WGU C211 Key Terms and Definitions|GUARANTEED SUCCESS

Base of the Pyramid Economies where people make less that $2,000 per capita per year BRIC Brazil, Russia, India, China Emerging Economies A term that has gradually replaced the term "developing countries" since the 1990s Emerging Markets A term that is often used interchangeably with "emerging economies" Expatriate manager A manager who works abroad Foreign Direct Investment Investment in, controlling and managing value-added activities in other countries Global business Business around the glob Globalization The close Integration of countries and peoples of the world Gross Domestic Product (GDP) The sum of value added by resident firms, households and governments operating in an economy Gross National Income GDP plus income from non-resident sources abroad. Used by the World bank and other international organizations to supersede the term GNP Gross National Product (GNP) GDP plus income from non-resident sources abroad. Group of 20 (G-20) The group of 19 major countries plus the European Union (EU) whose leaders meet on a biannual basis to solve global economic problems International Business A business or firm that engages in international (cross-boarder) economic activities and /or the action of doing business aboard International Premium A significant pay raise when working overseas Liability of Foreignness The inherent disadvantage that foreign firms experience in host countries because of their non-native status Multinational Enterprise (MNE) A firm that engages in foreign direct investment Nongovernmental Organization An organization that is not affiliated with governments Purchase power parity A conversion that determines the equivalent amount of goods and services that different currencies can purchase Reverse innovation An innovation that is adopted first in emerging economies and is then diffused around the world Risk management The identification and assessment of risks and the preparation to minimize the impact of high-risk, unfortunate events Scenario Planning A technique to prepare and plan for multiple scenarios Semi-globablization A perspective that suggests that barriers to a market integration at borders are high but not high enough to insulate countries from each other Triad North America, Western Europe and Japan Absolute advantage The economic advantage one nation enjoys that is absolutely superior to other nations Administrative policy Bureaucratic rules that make it harder to import foreign goods Anti-dumping duty Tariffs levied on imports that have been "dumped" (selling below costs to unfairly drive domestic firms out of business) Balance of trade The aggregation of importing and exporting that leads to the country-level trade surplus or deficit Classical trade theories The major theories of international trade that were advanced before the 20th century. Includes mercantilism, absolute advantage and comparative advantage Comparative advantage Relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations Dead Weight Cost Net losses that occur in an economy as a result of tariffs Factor endowment The extent to which different countries possess various factors of production such as labor, land and technology Factor endowment theory (Herchscher-Ohlin Theory) Nations that will develop comparative advantages based on their locally abundant factors First-mover advantage Advantage that first movers enjoy and do not share with late entrants Free trade The idea that free market forces should determine how much to trade with little or no government intervention Import Quota Restriction on the quantity of imports Infant industry argument The argument that if domestic firms are as young as "infants" in the absence of government intervention, they stand no changes of surviving and will be crushed by mature foreign rivals Local content requirement A requirement stipulating that a certain proportion of the value of the goods made in one country must originate from that country Merchandise Tangible products being traded Modern Trade Theories The major theories of international trade that were advanced in the 20th century. Includes product life cycle, strategic trade and national competitive of industries Opportunity cost Cost of pursuing one activity at the expense of another activity, given the alternatives Product Life Cycle Theory A theory that accounts for changes in the patterns of trade over time by focusing on the product life cycles Protectionism The idea that governments should actively protect domestic industries from imports and vigorously promote exports Resource Mobility Assumption that a resource used in producing a product for one industry can be shifted and put to use in another industry Strategic trade policy Government policy that provides companies a strategic advantage in international trade through subsides and other support Strategic Trade Theory A theory that suggests that intervention by governments in certain industries can enhance their odds for international success. Subsidy Government payment to domestic firms Tariff Barrier Trade barrier that relies on tariffs to discourage imports Theory of Absolute Advantage Suggests that under free trade, a nation gains by specializing in economic activities in which it has an absolute advantage Theory of Comparative Advantage Focuses on the relative advantage in on economic activity that one nation in comparison with other nations Theory of Mercantilism A theory that suggests that the wealth of the world is fixed and that a nation that exports more and imports less with be richer Theory of National Competitive Advantage of Industries (Diamond Theory) Suggests that the competitive advantage of certain industries in different nations depends on four aspects that for a diamond Trade deficit An economic condition in which a nation imports more that it exports Trade embargo Politically motivated trade sanctions against foreign countries to signal displeasure Trade surplus An economic condition with a nation exports more than it imports Voluntary Export Constraint An international agreement that shows that exporting countries voluntarily agree to restrict exports Agglomeration Clustering of economic activities in certain locations Bargaining power Ability to extract favorable outcome from negotiations due to one party's strengths Demonstration effect The reaction of local firms to rise to the challenge demonstrated by MNE's through learning and imitation Dissemination Risk The risk associated with unauthorized diffusion of firm specific know how Downstream vertical FDI A type of vertical FDI in which a firm engages in a downstream stage of the value chain in a host country Expropriation Government's confiscation of foreign assets FDI Flow The amount of FDI moving in a given period (usually a year) in a certain direction FDI Inflow Inbound FDI moving in to a country in a year FDI Outflow Outbound FDI moving out of a country in a year FDI Stock Total accumulation of inbound FDI in a country or outbound FDI from a country across a given period (usually several years) Foreign portfolio investment (FPI) Investment in a portfolio of foreign securities such as stocks and bonds Free Market View A political view that suggests that FDI unrestricted by government intervention is the best Horizontal FDI A type of FDI in which a firm duplicates its home country-based activities at the same value chain stage in a host country Knowledge Spillover Knowledge diffused from one firm to others among closely located firms Internalization The replacement of cross-border markets with one firm locating and operating in two or more countries