Glossary

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

A

Acceptance zone. An area within which a party is willing to negotiate.

Achievement oriented. Where status is earned rather than a right. Recruitment and promotion opportunities tend to be more dependent on performance, as in a meritocracy.

Ad valorem duty. A tax that is based on a percentage of the value of imported goods.

Adjusted present value (APV). An NPV that takes into account sources of country risk that might impact a project's expected future cash flows.

Advertising. A non-personal form of promotion in which a firm attempts to persuade consumers of a particular point of view.

Amakudari. (Literally “descent from heaven”) The temporary or permanent movement of public-sector officials in Japan into private corporations as a mechanism for coordinating national policy and company strategy.

Andean common market (Ancom). A sub-regional free trade compact designed to promote economic and social integration and cooperation; Bolivia, Colombia, Ecuador, Peru, and Venezuela are all members.

Andean Community. An economic union consisting of Bolivia, Colombia, Ecuador, Peru, and Venezuela.

Antidumping duties (AD). Import tariffs intended to protect domestic producers from foreign products sold at less than their cost of production or at lower prices than in their home market.

Arbitrageur. A person or firm that deals in foreign exchange, buying or selling foreign currency with simultaneous contracting to exchange back to the original currency. Arbitrageurs thus do not undertake exchange risk.

Arm's length price. The price that exists or would exist on a sale of a given product or service between two unrelated companies—as contrasted with an intra-company transfer price.

Ascription oriented. Where status is more of a right than earned. Recruitment and promotion opportunities tend to be more dependent on seniority, ethnicity, gender, religion, or birth.

Association of Southeast Asian Nations (ASEAN). An economic union founded in 1967 that includes Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam; this economic bloc focuses not on reducing trade barriers among members but, rather, on promoting exports to other nations.

Autonomous infrastructure. An infrastructure used by multinationals that compete in dissimilar national markets and do not share resources.

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B

Backward integration. The ownership of equity assets used earlier in the production cycle, such as an auto firm that acquires a steel company.

Balance sheet hedging. The use of financial instruments denominated in foreign currency to eliminate exchange rate (translation) risk from the balance sheet of a company.

Basic mission. The reason that a firm is in existence.

Benkyokai. Study associations or work groups for students or colleagues in companies to jointly develop particular areas of knowledge and expertise.

Business managers. Managers responsible for coordinating the efforts of people in a corporate organization; for example, in a matrix structure.

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C

Canada Labor Code. A federal law that covers areas such as wages, employment practices, work safety, and conciliation of labor disputes.

Caribbean Basin Initiative. A trade agreement that eliminates tariffs on many imports to the United States from the Caribbean and Central American regions.

Cartel. A group of firms that collectively agree to fix prices or quantities sold in an effort to control price.

Centrally-determined economy. An economy in which goods and services are allocated based on a plan formulated by a committee that decides what is to be offered.

Chu, meaning loyalty and giri, meaning duty, obligation, or responsibility. These terms are often used together to denote the traditionally close, trusting relationship between managers and employees. They are also used to describe the ties between older and younger members of a family.

Civil society. A group of individuals, organizations, and institutions that act outside the government and the market to advance a diverse set of interests.

Clearing account. A centralized cash management bank account in which one MNE affiliate reviews payment needs among various MNE affiliates and arranges to make payments of net funds due from each affiliate to others through the clearing account.

Cluster analysis. A marketing approach to forecasting customer demand that involves grouping data based on market area, customer, or similar variables.

Codetermination. A legal system that requires workers and their managers to discuss major strategic decisions before companies implement the decisions.

Collectivism. The tendency of people to belong to groups who look after each other in exchange for loyalty.

Common market. A form of economic integration characterized by the elimination of trade barriers among member nations, a common external trade policy, and mobility of factors of production among member countries.

Communication. The process of transferring meanings from sender to receiver.

Communism. A political system in which the government owns all property and makes all decisions regarding production and distribution of goods and services.

Comparative advertising. The comparing of similar products for the purpose of persuading customers to buy a particular one.

Competition Act. A Canadian federal law that regulates anticompetitive practices and prohibits actions that will substantially lessen or prevent competition; it is similar to US antitrust laws.

Competitive intelligence. The gathering of external information on competitors and the competitive environment as part of the decision-making process.

Competitive scope. The breadth of a firm's target market within an industry.

Compound duty. A tariff consisting of both a specific and an ad valorem duty.

Concurrent engineering. The process of having design, engineering, and manufacturing people working together to create a product, in contrast to working in a sequential manner.

Consolidation. The translation of foreign affiliate accounts and addition to home-country accounts for the purpose of reporting complete (global) condition of a company. Consolidation of foreign affiliate accounts that are denominated in other currencies necessarily produces translation risk.

Container ships. Vessels used to carry standardized containers that can be simply loaded onto a carrier and then unloaded at their destination without any repackaging of the contents of the containers.

Contract management. A process by which an organization (such as the government) transfers operating responsibility of an industry without transferring the legal title and ownership.

Control. The fundamental function of management that involves developing profit plans for the firm and its divisions and then deciding what to do when actual operating results differ from those planned.

