Publication Year: 2009
The Sage Course Companion in International Business is an easy-to-navigate support guide to the International Business curriculum. It allows readers to extend their understanding of key concepts and enhance their thinking skills in line with course requirements. This book also provides guidance on essential study skills and advice on developing critical thinking about international business.
- Front Matter
- Back Matter
- Subject Index
Part 2: Core Areas of the IB Curriculum
- Introduction to the Running Themes in the Book
- Chapter 2.1: International Business Basics: Terminologies and First Reflections on Globalization, Regionalism and International Commerce
- Chapter 2.2: International Trade and Investment Theory
- Chapter 2.3: Foundations of International Economy and Trade: Culture, Politics, Law and Ethics
- Chapter 2.4: Economic Integration and Trade Relations
- Chapter 2.5: Globalization and the Monetary System
- Chapter 2.6: Internationalization: Theory, Tools and HR Issues
- Chapter 2.7: International Strategy and Organizational Structures
- Chapter 2.8: Business Operations and International Marketing
- Chapter 2.9: Risk and Uncertainties
- Chapter 2.10: Knowledge Management in International Business
- Chapter 2.11: The International Economy and International Trade or: Why and how is International Business Influenced by the Global Policy Environment?
© Gabriele Suder 2009
First published 2009
Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act, 1988, this publication may be reproduced, stored or transmitted in any form, or by any means, only with the prior permission in writing of the publishers, or in the case of reprographic reproduction, in accordance with the terms of licences issued by the Copyright Licensing Agency. Enquiries concerning reproduction outside those terms should be sent to the publishers.
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The author would like to express her thanks and love to David, Chantal and Caroline, as well as to Ingrid and Rudolf.
Also, many thanks to Delia Alfonso, Anne Summers, Clare Wells and Jennifer Pegg at Sage for their professionalism, and to the reviewers for their valuable comments and suggestions. Part Three is part of Sage's standard companion guide text and was adapted for this book; all credentials go to its author.
Thank you for the assistance of, in particular, Cecile Klawatsch and Marek Turkiewicz, at the final stages of the manuscript's proofreading.[Page viii]
Essential Resources[Page 179]
Absolute advantage Goods that a nation can produce more efficiently than any other. Acquisition Where one company forcefully takes over another company. Balance of Payment (BoP) The accounting record of the transactions between a country and the rest of the world over a given period of time. Benchmarking A marketing technique that relies on the observation of competitors' management style to retain the best practices. Bill of lading A contract between the exporter and the transporter/carrier indicating the responsibility for the goods accepted by the logistics company that sells transportation in return for payment. Bootlegging The unauthorized recording of a musical broadcast on radio, television, or a live concert. Born Global Firms that are international by ‘birth’ in organization, structure and strategy. Capital account This states the long-term and short-term transactions like certificates of deposit or foreign exchange. Cash flow management This is about controlling money inflows and outflows so that the firm has enough resources for doing business at any moment in time. [Page 181]Centralization Where top managers make all decisions at headquarters while lower-level managers carry these directives out. Centrally-determined economy An economy that is controlled and directed by the state that creates policies and allocates the resources. Change management A discipline of management that uses knowledge, tools and resources to provide a particular business with a strategy for a period of organizational change within a company. Civil law Where the legal system judgement is based on an existing set of laws and rules defined by the legal power. Common law The legal system in which judges refer to the judgement made in previous cases to create or redefine the law. Common market Where there are no barriers to trade among members of this market grouping and there is a common external trade policy. Comparative advantage In the case that one nation produces two goods more efficiently than another, both parties still benefit from an exchange and should specialize in the production of the good for which they have the greatest relative advantage. Competitive advantage A sustainable advantage that a company enjoys over the competition. Contract An agreement that allows a firm to offer services abroad for a fee and for a certain period of time. Contract management Where the government keeps the ownership of assets but gives operational responsibilities to a private company. [Page 182]Corporate culture A set of norms, values and beliefs that are shared by the members of one company. Cost leadership A company's strategy that relies on cost reduction. Counterfeiting An unauthorized recording of pre-recorded sounds, or the duplication of original artwork, labels, trademarks, and packaging. Current account This states the monetary value of the international transactions in physical goods, in services, and in unilateral transfers such as gifts or aid. Customs union Where there are no barriers to trade among members and a common trade policy with respect to non-members. Decentralization Where decision-making in organizations is pushed down to the managers who are closest to the action, often the country managers. Digital risk (high-tech risk) A type of risk stemming from the information technology industry and depending on digital and cyber technologies; it deals with information theft or reluctant transfer, information