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MGCR 382 (35)

IB Vocab.odt

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McGill University
Management Core
MGCR 382
Hermann Juergens

IB Vocabulary Chapter One: What is International Business? International Business (n.) business transactions between parties from more than one country Just-in-time (JIT) Inventory System suppliers are expected to deliver necessary inputs just as they are needed International BusinessActivities Exporting and Importing Exporting the selling of products made in one's own country for use or resale in other countries Importing the purchasing of products made in another countries for use or resale in one's home country Merchandise Imports and Exports (Visible Trade) trade of tangible products Service Imports and Exports (Invisible Trade) trade of services (intangibles) International Investments capital supplied by residents of one country to residents of another International Investments Foreign Direct Investments (FDI) investments made for the purpose of actively controlling property, assets, or companies located in host countries Foreign Portfolio Investments (FPI) purchases of foreign financial assets for a purpose other than control Other Forms of International BusinessActivity International Licensing contractual arrangement in which a firm in one country licenses the use of its intellectual property to a firm in a second country in return for a loyalty payment International Franchising a firm in one country authorizes a firm in a second country to utilize its operating systems (brand names, trademarks, logos) International Management Contract firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed-upon fee (an) International Business any organization that engages in cross-border commercial transactions with individuals, private firms, and/or public sector organizations Multi-national Corporation (MNC) firms that have extensive involvement in international business Multi-national Enterprises (MNE) not necessarily a corporation Multi-national Organizations (MNO) can refer to both not-for-profit and profit-seeking enterprises The Era of Globalization Globalization - the inexorable integration of markets, nation-states, and technologies..in a way that is enabling individuals, corporations, and nation-states to reach around the world further, faster, deeper, and cheaper than ever before The Contemporary Causes of Globalization Strategic Imperatives 1. Leverage core competencies Core Competency distinctive strength or advantage that is central to a firm's operations 2. Acquire resources and supplies 3. Seek new markets 4. Better compete with rivals Environmental Causes of Globalization 1. Changes in the political environment 2. Technological Changes Globalization and Emerging Markets Emerging Markets countries whose recent growth or prospect for future growth exceed that of traditional markets BRIC countries Brazil, India, Russia, China Big Ten Argentina, China, Brazil, India, Indonesia, Mexico, Poland, SouthAfrica, South Korea, and Turkey Chapter Two: Marketplaces of N. America U.S. Invoicing Currency [USD] the currency in which the sale of goods and services is denominated (for about half of all international transactions) Flight Capital money sent out of a politically or economically unstable country to one perceived as a safe haven Canada Mexico C.America and the Caribbean Marketplaces of Western Europe EU Marketplaces of Eastern Europe and CentralAsia Newly Independent States (NIS) the fifteen remaining Soviet republics Commonwealth of Independent States (CIS) {[NIS] - [Lithuania, Estonia, and Latvia]} Marketplaces ofAsia Japan Keiretsu (Japan) large families of interrelated companies Australia and New Zealand The Four Tigers S. Korea Chaebol (Korea) large, privately owned, family-centered Hong Kong Singapore Reexporting importing foreign goods and then reexporting them to other countries Taiwan China Guanxi the chinese concept of reciprocal gift-giving relationships India SoutheastAsian Countries Thailand Malaysia Indonesia Vietnam Marketplaces ofAfrica and the Middle East Africa Middle East Sovereign Wealth Funds portfolios of foreign investments Marketplaces of S.America Import Substitution Policies a country attempts to stimulate the development of local industry by discouraging imports via high tariffs and non-tariff barriers Export Promotion countries pursue economic growth by expanding its exports Chapter Three: The Legal Environment Differences in Legal Systems Common Law based on the cumulative wisdom of judges' decisions on individual cases through history Statutory Laws laws enacted by legislative action Civil Law based on codification; a detailed listing of what is and is not permissible Religious Law based on the officially established rules governing the faith and practice of a particular religion Theocracy a country that applies religious law to civil and criminal conduct Bureaucratic Law regardless of the formal law of the land; whatever the countries bureaucrats say it is Domestically Oriented Laws Laws DirectlyAffecting International Business Transactions Sanctions restraints against commerce with a specific country Embargo a comprehensive sanction against all commerce within a given country Dual-use Production Products that may be used for both civilian and military purposes Extraterritoriality a country's attempt to regulate business activities that are conducted outside their borders Laws DirectedAgainst Foreign Firms Nationalization transfer ownership of resources from the private to the public sector Expropriation when a host government compensates the private owners for their losses Confiscation when a host country offers no compensation to private owners for their losses Privatization Privatization conversion of state-owned property to privately owned property Constraints on Foreign Ownership Repatriate returning to one's home country Impact of MNCs on Host Countries Economic and Political Impacts Cultural Impacts Dispute Resolution in International Business Forum Shopping seeking to have a case hearing held in the country where the court system is most favorable to the company's interests Arbitration process by which both parties to a conflict agree to submit their cases to a private individual or body whose decision they will honor Foreign Sovereign ImmunitiesAct of 1976 - the action of foreign governments against U.S. Firms are generally beyond the jurisdiction of U.S. Courts The Technological Environment Technology Transfer transmittal of technology from one country to another TheAccounting Environment Roots of National Differences Differences inAccounting Practices Value and Revaluation ofAssets Valuation of Inventories LIFO Last-in-First-Out Method of Inventory FIFO First-in-First-Out Method of Inventory Dealing with TaxAuthorities Use ofAccounting Reserves Accounting Reserves accounts created in a firm's financial reports to record forseeable future expenses that might affect its operations Other Differences Goodwill excess payment over the book value of an acquired firm's stock Impact on Capital Markets International Financial Reporting Standards (IFRS) - transparent approach to financial reporting issued by the IASB The Political Environment Political Risk Political Risk Assessment systematic analysis of the political risks they face in foreign countries Political Risks any changes in the political environment that may adversely affect the value of a firm's business activities Micropolitical Risk affects a specific firm or firms within a specific industry Macropolitical Risk affects all firms in a country Overseas Private Investment Corporation (OPIC) insures U.S. overseas investments against nationalization, insurrections or revolutions, and foreign exchange convertability Multilateral Investment GuaranteeAgency (MIGA) subsidiary of the World Bank, provides similar insurance against political risks Chapter Four: Characteristics of Culture Culture the collection of values, beliefs, behaviours, customs, and attitudes that distinguish one society from another Reflects Learned Behavior Elements are Interrelated Adaptive Shared Elements of Culture Social Structure Individuals, Families and Groups Social Stratification Social Stratification a society's categorization of people on the basis of birth, occupation, educational achievements, or other attributes Social Mobility the ability of individuals to move from one stratum of society to another Language Language as a Competitive Weapon Lingua Franca Lingua Franca predominant common language of international business Translation Backtranslation one person translates a document, then a second person translates the translated version back into the original language
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