Controlling. The process of determining that everything goes according to plan.

Coordinated infrastructure. An infrastructure used when there is a high degree of similarity among national markets and business units share resources in an effort to help each other raise overall sales.

Co-prosperity pyramid. A supply chain linked to a vertical, manufacturing keiretsu. It is hierarchical, with firms in the top tiers engaged in technology sharing, personnel exchanges, cross-shareholding, and long-term trading relationships. The further down the hierarchy a firm sits the more important price becomes and the less they are considered keiretsu members.

Corporate culture. The shared values, traditions, customs, philosophy, and policies of a corporation; also, the professional atmosphere that grows from this and affects behavior and performance.

Corruption. The misuse of public power for private benefit.

Cost strategy. A strategy that relies on low price and is achieved through approaches such as vigorous pursuit of cost reductions and overhead control, avoidance of marginal customer accounts, and cost minimization in areas such as sales and advertising.

Cost-of-living allowance. A payment to compensate for differences in expenditures between the home country and the foreign location.

Council of Ministers. The major policy decision-making body of the EU and one of its major institutions, consisting of one minister from each of the 12 member states.

Council of the European Union. The major policy decision-making body of the EU; it consists of one minister from each of the 25 member states and is one of four major institutions of the EU.

Countertrade. Barter trade in which the exporting firm receives payment in products from the importing country.

Countervailing duties (CVD). Import tariffs intended to protect domestic producers from harmful subsidization by foreign governments.

Country risk analysis. Examines the chances of non-market events (political, social, and economic) causing financial, strategic, or personnel losses to a firm following FDI in a specific country market.

Country-specific advantages (CSAs). Strengths or benefits specific to a country that result from its competitive environment, labor force, geographic location, government policies, industrial clusters, etc.

Court of Auditors. A court that has one judge appointed from each EU member country; this court monitors the financial aspects of the union.

Court of Justice. A court that has one judge appointed from each EU member country; this court serves as the official interpreter of EU law.

Cultural assimilator. A programmed learning technique designed to expose members of one culture to some of the basic concepts, attitudes, role perceptions, customs, and values of another culture.

Cultural convergence. The growing similarity between national cultures, including the beliefs, values, aspirations, and the preferences of consumers, partly driven by global brands, media, and common global icons.

Culture. The acquired knowledge that people use to interpret experience and to generate social behavior.

Culture clash. When two cultural groups (national or corporate) meet, interact, or work together and differences in their values, beliefs, rules of behavior, or styles of communication create misunderstandings, antagonism, or other problems.

Currency diversification. An exchange risk management technique through which the firm places activities or assets and liabilities into multiple currencies, thus reducing the impact of exchange rate change for any one of them.

Currency inconvertibility. The inability of a firm to transfer profit from a subsidiary in a host country to other areas of the organization or to shareholders because of host government restrictions on profit remittances.

Customs union. A form of economic integration in which all tariffs between member countries are eliminated and a common trade policy toward non-member countries is established.

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D

Debt–equity ratio. The value of a firm's total debt divided by the value of its total equity. A higher ratio implies greater leverage, and potentially greater risk.

Decision making. The process of choosing from among alternatives.

Delayed differentiation. A strategy in which all products are manufactured in the same way for all countries or regions until as late in the assembly process as possible, at which time differentiation is used to introduce particular features or special components.

Demand-Flow™ Technology (DFT). A production process that is flexible to demand changes.

Democracy. A system of government in which the people, either directly or through their elected officials, decide what is to be done.

Differentiation strategy. A strategy directed toward creating something that is perceived as being unique.

Diffuse. A tendency for workplace relationships and obligations, including relative status and hierarchical position, to extend into social situations and activities outside of work.

Distribution. The course that goods take between production and the final consumer.

Divestiture. (Also see Privatization.) A process by which a government or business sells assets.

Dumping. The selling of imported goods at a price below cost or below that in the home country.

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E

Economic integration. The establishment of transnational rules and regulations that enhance economic trade and cooperation among countries.

Economic risk. The risk of financial loss or gain to an MNE due to the effects of unanticipated exchange rate changes on future cash flows that are denominated in foreign currencies.

Economic union. A form of economic integration characterized by free movement of goods, services, and factors of production among member countries and full integration of economic policies.

Embargo. A quota set at zero, thus preventing the importation of those products that are involved.

Emotional. An acceptance of emotion and subjectivity as the bases for some decision making and a preference for explicit displays of emotions and feelings in the workplace.

Empowerment. The process of giving employees increased control over their work.

Endaka. Yen-appreciation; the growing value of the yen vis-à-vis other currencies which, among other things, made Japan a relatively expensive place to manufacture.

Enterprise for the Americas. An idea launched by President George Bush to create a free trade area from Alaska to Argentine Antarctica.

Esprit de corps. The spirit of a group that makes the members want the group to succeed.

Estimation by analogy. A method of forecasting market demand or market growth based on information generated in other countries, such as determining the number of refrigerators sold in the United States as a percentage of new housing starts and using this statistic in planning for the manufacture of these products in other world markets.

