
300
Portfolio Foreign Investment
Common form of foreign investment where businesses purchase stocks or bonds of businesses in other countries.
301
Preferential Trade Agreement (PTA)
A trade bloc which gives preferential treatment to participating countries.
302
Promotion
The act of furthering the growth and development of an organization by generating exposure to a target market.
303
Protectionism
The term for a business climate that is unwelcoming to foreign investors. Typically protectionism occurs in 2 ways: protecting the inbound flows of foreign investment or restricting the conditions of outbound investment.
304
Quota
A restriction on the number of goods able to be exported in a period.
305
Research and Development (R&D)
Work to introduce and improve products and services.
306
Reshoring
A movement to restore manufacturing jobs to the US
307
Return on Investment (ROI)
Net income divided by dollars invested.
308
Revolving Loan Fund (RLF)
A pool of funds that are lent out, whereby the loan repayments and income are recycled or plowed back into the pool which increases funds available for lending.
309
Risk
The degree of uncertainty that an investment will be lost.
310
Risk Management
Strategically protecting against financial losses for any venture that has an uncertain outcome.
311
Secondary Market
Markets where ownership of an investment is transferred from the one owner, usually the original, to another.
312
SelectUSA (SUSA)
A part of the International Trade Administration of the US Dept. of Commerce; The country's investment promotion agency designed to foster FDI inflows by connecting businesses and investors from around the world with domestic economic development organizations.
313
Service (trade)
Intangible traded product delivered from producer to client in the form of labor or information; such as travel, consulting or information technology work. In the context of trade, often contrasted with Merchandise or Goods.
314
Shipping mark
A designation of what is written on export cartons.
315
Small Business Administration (SBA)
Founded in 1953, SBA's mission is to aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns. Its charter also mandates that the SBA ensure small businesses a fair proportion of gov't contracts and sales of surplus property. Since its inception, the SBA has delivered more than 13M loans, loan guarantees, contracts, and other forms of assistance to small businesses
316
Small or medium sized enterprise (SME)
Businesses with fewer employees than a set threshold.
317
Social media
The use of emerging media (web, mobile phone, etc.) to communicate interactively with customers.
318
Soft costs
Development costs for various services, including architecture and engineering fees, construction interest, loan fees, insurance fees, legal and accounting feed and permit fees.
319
Soft landing
An adjustment where available assets, tools and resources are marshaled to accommodate the needs of investors so they can acclimate and succeed in an unfamiliar environment.
320
Spillover effect
Benefits that are unique to FDI that transfer into the community at large; often the main reason that decision makers at the national level initiate FDO-specific attraction policies and subsidies.
321
State-owned enterprise (SOE)
When national gov'ts hold majority stakes in for-profit businesses.
322
Subsidiary
An extremely common way that large foreign corps invest in foreign countries; a separate legal entity, such as a corp or partnership that is a least 80% controlled by a foreign parent corp or holding company. Evolve away from their parent corp and develop their own business culture and operations.
323
Supply chain
The multi-step process involved in moving a product from producer to consumer.
324
SWOT Analysis
A tool used in the economic development planning process to asses a community's Strengths, Weaknesses, (factors within a community that can be changed) as well as Opportunities and Threats (factors from outside the community that cannot be changed).
325
Tariff
An import duty on products.
326
Tariff rate quota
Quotas that allow for a quantity of goods to be imported at a reduced tariff. Importers of goods in excess of the quota pay a higher tariff.
327
Tax Incentive
The use of various tax relief measures, such as tax exemptions, tax credits or tax abatements, to recruit and attract businesses to a community or help a local business expand.
328
Technical assistance
Includes aid with preparing grant apps, training staff, applying for loans and marketing products. It may also include assisting a small business to improve the design of its product or mfg process. Technical assistance is generally aimed at providing specific services that small businesses typically cannot afford.
329
Technology transfer
Includes transfer from foreign to local firms. includes both physical technology, such as equipment, as well as intangible technology, such as production processes and innovative and effective ways of doing business.
330
Terms Loans
Debt capital repayable according to a specific schedule. It includes medium and long-term loans.
331
Terms of Trade (TOT)
The relative price of exports in terms of imports. TOT is calculated by dividing export prices by import prices.
332
Trade association
An organization established to serve the needs of members of that same industry or trade.
333
Trade deficit
When a country's imports are of greater value than their exports.
334
Trade barrier
Gov't restrictions on international trade.
335
Trade mission
A trip by gov't agents to explore business oppys.
336
Trade surplus
When a country's exports are of greater value than their imports.
337
Trade Show
A commercial or industrial formal gathering in which sellers at pre-assigned stations present goods or services for possible sale to prospective buyers.
338
Underwriting
The process of evaluating a potential borrower in terms of its creditworthiness, risks involved and performance potential.
339
United Nations
An intergovernmental organization which promotes international cooperation.
340
Venture Capital
Investment capital subject to considerable risk, generally associated with capitalizing new or unproven businesses with the possibility of very substantial returns.
341
Vertical spillover
When companies tacitly or explicitly learn business processes from a foreign supplier.
342
Working capital
Current assets of an entity including cash, marketable securities, accounts receivable, inventory and prepaid expenses. Net working capital is current assets less current liabilities.
343
World Bank
An international financial institution which offers loans to businesses in developing economies.
