International Marketing

Multidomestic company
An organization with multi-country affiliates, each of which formulates its own business strategy based on perceived market differences

Global company
An organization that attempts to standardize and integrate operations worldwide in all functional areas

International company
Either a global or a Multidomestic company

Environment
All the forces surrounding and influencing the life and development of the firm

Uncontrollable forces
External forces over which management has no direct control, although it can exert an influence

Controllable forces
Internal forces that management administers to adapt to changes in the uncontrollable forces

Domestic environment
All the uncontrollable forces originating in the home country that surround and influence the firms life and development

Foreign environment
All the uncontrollable forces originating outside the home country that surround and influence the firm

International environment
Interaction between domestic and foreign environmental forces or between sets of foreign environmental forces

Self-reference criterion
Unconscious reference to ones own cultural values when judging behaviors of others in a new and different environment

Portfolio investment
The purchase of stocks and bonds to obtain a return on the funds invested

Direct investment
The purchase of sufficient stocks in a firm to obtain significant management control

Preferential trading arrangement

An arrangement by a small group of nations to establish free trade among themselves while maintaining trade restrictions with all other nations

In` bond plants (maquiladoras)

Production facilities in Mexico that temporarily import raw materials, components, or parts duty-free to be manufactured, processed, or assembled with less expensive local labor; the finished or semifinished product is then exported

North American Free Trade Agreement (NAFTA)

A treaty establishing a free trade area consisting of the United States, Mexico, and Canada; quotas on each others goods were eliminated in January 1994, and import duties will be phased out over 10 years

Growth triangles
Transnational economic zones spread over large, geographically proximate areas covering three or more countries where differences in factor endowments are exploited to promote external trade and investment

Indirect exporting
The exporting of goods and services through various types of home-based exporters

Direct exporting
The exporting of goods and services by the firm that produces them

Joint venture
A cooperative effort among two or more organizations that share a common interest in a business enterprise or undertaking

Management Contract
An arrangement by which one firm provides management in all or specific areas to another firm

Licensing
A contractual arrangement in which one firm grants access to its patents, trade secrets, or technology to another for a fee

Franchising
A form of licensing in which one firm contract with another to operate a certain types of business under an established name according to specific rules

Contract Manufacturing
An arrangement in which one firm contracts with another to produce products to its specifications but assumes responsibility for marketing

Strategic Alliances
Partnerships between competitors, customers, or suppliers that may take one or more of various forms

Sogo Shosha
The largest of the Japanese general trading companies

Export Trading Company (ETC)

A firm established principally to export domestic goods and services and to help unrelated companies export their products

Cooperative exporters
Established international manufactures that export other manufacturers, goods as well as their own

Manufacturers Agents
Independent sales representatives of various noncompeting suppliers Distributors Independent importers that buy for their own account for resale

Trading Companies
Firms that develop international trade and serve as intermediaries between foreign buyers And domestic sellers and vice versa

Parallel Importers
Wholesalers that import products independently of manufacturer-authorized importers or buy good for export and divert them to the domestic market

Gray Market
The sale of goods that are either legal but-unauthorized imports bearing domestic manufacturers trade names or exports that have been diverted to domestic market

Hypermarkets
Huge combination supermarket /discount stores where soft and hard goods are sold

Superstores
Name given to hypermarkets in Japan, some parts of Europe, and the United States

Mercantilism
An economic philosophy based on the belief that (1) a nations wealth depends on accumulated treasure, usually gold, and (2) to increase wealth government policies should promote exports and discourage imports

Absolute Advantage
The capability of one nation to produce more of a good with the same amount of input than another country

Comparative Advantage
A nation having absolute disadvantages in the production of two goods with respect to another nation has a comparative or relative advantage in the production of the goods in which its absolute disadvantage is less

Factor Endowment
Heckscher-Ohlin theory that countries export products requiring large amounts of their abundant production factors and import product requiring large amounts of their scarce production factors

Exchange Rate
The price of one currency stated in terms of another currency

Currency Devaluation
Lowering its price in terms of other currencies

International Product life cycle (IPLC)

A theory explaining why a product that begins as a nations export eventually becomes its import

Dumping
Selling a product abroad for less than the cost of production, the price in the home market, or the price to third countries

Subsidies
Financial contribution provided directly or indirectly by a government, which confers a benefit; include grants, preferential tax treatment, and government assumption of normal business expenses

Countervailing Duties
Additional import taxes levied on imports that have benefited from export subsidies

Tariffs
Taxes on imported goods for the purpose of raising their price to reduce competition for local producers or stimulate their local production

Ad valorem Duty
An import duty levied as a percentage of the invoice value of imported good

Compound Duty
A combination of specific and ad valorem duties

Variable Levy
An import duty set at the difference between world market prices and local governmentsupported prices

Nontariff Barriers
All forms of discrimination against imports other than import duties

Quotas
Numerical limits placed on specific classes of imports

Voluntary Export Restrains (VERs)

Export quotas imposed by the exporting nation

Orderly Marketing Arrangements

Formal agreements between exporting and importing countries that stipulate the import or export quotas each nation will have for a good

Developed
A classification for all industrialized nations, which are most technically developed

Developing
A classification for the worlds lower-income nations, which are less technically developed

Newly Industrializing Countries (NICs)

The fours Asian tigers and the middle-income economies of Brazil, Mexico, Malaysia, Chile and Thailand

Newly industrialized economies (NIEs)

Fast-growing upper-middle-income and high income economies of South Korea, Taiwan, Hong Kong, and Singapore

Underground economy
The part of a nations income that, because of unreporting or underreporting, is not measured by official statistics

Purchasing power parity (PPP)

The number of units of a currency required to by the same amounts of goods and services in the domestic market that one dollar would buy in the United States

Human-needs approach
Defines economic development as the elimination of poverty and unemployment as well as an increase in income

Import substitution
The local production of goods to replace imports

Monopolistic advantage theory

Foreign direct investment is made by firms in oligopolistic industries possessing technical and other advantage over indigenous firms

Cross investment
Foreign direct investment by oligopolistic firms in each others home countries as a defense measure

Internalization theory
An extension of the market imperfection theory; to obtain a higher return on its investment, a firm will transfer its superior knowledge to a foreign subsidiary rather than sell it in the open market

Eclectic theory of international production

For a firm to invest overseas, it must have three kinds of advantages: ownership-specific, internalization, and location-specific

Multilateral development banks

International leading institutions that work primarily with developing countries to promote economic and social progress

Hard loans
Made and repayable in hard, convertible currencies at market interest rates with normal market maturities

Soft loans
May be repayable in soft, nonconvertible currencies; carry low or no interest obligations; are frequently long terms, up to 40 years; and may grant grace periods of up to 10 years during which no payments are required