Ethnocentric. A belief in the superiority of one's own ethnic group. The dominance of the home-country culture in decision making, human resource management, and overall corporate culture in a multinational firm.

Ethnocentric predisposition. The tendency of a manager or multinational company to rely on the values and interests of the parent company in formulating and implementing the strategic plan.

Ethnocentric solution. A centralized decision-making framework in which financial decisions and control for foreign affiliates are largely integrated into home-office management.

Ethnocentrism. The belief that one's way of doing things is superior to that of others.

Eurobond. A bond denominated in foreign currency issued in any country's financial market. Most eurobonds are issued in London or in Luxembourg (for tax reasons).

Eurocurrency. A bank deposit in any country, which is denominated in a foreign currency. A yen-denominated bank deposit in Germany is a euro-yen deposit, a form of eurocurrency.

Eurodollar. A dollar-denominated bank deposit outside of the United States.

European Coal and Steel Community (ECSC). A community formed in 1952 by Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany for the purpose of creating a common market that would revitalize the efficiency and competitiveness of the coal and steel industries in those countries.

European Commission. A 25-member group chosen by agreement of member governments of the EU; the Commission is the executive branch of the EU.

European Council. Composed of the heads of state of each EU member country as well as the president of the European Commission. Meetings of the Council take place at least twice a year and their purpose is to resolve major policy issues and to set policy direction.

European Free Trade Association (EFTA). A free trade area currently consisting of Iceland, Liechtenstein, Norway, and Switzerland; past members included the UK (before it joined the EU).

European Monetary Union (EMU). The agreement among, initially, 11 of the European Union countries to eliminate their currencies and create the euro. European Union countries do not necessarily have to join the EMU.

European Parliament. A group of 732 representatives elected directly by voters in each member country of the EU; the Parliament serves as a watchdog on EU expenditures.

European Research Cooperation Agency. A research and development alliance that emphasizes projects in the fields of energy, medicine, biotechnology, communications, information technology, transport, new materials, robotics, production automation, lasers, and the environment.

European Union (EU). A treaty-based institutional framework that manages economic and political cooperation among its 25 member states: Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.

Exchange controls. Controls that restrict the flow of currency.

Exchange rate. The value of one currency in terms of another. For example, $US 1.30 / e 1.

Exchange risk. The risk of financial loss or gain due to an unexpected change in a currency's value.

Exchange risk adaptation. An exchange risk management technique through which a company adjusts its business activities to try to balance foreign-currency assets and liabilities, and inflows and outflows.

Exchange risk avoidance. An exchange risk management technique through which the firm tries to avoid operating in more than one currency.

Exchange risk transfer. An exchange risk management technique through which the firm contracts with a third party to pass exchange risk onto that party, via such instruments as forward contracts, futures, and options.

Expatriates. Individuals who reside abroad but are citizens of the multinational's parent country; they are citizens of the home, not the host country.

Export tariff. A tax levied on goods sent out of a country.

Exports. Goods and services produced by a firm in one country and then sent to another country.

Expropriation. The governmental seizure of private businesses coupled with little, if any, compensation to their owners.

External economies of scale. Efficiencies brought about by access to cheaper capital, highly skilled labor, and superior technology.

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F

Factor conditions. Land, labor, and capital.

Factor endowment theory. A trade theory which holds that nations will produce and export products that use large amounts of production factors that they have in abundance and will import products requiring a large amount of production factors that they lack.

FDI cluster. A group of developing countries usually located in the same geographic region as a triad member and having some form of economic link to this member.

Firm-specific advantages (FSAs). Strengths or benefits specific to a firm and a result of contributions that can be made by its personnel, technology, and/or equipment.

Five partners. A business network consisting of five partner organizations: the flagship firm (a multinational enterprise), key suppliers, key customers, key competitors, and the non-business infrastructure.

Flagship firms. Multinational firms characterized by global competitiveness and international benchmarks.

Flying Geese model. A model suggesting that Asian countries are following Japan's historical economic transition, specializing in particular industries (steel to textiles to clothing to autos to electronics) during particular growth stages. At a particular point in time we should expect to see these industries located in different Asian countries, depending on their resource endowments, labor costs, and capabilities.

Focus strategy. A strategy that concentrates on a particular buyer group and segments that niche based on product line or geographic market.

Foreign bond. A bond issued by a foreign company in another country's financial market. In Japan, these are called “Samurai bonds.”

Foreign direct investment (FDI). Equity funds invested in other nations.

Foreign exchange. Foreign-currency-denominated financial instruments, ranging from cash to bank deposits to other financial contracts payable or receivable in foreign currency.

Foreign exchange broker. A company that providers specialized services to commercial banks in the interbank foreign exchange market, essentially functioning to unite interested buyers and sellers of foreign-currency-denominated bank deposits. Brokers intermediate about half of all wholesale foreign exchange transactions in New York and London.

Foreign exchange traders. Bankers who deal in foreign exchange, buying and selling foreign currencies on behalf of clients and/or for the bank itself. Typically they deal in foreign-currency-denominated bank deposits.

