D080 questions answered correct at rating A+

D080 questions answered correct at rating A+ Globalization Worldwide interconnections in virtually every sphere of activity including the spread of products, technology, information, and job opportunities. Can result in blurred boundaries between nations, organizations, and investors Trade The actions of buying and selling goods and serviced 00:19 01:08 Capital Financial assets such as funds but also equipment, facilities, and other means of production 1. Trade and Transactions 2. Capital and Investment Movements 3. Migration and Movement of People 4. Dissemination of Knowledge Four fundamental aspects of globialization Economic Cultural Political Three major areas of globalization Outsource To obtain goods or services from an outside or foreign supplier Cultural Globalization Transmission of ideas, meanings, and values around the world in such a way that extends and intensified social relations Nongovernmental Organizations (NGOs) Not for profit organizations that are independent of the government and are active in humanitarian causes Economic Globalization Refers to the widespread international movement of goods, capital, services, technology, and information Subsidies A sum of money granted by the government to assist and industry or business Intellectual Property A work or invention that is a result of creativity, such as a manuscript Financial Instrument A monetary contract between parties 00:02 01:08 Stakeholder Analysis A technique to identify and assess the important key people, groups of people, or institutions that may significantly influence the success of an organization's activity, project, or business Foreign Direct Investment When a firm invests assists directly into a foreign country's buildings, equipment, or organizations Stage 1: Market Entry Stage 2: Product Specialization Stage 3: Value Chain Disaggregation Stage 4: Value Chain Re-engineering Stage 5: Creation of New Markets The five stages of becoming a global company McKinsey Global Institute An organization whose mission is to help leaders in the commercial, public, and social sectors develop and understanding of the evolution of the global economy Stage 1: Market entry Stage when companies enter the new countries using business models similar to the ones deployed in their home markets Stage 2: Product specialization Stage when companies transfer the full production process of a particular product to a single, low-cost location and export the goods to various consumer markets Stage 3: Value Chain Disaggregation Stage when companies disaggregate (separate into its component parts) the production process and focus on completing each activity in the most advantageous location Stage 4: Value Chain Reengineering Stage when companies seek to further increase their cost savings by re-engineering their processes to suit local market conditions by substituting lower cost labor for capital Stage 5: Creation of New Markets Stage when companies focus on market expansion Opportunities for Scale Cost advantages due to an increase in the amount of output and a decrease in the cost per unit Market Opportunities Cost Competition Government Four industry globalization drivers Scope To develop efficiencies in terms of variety not volume 1. Ethical Business Practices 2. Organization Structure 3. Public Relations 4. Leadership 5. Legal and Regulatory Structure 6. Infrastructure 7. Technology 7 Drawbacks of Global Expansion Market Driver Drivers: Opportunity for scale and scope; convergence of needs; needs and wants of the market Cost Drivers Drivers: Economies of scale and scope; exploiting cost of factors of production Competition Drivers Drivers: New markets; Increased levels of trade Government Driver Drivers: Favorable policies; Support for industry 1. Organizations 2. Governmental Organizations 3. NGOs What are the different forms of international business? Importer Sells products and services that are sources from other countries Exporter Sells products and services that are sources from its home country in foreign countries Foreign Direct Investment When a firm invests assets directly into a foreign country's buildings, equipment, or organizations Organizations Engages in foreign business such as exporting, importing, foreign direct investment Governmental Organization Engages in creating international treaties to issues such as trade, environment, or child labor; maintain embassies and consulates in foreign countries Non-Governmental Organization (NGO) Includes any nonprofit, voluntary citizens group that are organized on a local, national, or international level Six Sigma A method that provides tools for organizations to increase performance and decrease process variation Culture Administration Geography Economics CAGE components Human capital The education and skills of workers Gini Coefficient Measures the inequality among values of a frequency distribution such as levels of income Happy Planet Index Measures how well nations are doing at achieving long, happy, sustainable lives Political system The system of politics and government in a country; it governs a complete set of rules, regulations, institutions, and attitudes. Anarchy The absence of organized government; individuals have the right to choose what happens Monarchy A government in which a single person rules until he or she dies or abdicated the throne Absolute Monarchy Governments where a monarch has absolute or unmitigated power Constitutional Manarchy Governments of nations that recognize monarchs but require that these figures abide by the laws of a greater constitution; feature prime ministers Oligarchy An elite group holds the power of the government Dictatorship Power is held by a single person (or very small group of people) who wields complete and absolute authority over a government and its population Democracy Form of government that strives to provide all citizens an equal voice, or vote, in determining state policy, regardless of socioeconomic status Totalitarian Dictatorship A dictatorship in which the dictator controls all aspects of its subjects lives, including occupations, religious beliefs, and the number of children each family is permitted to have Macroeconomic A branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole 1. Centered around a family or tribe and guided by tradition 2. Found in hunt-gatherer and nomadic societies; everyone consumed and produces the same goods 3. Relies on bartering 4. Members product what they need with no surplus 5. Eventually, the economy evolves to some form of currency 5 characteristics of a traditional economy 1. Collective or state ownership of capital (such as money, property, and other physical assets) 2. The state determines inputs and outputs 3. Labor is allocated according to state plans 4. Private ownership is not possible 5. Prices and paying for goods and services are regulated by the state with little regard to costs; often a currency does not exist but resources are given to citizens as needed 5 distinguishing features of a command economy 1. It is standard for all goods and services to be privately owned. 