- The buying and selling of goods and services by people from different countries.
- Business across national borders
- Business around the globe
A corporation that owns businesses in two or more countries.
Foreign Direct Investment (DFI)
A method of investment in which a company builds a new business or buys an existing business in a foreign country.
Government-imposed regulations that increase the cost and restrict the number of imported goods.
A government's use of trade barriers to shield domestic companies and their workers from foreign competition.
A direct tax on imported goods.
5 types of nontariff barriers
- Nontax methods of increasing the cost or reducing the volume of imported goods.
- Quota: limit on the number or volume of imported products.
- Voluntary export restraints: voluntarily imposed limits on the number or volume of products exported to a particular country.
- Government import standards: A standard ostensibly established to protect the health and safety of citizens but, in reality, often used to restrict imports.
- Government subsidies: Government loans, grants, and tax deferments given to domestic companies to protect them from foreign competition.
- Custom classification: classification assigned to imported products by government officials that affects the size of the tariff and imposition of import quotas.
World Trade Organization (WTO)
As the successor to GATT, the only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible.
Regional Trading Zones
- Areas in which tariff and nontariff barriers on trade between countries are reduced or eliminated.
- FTA: Free trade agreement
- -Liberalizes trade among member countries
- -Eliminates most tariffs and barriers.
When a MNEmultinational company has offices/plants in different countries and uses the same rules, guidelines, policies, and procedures.
When a MNEmultinational company modifies its rules, guidelines, policies, and procedures to adapt to differences in foreign customers, governments, and regulatory agencies.
Forms for Global Business
- Exporting: selling domestically produced products to customers in foreign countries.
- Cooperative contracts: Licensing(license the entire business)/Franchising(license IPRs for royalty payments).
- Strategic Alliances: an agreement in which companies combine key resources, costs, risk, technology, and people.
- Wholly owned affiliates: foreign offices, facilities, and manufacturing plants that are 100 percent owned by the parent company
- Global New Ventures: new companies that are founded with an active global strategy and have sales, employees, and financing in different countries.
a strategic alliance in which two existing companies collaborate to form a third, independent company.
a comparison of the relative cost of a standard set of goods and services in different countries.
the risk of major changes in political regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events.
the risk associated with changes in laws and government policies that directly affect the way foreign companies conduct business
the set of shared values and beliefs that affects the perceptions, decisions, and behavior of the people from a particular country.
Hofstede's Five Cultural Dimensions
- Power distance: high or low
- Individualism vs. collectivism
- Masculinity vs. femininity
- Uncertainty avoidance: high or low
- Short-term vs. long-term orientation