Foreign investment controls. Limits on foreign direct investment or the transfer or remittance of funds.

Foreign investment review agency. A government agency that reviews applications for foreign direct investment projects and approves or disapproves the projects, according to standards established by the government.

Foreign Sales Corporation Act. Legislation designed to allow US exporters to establish overseas affiliates and not pay taxes on the affiliates' income until the earnings are remitted to the parent company.

Foreign trade zones. Areas where foreign goods may be held and processed and then re-exported without incurring customs duties (same as a free trade zone).

Forward integration. The purchase of assets or facilities that move the company closer to the customer, such as a computer manufacturer that acquires a retail chain which specializes in computer products.

Forward rate. An exchange rate contracted today for some future date of actual currency exchange. Banks offer forward rates to clients to buy or sell foreign currency in the future, guaranteeing the rate at the time of the agreement.

Free trade area. An economic integration arrangement in which barriers to trade (such as tariffs) among member countries are removed.

Free Trade Area of the Americas (FTAA). A regional trade agreement that is expected to succeed NAFTA and include 34 countries across North, Central, and South America.

Free trade zone. A designated area where importers can defer payment of customs duty while further processing of products takes place (same as a foreign trade zone).

Fronting loan. A third-party loan in which an MNE home office deposits funds with a financial institution, which then lends to the MNE's affiliate in a country where the MNE faces political risk or currency transfer restrictions.

Funds positioning techniques. Mechanisms such as transfer pricing, intercompany loans, and timing of payments that are used to move funds from one affiliate to another in a multinational firm.

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G

Gaijin. A term used for non-Japanese and while not too offensive is not particularly polite. Gai means outside or foreign, jin means person.

General Agreement on Tariffs and Trade (GATT). A major trade organization that has been established to negotiate trade concessions among member countries.

Geocentric. Neither home nor host country culture dominates decision making, human resource management, and overall corporate culture in a multinational firm.

Geocentric predisposition. The tendency of a multinational to construct its strategic plan with a global view of operations.

Geocentric solution. A decision-making framework in which financial decisions and evaluation related to foreign affiliates are integrated for the firm on a global basis.

Gestion. The skill or practice of controlling, directing, or planning something, especially a commercial enterprise or activity.

Global area structure. An organizational arrangement in which primary operational responsibility is delegated to area managers, each of whom is responsible for a specific geographic region.

Global functional structure. An organizational arrangement in which all areas of activity are built around the basic tasks of the enterprise.

Global product structure. An organizational arrangement in which domestic divisions are given worldwide responsibility for product groups.

Global sourcing. The use of suppliers anywhere in the world, chosen on the basis of their efficiency.

Globalization. The production and distribution of products and services of a homogeneous type and quality on a worldwide basis.

Grande Ecole. One of the “grand” or great schools considered to be the pinnacle of French higher education, highly selective and prestigious and the main source of the country's business and political leaders.

Guanxi. Personalized or informal networks of relationships in China. They can be important preconditions for smoothing the way or gaining favors or advantages, particularly when both society and the economy are dominated by central government. There are parallels with the concept of social capital.

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H

Hai. “Yes” in Japanese does not necessarily mean “yes I agree,” but “yes, I hear what you say.”

Hardship allowance. A special payment made to individuals posted to geographic areas regarded as less desirable.

Heckscher–Ohlin theory. A trade theory that extends the concept of comparative advantage by bringing into consideration the endowment and cost of factors of production and helps to explain why nations with relatively large labor forces will concentrate on producing labor-intensive goods, whereas countries with relatively more capital than labor will specialize in capital-intensive goods.

Hedge. A strategy to protect the firm against risk, in this case against exchange rate risk.

Home-country nationals. Citizens of the country where the multinational resides.

Horizontal integration. The purchase of firms in the same line of business, such as a computer chip firm that acquires a competitor.

Host-country nationals. Local people hired by a
multinational.

Humane orientation. Cultures that emphasize helping others, charity, and peoples' wider social obligations.

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I

Ideology. A set of integrated beliefs, theories, and doctrines that helps to direct the actions of a society.

Import tariff. A tax levied on goods shipped into a country.

Imports. Goods and services produced in one country and brought in by another country.

Indigenization laws. Laws which require that nationals hold a majority interest in all enterprises.

Individualism. The tendency of people to look after themselves and their immediate family only.

Industrial democracy. The legally mandated right of employees to participate in significant management decisions.

Initial screening. The process of determining the basic need potential of the multinational's goods and services in foreign markets.

Integrative techniques. Strategies designed to help a multinational become a part of the host country's infrastructure.

Intermodal containers. Large metal boxes that fit on trucks, railroads, and airplanes and help reduce handling costs and theft losses by placing the merchandise in a tightly sealed, easy-to-move unit.

Internal economies of scale. Efficiencies brought about by lower production costs and other savings within a firm.

International business. The study of transactions taking place across national borders for the purpose of satisfying the needs of individuals and organizations.

International division structure. An organizational arrangement in which all international operations are centralized in one division.