disability, system destruction or infection. Disaster management A discipline of management dealing strictly with a type of critical occurrence that a company might face; the only certainty is that disasters will occur, but the timing and perhaps the periodicity is obscure. Diversification Where, in order to reduce the impact of exchange rate changes, the company spreads its assets and liabilities through several currencies (Euros, Dollars, etc.). Divestiture The selling of assets. [Page 183]Double taxation Where a company or person has to pay twice the income tax for the same source of revenue to the different countries in which it is operating. Dumping Where the export price of a product is under-average compared to the corresponding product, the ‘like product’, on foreign markets, under specific conditions. Earned Value Analysis (EWA) A crucial measure for any project; it gives an answer for the difference between real and estimated costs (before the start of the project) of a particular project; it can be carried out at any stage of the project realization. Economic union The integration of economic policies and the free movement of goods, services and factors of production. Economies of scale Where companies are able to reduce their production costs by increasing their quantities to supply a bigger market. Embargo The strongest trade sanctions that prohibit export (i.e. shipping) of particular goods to a country on which an embargo is placed. Ethnocentrism Where one believes one's culture to be superior to others. Eurobonds Bonds underwritten by an international syndicate of banks and other securities firms, and sold exclusively in countries other than the country whose currency denominates the issue. Eurocurrency A set of bank deposits located outside the countries whose currency is used in the deposit. [Page 184]Euroequities Shares of publicly traded stock whose primary exchange is located outside the issuing firm's home country. Explicit knowledge A category of knowledge that is codified and interacting information in databases, documents etc., and formalized. Export commission agents Overseas purchasers who buy for their foreign customers. Export merchants These buy goods directly from the producer and then sell, invoice and ship them in their own name. Fiscal policy One of the two major tools (the other is monetary policy) used by the government of a country to influence its economy (mostly: inflation, unemployment and production) by means of changes in taxation and/or government spending. Foreign currency exposure management A valuable tool for firms to protect themselves from fluctuations in the global currency price. Foreign Direct Investment (FDI) Where firms invest outside their home country and thus control their foreign assets. Franchising Where the use of trademarks or assets of a company is granted to an independent firm that pays a fee. Free/liberal trade Terms used for an economy or international trade pattern in which governments try to maximise the freedom of businesses exchange. Free trade area Where all barriers to trade among member countries are removed. [Page 185]Global sourcing The use of overseas suppliers and assembly plants. Greenfield investment Wholly owned investment that the firm retains for its own use. Guanxi A Chinese term which means ‘informal, reciprocal obligation networks’; this is very important for business with China because the creation of relationships is the basis of future business success with Chinese business partners. Hedging Securing particular currency rates, thus safeguarding from future changes. International value chain A conceptual tool which is used to define the primary and secondary activities of one international company that determine the value added to a product or services. Incoterms (International Commercial Terms) Internationally accepted standard definitions, set by the International Chamber of Commerce, which are uniform for international shipment and sales activity. Joint venture Where two or more partners share a project that is limited in time, purpose and quantity. Knowledge management (KM) An evolution of information management and information technology that is directly related to corporate/strategic intelligence using specialized groupware, networking and business intelligence products that help firms develop, retain and transfer knowledge. ‘Laissez-faire’ economy A liberal economy that is self-regulated and characterized by no or very few interventions of governments. [Page 186]Letter of Credit A document that guarantees that the issuing bank makes payments upon agreed terms, and the presentation of specific documents. Licensing This gives the right to use a product or concept or perform a service that is under intellectual property rights. Macro political risk A risk that affects all foreign enterprises in the same way. Market driven economy An economy that is self-regulated by the market and focus on customer demand to which companies try to respond the best by the right allocation of resources. Mercantillsm The period from the 16th to the 18th centuries characterized by the encouragement of exports and stifling imports. Merger Where two or more full independent companies get together to form a new company. Micro political risk Monetary theory A risk that affects selected sectors of the economy or specific foreign businesses. Monetary theory One of the classical theories of macroeconomics giving the major economic influence to money demand and supply; using the core tools designed for controlling those two is crucial for dealing with issues such as inflation, unemployment or production. Monopolistic competition A market that is dominated by only one competitor which owns a large majority of the market share. Nationalization Where the government buys private goods or services that become a public property. National systems of innovation A system of clusters (private and public) responsible for R&D and innovation