2. People are free to choose to produce, sell, and purchase goods at the price set with the capital they possess 3. Every seller aims to make the most profit possible 4. Market economy relies on an efficient market in which all buyers and sellers have equal access to the same information 5. Competition keeps prices low 6. Government interference is at the minimum that is necessary to ensure that markets are functioning correctly 6 characteristics of a market economy Civil Common Religious Three types of conventional systems of law Civil Law Countries under this system of law have more detailed, prescriptive laws in which the role of the judge is to investigate whether a law has been broken Common Law This legal system is based on precedence. The role of the judge is to hear arguments from both parties and make a judgment, which is used as a precedent for future cases Religious Law This legal system is based on religious beliefs Special Drawing Right (SDR) International type of money reserve created by the IMF used to loan money to member countries Balance of Payments The difference in total volume between payments into and out of the country over a period of time Fixed-Rate Currency Exchange System When a country's currency value is fixed or pegged by a monetary authority against the value of another currencyC a basket of currency, or another measure of value To promote international economic cooperation To promote international trade To promote employment To promote exchange rate stability By making financial resources available to member countries to meet their balance of payment needs Objectives of the IMF Collateral Something pledged as security for repayment of a loan to be forfeited in the event of a default 1. Prior actions 2. Quantitative Performance Criteria 3. Indicative Targets 4. Structural Benchmarks Four conditions of the IMF Prior Actions Actions that a country agrees to before the IMF's executive board approves financing or completes a review Quantitative Performance Criteria that are specific and measurable conditions that a country must meet to complete a review Indicative targets Quantitative targets used to measure a country's progress in meeting the IMF's requirements Structural benchmarks Nonquantitative measures such as social safety nets A country doesn't need collateral, but has to correct financial practices that led to debt in the first place to ensure the country can pay back its loan to support other struggling countries Conditionality of the IMF Being owned and directed by the governments of the member nations Which activity of the IMF affects policy making? IMF Is a cooperative institution and provides more effective currency exchange Privatization Selling government holdings to private companies Deregulation The removal of regulations or restrictions in a particular industry Result currency exchange change between nations Original purpose of the IMF Provides means for nations to easily exchange currency Provides oversight Offers loans to member organizations Evolved purpose of the IMF 1. Conditionalities may make conditions worse in a struggling country 2. Poor countries are underrepresented 3. Does not consider effects on the environment 3 criticisms of the IMF AAA Rating The highest possible rating that may be assigned by a credit rating agency for a bond Debt Instrument A tool used by a company or any other entirety to raise money or capital 1. Helping build sustainable economic growth 2. Investing in people 3. Building resilience to shocks and threats 3 World Bank Priorities 1. To end extreme poverty 2. To improve the income of the lowest 40% of citizens in each country 2 World Bank Goals Commodities A raw material or primary agricultural product that can be bought or sold Mercantilism One of the earliest economic theories, which states that a country's wealth was determined by the amount of gold and silver they had in their possession Trade surplus When the value of a country's exports is greater than the value of goods being imported Nation-States When a group of people are conscious of sharing a common identity and the same culture Protectionism The theory or practice of protecting a country's domestic industries from foreign competition by taxing imports Navigation Acts British Acts in 1651 to tighten and protect trade between Asia, American colonies, Africa, and England. Trade had to come in English ships. The purpose was to use American colonies to increase British finances and power Government subsidies Money paid by the government to help and organization or industry reduce its costs Free trade International trade left to its natural course without tariffs, quotas, and other restrictions Absolute Advantage The ability of an individual or group to produce a good or service more efficiently than another Production Possibility Frontier (PPF) A curve that shows various combinations of the amount of two that can be produced within the limits of the given resources and technology Slope The gradient of a graph at any point calculated as the change in y over the change in x Hecksher-Ohlin Theory Stated that countries would produce and export goods that required resources or factors that were in abundant supply and therefore cheaper; in contrast, countries would import goods that required resources that were in short supply but higher demand Country Similarity Theory Theory that proposed that customers in countries that are in the same or similar stage of development would have similar preferences; takes brands and customer loyalty, technology, and quality into account Global Strategic Rivalry Theory Theory that focused on Multinational corporations and their efforts to gain a competitive advantage against other global firms; to prosper, they must develop competitive advantage Barriers to Entry The obstacles that make it difficult for a new company to enter a given market. These barriers may include technology challenges, start-up costs, or government regulations Economies of Scale A proportionate savings in costs gained by an increased level of production Convertible A currency that can be used to buy or sell without government restrictions Resource endowments Refers to the skill and abilities of a country's workforce, the natural resources available within its borders, and the sophistication of its capital stock Economic sanctions Commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual Value chain The process or activities by which a company adds value to an article, including production, marketing, and the provision of after-sales services Producer Surplus The difference between how much money producers want to sell a good for an how much they receive by selling it Wholesaler A person or company that sells goods in large quantities at low prices, typically to retailers Quotas A limited quantities of a particular product that can be produced, exported, or imported under official controls Consumer Surplus The difference in price between the highest price a consumer is willing to pay for a good or service an what they actually paid Import tariff Taxes on goods that are imported into a country Export tariff Taxes on goods leaving a country Protective tariff Tariffs that protect a domestic industry by making imported goods more expensive than equivalent goods produced domestically Revenue tariff Tariffs levied to raise revenue for the government Specific tariff Import taxes expressed in an amount of money per unit inported Ad volerem tariff Import taxes based on a fixed percentage of the assessed commercial value of imported goods Compound tariff Taxes on imported goods that are a combination of a fixed amount and an amount based on the value of the goods Absolute quota Quota that strictly limits the quantity of goods that may enter a country Tariff-rate quota Quota that permits a specified quantity of imported goods to enter a country at a reduced rate during the quota period Voluntary export restraint A trade restriction on the quantity of a good that an exporting country is allowed to export to another country Autarky A political or economic system that becomes self-sufficient to survive Government Procurement Programs The process of buying goods and services by a government agency through a specific process of issuing bid proposals and seeking responses from companies Export subsidies A government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low cost loans, tax relief for exporters, or government-financed international advertising Countervailing duties Import taxes imposed on certain goods to prevent dumping or counter export subsidies Economic inefficiency An economic state in which every resource is not optimally allocated to serve each individual or entity in the best way possible by minimizing waste and inefficiency Trade diversion Trade is diverted from a more efficient exporter toward a less efficient one by the formation of s free trade agreement or a customs union Dumping The practice of charging a lower price for a product in foreign markets than in the firm's home market Must be approved by a Senate 2/3 vote How are treaties made? Must be approved by the US senate and the house of representatives How are trade agreements made? Free Trade Agreement Economic agreement between countries to allow free trade between members Colonialism The policy or practice of acquiring full or partial political control over another country to exploit it economically Portfolio Investment An investment in another country is purely financial and does not involve any management responsibility; investing in a company's stocks, bonds, or assets but not to control the firms operations Diversifying The process of allocating capital in a way that reduces the exposure to any one particular asset or risk Foreign Direct Investment (FDI) An investment in or the acquisition of foreign assets with the intent to control and manage them; don't by purchasing assets, investing in the company or new property, plant and equipment, or participating in a joint venture Most Favored Nation Each and every nation that participated in the WTO is obligated to give all investors the same treatment as it produces its most favored trading partners 10% ownership of the firm What is the threshold to be considered a direct investment? Dividend repatriation The return of earnings from foreign subsidies to their parent companies back in the home country Market capitalization The total dollar value of a company's outstanding shares of stock, which can be sensitive to growth rates, exchange rate stability, health of the foreign banking system, liquidity of the stock and bond market, interest rates, and level of foreign exchange reserves held by the central banks Horizontal FDI When a company is trying to open a new market Vertical FDI When a company invests internationally to provide input into its core operations— usually in its home country Greenfield FDI When multinational corporations enter into developing countries to build NEW factories or stores; starts from the beginning Brownfield FDI When a company or government entity purchases or leases existing production facilities to launch a new production activity; modifying or upgrading existing facilities Multinational corporations Change agents that drive trade and investment flows that allow for economic growth Regional Economic Integration A unification between states or countries with a partial or full abolition of tariff and non tariff restrictions on trade between them; the ideal would be free trade 1. Free trade area 2. Customs unions 3. Common market 4. Economic union 5. Political union Five Stages of Economic Integration Political Union When a single nation is formed and a mutual organization confederates all policies; USA Free Trade Area Allows basic economic cooperation so member countries remove barriers to trade among themselves; no mutual policy on trading with nonmember countries; NAFTA Common Market Permits the formation of economically integrated markets between member countries, removing trade barriers and any restrictions on the movement of labor, technology, and capital; Common Market for Eastern and Southern Africa Customs Union Offers economic collaboration by removing trade barriers between member countries and establishing a mutual trading policy with nonmembers; Mercosur Economic Union When countries enter into an economic agreement to remove barriers to trade and adopt common economic policies; members use a common currency, harmonized taxes monetary, and fiscal policy; European Union 1. Encourages specialization 2. Lowers prices 3. Provides more choices on goods and services 4. Increases productivity 5. Allow for more efficient use of natural resources 5 goals of a trade bloc Exchange rates The price of one currency expressed in terms of units of another countrh Trade bloc A free-trade zone formed by one or more tax, tariff, and trade agreement between two or more countried Preferential tariff A tariff that is lower for some nations than others Dollarize A country that is not the United States uses the U.S. dollar as its currency Foreign Exchange Market The market in which people use one currency to buy another