International Fisher effect. Theory of exchange rate determination that states that differences in nominal interest rates on similar-risk deposits will be eliminated by changes in the exchange rate.

International human resource management (IHRM). The process of selecting, training, developing, and compensating personnel in overseas positions.

International joint venture (IJV). An agreement between two or more partners to own and control an overseas business.

International logistics. The designing and managing of a system to control the flow of materials and products throughout the organization.

International market assessment. An evaluation of the goods and services that the multinational can sell in the global marketplace.

International marketing. The process of identifying the goods and services that customers outside the home country want and then providing them at the right price and place.

International Monetary Fund (IMF). The international organization founded at Bretton Woods, New Hampshire, in 1994 that includes most countries of the world and offers balance of payments support to countries in crisis along with financial advising to Central Banks.

International monetary system. The arrangement between national governments/central banks that oversees the operation of official foreign exchange dealings between countries. The central organization in the system today is the International Monetary Fund.

International product life cycle (IPLC) theory. A theory of the stages of production of a product with new “know-how”; it is first produced by the parent firm, then by its foreign subsidiaries, and finally anywhere in the world where costs are the lowest; it helps explain why a product that begins as a nation's export often ends up as an import.

International screening criteria. Factors used to identify individuals regarded as most suitable for overseas assignments.

International trade. The exchange of goods and services across international borders.

Internationalization. The process by which a company enters a foreign market.

Intra-regional investments. Investments in the local region rather than in other triad or non-triad regions, such as when Chinese firms invest in other Southeast Asian economies.

Investment Canada Act (ICA). An act designed to create a welcome climate for foreign investment by significantly loosening previous restrictions.

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J

Just-in-time (JIT) inventory. The delivery of parts and supplies just as they are needed.

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K

Kaizen. Normally taken to mean “continuous improvement” and is associated with lean or low-cost, high-productivity manufacturing. A more accurate interpretation is “to dismantle and re-assemble a process to make it better.” As such kaizen was an early form of business process re-
engineering.

Keiretsu. Groupings of Japanese firms with long-term associations and cross-shareholdings. Each firm maintains its operational independence but coordinates strategy and often exchanges assets and resources with other firms in its group.

Kinesics. A form of non-verbal communication that deals with conveying information through the use of body movement and facial expression.

Kinyu keiretsu. Horizontal conglomerates encompassing a wide range of diversified businesses, centered on a dominant bank and/or trading company.

Korean chaebols. Traditionally family-dominated, diversified conglomerates. Family ownership has been reduced and many are now focused in particular business sectors, reducing their diversity. There are parallels with Japanese sogo shosha in terms of early government support and their relationship with dominant national banks.

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L

Latin American Integration Association (LAIA). A free trade group formed to reduce intra-regional trade barriers and to promote regional economic cooperation. Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela are all members.

Leontief paradox. A finding by Wassily Leontief, a Nobel prize economist, which shows that the United States, surprisingly, exports relatively more labor-intensive goods and imports capital-intensive goods.

Liberalization policies. Government policies that move away from planned economies toward more free-market systems. They are marked by the privatization of state-owned businesses, a lowering of tariff and non-tariff barriers, and reductions in the constraints placed on foreign firms' investments and business activities.

LIBOR. The London Inter-Bank Offered Rate is the interest rate on large-scale foreign-currency-denominated deposits offered from one bank to another in London.

License. A contractual arrangement in which one firm (the licensor) provides access to some of its patents, trademarks, or technology to another firm in exchange for a fee or royalty.

Licensee. A firm given access to some of the patents, trademarks, or technology of another firm in exchange for a fee or royalty.

Licensor. A company that provides access to some of its patents, trademarks, or technology to another firm in exchange for a fee or royalty.

Lighter aboard ship (LASH) vessel. Barges stored on a ship and lowered at the point of destination.

Localization of production. The manufacturing of goods in the host market.

Localization of profits. The reinvestment of earnings in the local market. 

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M

Macro political risk. A risk that affects all foreign enterprises in the same way.

Managerial development. The process by which managers obtain the necessary skills, experiences, and attitudes that they need to become or remain successful leaders.

Maquiladora industry. A free trade zone that has sprung up along the US–Mexican border for the purpose of producing goods and then shipping them between the two countries.

Maquiladoras. (Also see Twin factories. ) Production operations set up on both sides of the US–Mexican border in a free trade zone for the purpose of shipping goods between the two countries.

Market coordination infrastructure. An infrastructure used by firms that compete in similar national markets but do little resource sharing among their businesses.

Market growth. The annual increase in sales in a particular market.

Market indicators. Indicators used for measuring the relative market strengths of various geographic areas.

Market intensity. The richness of a market or the degree of purchasing power in one country as compared to others.

Market size. An economic screening consideration used in international marketing; it is the relative size of each market as a percentage of the total world market.

Market-driven economy. An economy in which goods and services are allocated on the basis of consumer demand.

Market-seeking FDI. MNEs invest in distribution, sales, or marketing operations in order to sell products or services (outputs) in particular country markets.

Masculinity. The degree to which the dominant values of a society are success, money, and material things.