that are linked with [Page 187]each other to reinforce the efficiency of innovations in a country; these include government, universities, and private companies. Netting Where before government reporting, international firms adjust and determine the net balance due to and from each separate operation. Non-governmental organizations (NGOs) Non-profit organizations which are focused on particular issues such as human rights, environmental protection and humanitarian work. Non-tariff barrier A restriction on imports that is imposed under certain conditions. Pirating An unauthorized duplication of sounds, images, etc., from a legitimate version. Positive trade Balance Where both parties benefit from the exchange of goods or services between them. Power distance An index defined by Hofstede which measures the extent to which less powerful members of an organization or structure accept and consider the unequal distribution of power as a norm. Privatization Where the government sells public goods and services to private investors. Product standardization Products or services are similar in a variety of countries and the distinctions between these markets are low. Purchase Power Parity Describes how much one can buy with the home country's currency in another country with a different currency (it is a comparison of exchange rates and local prices). [Page 188]Quotas Limiting supply from foreign producers. Return on Capital Employed (ROCE) A financial tool for a ratio between Earnings Before Interest and Tax and Net Assets (total assets less current liabilities); it shows how much profit a company made thanks to its capital investments. Return on Equity (ROE) A tool used in finance; it is the ratio between net income and a shareholder's equity of a particular company; it gives information on how much profit a company made from money invested by its shareholders. Risk adaptation A strategy relying on the company's reactivity to risk occurrence. Risk avoidance A company decides not to enter a business or market to avoid the potential risk of doing so. Risk transfer The firm transfers the responsibility related to a specific risk to a third party that accepts the conditions. Strategic alliance Firms are working together on major strategic initiatives but cooperation is limited to a specific purpose. Tacit knowledge A category of knowledge stemming from people's intellect, intuition, education and experience; it is rather informal. Tariffs Tax levied on imports. The Balanced Scorecard A management tool that allows companies to manage knowledge, boost international strategy, corporate culture and control mechanisms and to evolve in this through the use of technology. Trade creation Beneficial results of companies trading more extensively with each other within the market group. [Page 189]Trade diversion A reduction of trade with companies outside the market group. Trade policies Policies designated to regulate, direct and protect national economic activity and welfare where necessary. Trade sanctions Trade penalties that countries impose against others. These include import tariffs, duties or licensing schemes. Trading bloc A preferential economic arrangement among a group of countries. Transaction costs Costs of an economic exchange. Transfer pricing The estimated cost of goods, services or funds transfer from one company to another related company. Tax havens Countries where tax rates are very low in comparison to others or do not exist at all. Uncertainty avoidance One of Hofstede's four dimensions for describing different cultures; it refers to a particular nation's acceptance or avoidance of doubtful situations. Voluntary Export Restraints (VERs) The importer limits shipping to a specific country, self-imposed and not due to tariffs and quotas that are, in contrast, imposed by governmental authorities. Vulnerability An objective estimation that the organizational system has features which constitute a high probability of adverse risks existing, and of subsequent development of crisis leading to disaster.
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Appendix of Useful Websites[Page 195]
EUROSTAT – epp.eurostat.ec.europa.eu The publication of European Union statistics on all trade, business- and economy-related issues that involve Europe, by far or by long.
The Federation of International Trade Associations (FITA) – http://www.fita.org Although some of the content here is for sale, there are many useful links found on the FITA site. Business directories, cultural information on different countries, links to glossaries and dictionaries, lists of government and multinational organizations, and several forums for trading information are among the many things to be found here.
The Global Edge – globaledge.msu.edu/resourceDesk/ International business and global trade resources and many academic sources, with many useful links to even more resource sites.
The International Trade Center (ITC) – http://www.intracen.org Extensive dossiers by individual countries can be found on the ITC site. The age of the data depends on the selected country, but was found to be fairly recent (2004–2005). Information such as trade performance indexes, national export performance, import profiles and even statistic reliability for the figures is provided. Most of the content is also free of charge.
The World Bank – http://www.worldbank.org Reports, data and a multitude of insights into international trade and development issues, on topic or country perspective, indicators for markets, economies and a variety of other themes, with key reports, numbers and figures.
The World Trade Organization (WTO) – http://www.wto.org The WTO provides extensive information on worldwide import and export statistics. The latest data is from 2005, so is quite recent, and can be requested free of charge. Precise numbers on amounts traded or percentiles can be collected either by regions, countries, imports, exports and trade sectors.