Material handling. The careful planning of when, where, and how much inventory will be available to ensure maximum production efficiency.

Matrix structure. An organizational arrangement that blends two organizational responsibilities such as functional and product structures or regional and product structures.

Mercantilism. A trade theory which holds that a government can improve the economic well-being of the country by encouraging exports and stifling imports to accumulate wealth in the form of precious metals.

Mercosur. A subregional free trade group formed to promote economic cooperation; the group consists of Argentina, Brazil, Paraguay, and Uruguay.

Micro political risk. A risk that affects selected sectors of the economy or specific foreign businesses.

Ministry for Economy, Trade and Industry (METI). Superseded MITI, which was at the heart of Japan's post-war economic boom.

Ministry of Finance (MOF). A historically influential Japanese ministry that remains a powerful force in the deregulation of the economy.

Ministry of International Trade and Industry (MITI). A Japanese ministry charged with providing information about foreign markets and with encouraging investment in select industries and, in the process, helping to direct the economy.

Mitsubishi Kinyokai. The Friday Club in Marunouchi, Tokyo, where the most senior managers from the 29 core firms of the Mitsubishi keiretsu gather each month to discuss business.

Mittelstand. About 3.4 million small- and medium-sized firms defined as having less than 50 million euros turnover that make up the heart of the German economy.

Mixed economies. Economic systems characterized by a combination of market and centrally driven planning.

Mixed structure. A hybrid organization design that combines structural arrangements in a way that best meets the needs of the enterprise.

Modular integrated robotized system (MIRS). A software-based production process that relies entirely on robots.

Modular manufacturing. A manufacturing process that consists of modules that can be easily adapted to fit changing demand.

Monetary exchange rate. The price of one currency stated in terms of another currency.

Multilateral netting. Payment of net amounts due only between affiliates of a MNE that have multiple transactions among the group, which can be partially netted out among them, so then only the net funds need to be transferred.

Multinational enterprises (MNEs). A company headquartered in one country but having operations in other countries.

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N

National responsiveness. The ability of MNEs to understand different consumer tastes in segmented regional markets and to respond to different national standards and regulations imposed by autonomous governments and agencies.

Nationalization. A process by which the government takes control of business assets, sometimes with remuneration of the owners and other times without such remuneration.

Nemawashi. Literally means “root-tying” and is a process of consultation to get agreement on a particular issue before it becomes explicit policy.

Neo mercantilism. A trade theory which holds that a government can improve the economic well-being of the country by encouraging exports and stifling imports.

Neutral. A preference for unemotional, objective analysis of a situation or a decision and for limited displays of emotions and feelings in the workplace.

Newly industrialized countries (NICs). A sub-group of emerging market economies that has experienced rapid economic growth, normally accompanied by political and social change. The forerunners were the four Asian “Tiger” economies: Singapore, South Korea, Taiwan, and Hong-Kong. The rapid growth, increased trade and FDI, and integration of China in the global economy suggest it is approaching this status.

Nominal interest rate. The actual rate of interest offered by a bank, typically given as an annual percentage rate.

Non-governmental organizations (NGOs). (Also see Civil society. ) Private-sector groups that act to advance diverse social interests.

Non-tariff barriers. Rules, regulations, and bureaucratic red tape that delay or preclude the purchase of foreign goods.

North American Free Trade Agreement (NAFTA). A regional free trade agreement between Canada, the United States, and Mexico.

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O

Organization for Economic Cooperation and Development (OECD). A group of 30 relatively wealthy member countries that facilitates a forum for the discussion of economic, social, and governance issues across the world.

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P

Particularism. Judging a situation and adjusting rules and procedures according to the specific of the situation or individuals involved.

Personal selling. A direct form of promotion used to persuade customers of a particular point of view.

PEST framework. Examines the political, economic, socio-cultural, and technological conditions in particular country markets.

Plaza Accord. An agreement signed by the G5 in 1985 in New York agreeing to devalue the US dollar against the Japanese yen and the Deutsche (German) mark. It triggered the bubble economy and eventual economic recession in Japan in the 1990s.

Political risk. The probability that political forces will negatively affect a multinational's profit or impede the attainment of other critical business objectives.

Political union. An economic union in which there is full economic integration, unification of economic policies, and a single government.

Polycentric. Each subsidiary, division, or function reflects the culture of its host country. Local managers' cultural predispositions and decision making dominate over those of home-country managers in a multinational firm.

Polycentric predisposition. The tendency of a multinational to tailor its strategic plan to meet the needs of the local culture.

Polycentric solution. A decentralized decision-making framework in which financial decisions are largely allocated to foreign affiliates, and financial evaluation of affiliates is done in comparison with other firms in that context.

Portfolio investment. The purchase of financial securities in other firms for the purpose of realizing a financial gain when these marketable assets are sold.

Power distance. A cultural dimension that measures the degree to which less powerful members of organizations and institutions accept the fact that power is not distributed equally.

Privatization. The process of selling government assets to private buyers.

Process mapping. A flow charting of every step that goes into producing a product.

Product managers. Managers responsible for coordinating the efforts of their people in such a way as to ensure the profitability of a particular business or product line.

Production system. A group of related activities designed to create value.

Promotion. The process of stimulating demand for a company's goods and services.

Protective and defensive techniques. Strategies designed to discourage a host country from interfering in multinational operations.

Proxemics. A form of non-verbal communication that deals with how people use physical space to convey messages.

Psychic distance. A measure of the similarity or difference between two cultures. Also commonly defined as the measurable distance between the home market and a foreign market resulting from the perception of cultural and business differences.

Purchasing power parity. The theory of exchange rate determination that states that differences in prices of the same goods between countries will be eliminated by exchange rate changes.

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Q

Quota. A quantity limit on imported goods.

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R

Real interest rate. The nominal interest rate adjusted for price changes. Domestically, this means adjusting for inflation. Internationally, this means adjusting for exchange rate (currency price) changes.

Regiocentric predisposition. The tendency of a multinational to use a strategy that addresses both local and regional needs.

Regional managers. In a geocentric matrix, managers charged with selling products in their geographic locale.

Regression analysis. A mathematical approach to forecasting that attempts to test the explanatory power of a set of independent variables.

Repatriation. The process of returning home at the end of an overseas assignment.

Repatriation agreement. An agreement that spells out how long a person will be posted overseas and sets forth the type of job that will be given to the person upon returning.

Resource managers. In a matrix structure, managers charged with providing people for operations.

Resource-seeking FDI. MNEs invest in production-related activities to benefit from cheaper or better sources of inputs in a particular location; these can include raw materials, components, or labor and expertise.

Resource-sharing infrastructure. An infrastructure used by firms that compete in dissimilar national markets but share resources such as R&D efforts and manufacturing information.

Return on investment (ROI). A percentage determined by dividing net income before taxes by total assets.

Ringi. The formalized consensus process of decision making. The ringisho is a decision proposal that is circulated around company departments to be revised or approved before implementation.

Roll-on-roll-off (RORO) vessels. Ocean-going ferries that can carry trucks that drive onto built-in ramps and roll off at the point of debarkation.

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S

Secular totalitarianism. A system of government in which the military controls everything and makes decisions that it deems to be in the best interests of the country.

Sequential. Cultures that view time in a sequential or linear fashion. Order comes from separating activities and commitments.

Shinjinrui. The new generation Japanese, with very different values and aspirations than their parents.

Single European Act (SEA). An Act passed by the EU that contains many measures to further integrate the member states, along economic and political dimensions, and that allows the Council of Ministers to pass most proposals by a majority vote, in contrast to the unanimous vote needed previously.

Single European market (SEM). A market consisting of all members of the EU, bound together by a single currency, a special charter, complete harmonization of social and economic policies, and a common defense policy.

Small- and medium-sized enterprises (SMEs). The definition of SMEs varies according to the nation. In the US, SMEs are companies with up to 500 employees. In the EU, SMEs have between 11 and 200 employees and sales of under US $40 billion. In Japan, SMEs in industry have up to 300 employees while those in wholesale and retail have up to 150 and 50 employees, respectively. Developing countries use the World Bank benchmark of 11 to 150 employees and sales of under US $5 billion.

Socialization. The process of enculturation, or the adoption of the behavior patterns of the surrounding culture.

Sogo shosha. International trading companies that help other Japanese firms import and export products and services. They were very influential in the rapid growth era in helping local firms break into overseas markets.

Special drawing right (SDR). The currency of the IMF. Accounts at the IMF are denominated in SDRs, and the IMF has issued about $ US 30 billion of SDRs as currency since its inception in 1969.

Specific. A tendency to limit workplace relationships and obligations, including relative status and hierarchical position, to the workplace.

Specific duty. A tariff based on the number of items being shipped into a country.

Speculator. A person or firm that takes a position in foreign exchange with no hedging or protection mechanism. The person would take this action to try to gain from expected exchange rate changes.

Spot rate. The exchange rate offered on the same day as the request to buy or sell foreign currency. Actual settlement (payment) may occur one or two days later.

Standardized training programs. Generic programs that can be used with managers anywhere in the world.

State-owned enterprises (SOEs). Companies that are owned, financed, and controlled by government. Privatization is the process whereby ownership and control is transferred to the private sector through sales of state-owned assets.

Strategic alliance. A business relationship in which two or more companies work together to achieve a collective advantage.

Strategic business units (SBUs). Operating units with their own strategic space; they produce and sell goods and services to a market segment and have a well-defined set of competitors.

Strategic cluster. A network of businesses and supporting activities located in a specific region, where flagship firms compete globally and supporting activities are home based.

Strategic fit. A strategic management concept which holds that an organization must align its resources in such a way as to mesh effectively with the environment.

Strategic management. Managerial actions that include strategy formulation, strategy implementation, evaluation, and control and encompass a wide range of activities, including environmental analysis of external and internal conditions and evaluation of organizational strengths and weaknesses.

Strategic planning. The process of evaluating the enterprise's environment and its internal strengths and then identifying long- and short-range activities.

Strategy formulation. The process of evaluating the enterprise's environment and its internal strengths.

Strategy implementation. The process of attaining goals by using the organizational structure to execute the formulated strategy properly.

Synchronic. Cultures that view events in parallel over time. Order comes from coordinating multiple activities and commitments.

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T

Tailor-made training programs. Programs designed to meet the specific needs of the participants, typically including a large amount of culturally based input.

Tariff. A tax on goods shipped internationally.

Tax havens. Jurisdictions that offers the MNE a lower tax rate (or no tax) than in other places, so that MNEs can locate some of their business activities there and thus reduce overall tax payments.

Theocratic totalitarianism. A system of government in which a religious group exercises total power and represses or persecutes non-orthodox factions.

Theory of absolute advantage. A trade theory which holds that nations can increase their economic well-being by specializing in goods that they can produce more efficiently than anyone else.

Theory of comparative advantage. A trade theory which holds that nations should produce those goods for which they have the greatest relative advantage.

Third-country nationals. Citizens of countries other than the one in which the multinational is headquartered or the one in which they are assigned to work by the multinational.

Time-to-market accelerators. Factors that help reduce bottlenecks and errors and ensure product quality and performance.

Totalitarianism. A system of government in which one individual or party maintains complete control and either refuses to recognize other parties or suppresses them.

Trade adjustment assistance. Assistance offered by the US government to US businesses and individuals harmed by competition from imports.

Trade creation. A process in which members of an economic integration group begin to focus their efforts on those goods and services for which they have a comparative advantage and start trading more extensively with each other.

Trade diversion. Occurs when members of an economic integration group decrease their trade with non-member countries in favor of trade with each other.

Training. The process of altering employee behavior and attitudes in a way that increases the probability of goal attainment.

Transaction risk. The risk of financial loss or gain to an MNE due to unanticipated exchange rate changes affecting future cash flows from transactions that are denominated in foreign exchange.

Transfer price. The price used for an intra-company payment for shipment of products or services from one affiliate to another in an MNE. These prices can be used to reduce taxes, move funds to desired locations, etc.

Transit tariff. A tax levied on goods passing through a country.

Transition strategies. Strategies designed to help smooth the move from foreign to domestic assignments.

Translation risk. The risk of losses or gains on the MNE's balance sheet, due to unhedged exchange rate changes during an accounting period.

Transnational network structure. An organization design that helps MNEs take advantage of global economies of scale while also being responsive to local customer demands

Transparency. The clarity and consistency of policies and legislation applied in the governance of businesses.

Trend analysis. The estimation of future demand by either extrapolating the growth over the last three to five years and assuming that this trend will continue or by using some form of average growth rate over the recent past.

Triad. The three major trading and investment blocs in the international arena: the United States, the EU, and Japan.

Twin factories. (Also see Maquiladoras.) Production operations set up on both sides of the US–Mexican border for the purpose of shipping goods between the two countries.

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U

Uncertainty avoidance. The extent to which people feel threatened by ambiguous situations and have created institutions and beliefs for minimizing or avoiding those uncertainties.

Unconventional cargo vessels. Vessels used for shipping oversized and unusual cargoes.

United States–Canada Free Trade Agreement (FTA). A trade agreement that eliminates most trade restrictions (such as tariffs) between these two countries and extends national treatment to foreign investment.

Universalism. The uniform application of rules and procedures, regardless of situation, context, or individuals involved.

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V

Value chain. The way in which primary and support activities are combined in providing goods and services and increasing profit margins.

Vertical integration. The ownership of assets involved in producing a good or service and delivering it to the final customer.

Virtual integration. A networking strategy based on cooperation within and across company boundaries.

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W

Weighted Country Risk Assessment Model. Combines an investment project appraisal with country risk analysis.

Weighted-average cost of capital (WACC). The firm's cost of obtaining funds from the various sources available. Each source of funds is weighted (multiplied) by the percentage of total capital it provides. Thus, the WACC is W 1 (cost of using retained earnings) + W 2 (cost of bank borrowing) + W 3 (cost of other source of funds), where each cost is stated as an annual percentage rate and each W is the percentage of total capital from that source.

Work councils. Groups that consist of both worker and manager representatives and are charged with dealing with matters such as improving company performance, working conditions, and job security.

Working capital. Short-term financial instruments such as bank deposits and marketable securities that can be optimized by the MNE on a global basis.

World Bank. The world's largest development bank, formed along with the IMF at Bretton Woods in 1944. Its original name was the International Bank for Reconstruction and Development (IBRD). The World Bank assists developing countries with loans and economic advising for economic development.

World Trade Organization (WTO). An international organization that deals with the rules of trade among member countries. One of its most important functions is to act as a dispute-settlement mechanism.

WTO accession. Admission to the World Trade Organization; in return for the right to access and to engage in fair trade with other national markets, the country must liberalize its own markets.  

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X

 

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Y

 

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Z

Zaibatsu. The pre-war antecedents of some modern-day keiretsu in Japan. Attempts by the allied forces to break these up after World War II largely failed.

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