Ebook International business - Environments and operations (15th edition): Part 2

(BQ) Part 2 book International business - Environments and operations has contents: Factors that influence exchange rates, factors that influence exchange rates, ethics and social responsibility, evaluation of countries for operations,...and other contents.

Find more at http://www.downloadslide.com The Global Monetary Environment Part Four Chapter Markets for Foreign Exchange Objectives After studying this chapter, you should be able to Learn the fundamentals of foreign exchange Identify the major characteristics of the foreignexchange market and how governments control the flow of currencies across national borders Describe how the foreign-exchange market works Examine the different institutions that deal in foreign exchange Understand why companies deal in foreign exchange MyManagementLab® Improve Your Grade! When you see this icon , visit www.mymanagementlab.com for activities that are applied, personalized, and offer immediate feedback Another man’s trade costs money Source: © albertocc311 - Fotolia.com —Por tuguese Proverb M08_DANI6795_15_GE_C08.indd 339 01/04/14 3:05 PM Find more at http://www.downloadslide.com CASE Going Down to the Wire in the Money-Transfer Market Long known as “the fastest way to send money,” U.S.-based Western Union controls nearly 80 percent of the moneytransfer market and is widely acknowledged as the world leader in wire transfers—electronic transfers of funds from one financial institution to another.1 In this case, it’s a transfer from one Western Union office to another Now, however, Western Union is facing stiff competition from banks threatening to encroach on its market share of the electronic money-transfer business Western Union was started in 1851 when a group of businessmen in Rochester, New York, formed the New York and Mississippi Valley Printing Telegraph Company The name was changed to Western Union in 1861 when the first transcontinental telegraph line was completed Western Union introduced its money-transfer service in 1871; in 1989 it began offering it outside North America Today, more than half a million Western Union agent locations are found in over 200 countries and territories around the world Money transfers make up 85 percent of Western Union’s revenues, with the company transferring about $80 billion annually Customers have many different options when sending money through Western Union: in person, at an agent location, over the phone, or online; via cash, debit cards, or credit cards And they can use the service at a variety of locations: an actual Western Union office, a grocery store, a post office—just about anywhere people go to transact business To send money to, say, India or Mexico using a Western Union agent location, the customer fills out a “Send Money” form and gets a receipt, which includes a Money Transfer Control number to give to the person receiving the funds To retrieve the funds, the receiver then fills out a “Receive Money” form and presents the Money Transfer Control number along with valid identification at a Western Union agent location Sources and Destinations of Migration Converting Currency The Mexican Connection (I) Transfer funds are converted into the foreign currency using an exchange rate set by Western Union The fees for sending money are determined based on how much is sent, in what form (cash or debit/credit card), and where it is going For example, sending $500 to Mexico from Utah costs $12 Part of Western Union’s attractiveness is its speed and ­anonymity—it can move cash from one location of the world to another in just minutes Money can be sent through an agent by cash, debit card, credit card, or a Western Union Gold Card, and senders are required to fill out a form and show a proper ID Most of the migrant workers in the United States come from Latin America and the Caribbean Most of Western Union’s wire transfer business in the U.S comes from Mexican immigrants who send part of their paychecks home to support their families Mexico has historically ranked as the largest host country in Latin America for remittances, followed by Brazil Remittances already exceed foreign direct investment and overseas aid as sources of foreign exchange Annual remittance income has passed tourism to become the second-largest source of foreign-exchange income in Mexico, after oil revenues M08_DANI6795_15_GE_C08.indd 340 Migration is based on supply and demand People work in other countries because of better economic opportunities A  country accepts migrant workers because it is short on labor Each situation is different The top five countries in terms of the number of immigrants recently were the United States (42.8 million), Russia (12.3 million), Germany (10.8  million), Saudi Arabia (7.3 million), and Canada (7.2 million) In terms of percentage of the total population, however, three of the top five destinations for migrant workers were from the Gulf Cooperation Council, with Qatar at #1 (86.5 percent of the total population) and the United Arab Emirates, including Dubai, at #3 (70 percent of the population) Of the top five emigration countries, Mexico was #1  with 11.9 million people working abroad, and India was #2 with 11.4 million The top migration corridor in 2010 was from Mexico to the United States, with 11.6 million workers India sent 2.2 million workers to the UAE, which ranked as the #9 migration corridor Excluding the former Soviet Union, the India-UAE corridor ranked #5 in the world In spite of the economic crisis, remittances from international immigrants were expected to total $534 billion in 2012, of which $406 billion went to families in developing countries Remittances were projected by the World Bank to continue to expand, possibly hitting $685 billion by 2015 In 2012, the top remittance-receiving country was India at $70  billion, followed by China at $66 billion and the Philippines and Mexico at $24  billion each High oil prices were driving ­migrant workers to the Gulf Cooperation Council Countries, whereas remittances to Latin America and the Caribbean suffered due to weak economies in Europe and the United States The U.S was by far the top remittance-sending country 01/04/14 3:05 PM Find more at http://www.downloadslide.com Chapter Markets for Foreign Exchange 341 Exchange Rates and Competition A class-action lawsuit was filed against Western Union in 1997, charging that it offered its customers lower exchange rates than the market without informing them of the difference The lawsuit was settled in 2000, and Western Union is now required to state on its receipts and advertisements that it uses its own exchange rate on transactions and that any difference between the company rate and the m ­ arket rate is kept by the company For example, the market exchange rate on April 18, 2013, for Mexican pesos was 12.26 pesos/US $ (US $500 = 6,100 pesos), whereas Western Union’s offered exchange rate was 11.896  pesos/US $ (US $500 = 5,948 pesos) One reason for the difference is that the market rate is ­typically for very large commercial transactions, whereas the normal Western Union transaction is much smaller—the smaller the transaction, the less favorable the exchange rate Compare that with buying products in bulk rather than a few at a time Financial institutions such as banks have pressured Western Union to use better exchange rates Profit margins in the money-transfer business can reach 30 percent, and many banks have started to offer their own money-transfer services in an attempt to take advantage of the continued expected growth of the foreign money-transfer industry For example, in 2001 Wells Fargo agreed to accept consular identification cards from Mexican immigrants who want to open bank accounts but lack U.S driver’s licenses These cards verify Mexicans’ identities without revealing their immigration status After Wells Fargo began accepting the consular identification card, the number of bank accounts opened with a consular ID jumped by over 500 percent within three years The Mexican Connection (II) Wells Fargo and other U.S banks, including Citi and Bank of America, have established alliances with Mexican banks to offer remittance accounts to the immigrant workers in the United States Workers can now open U.S bank accounts with their consular IDs and each ask for two ATM cards They can then deposit remittance money in the U.S account, and their family members at home can withdraw the money from the associated Mexican bank In 2005, the Federal Reserve teamed up with Mexico’s central bank to create a new program that facilitates remittances made from the U.S to Mexico The program allows U.S commercial banks to make money transfers for Mexican workers through the Fed’s own automated clearinghouse, which is linked to Banco de México, the Mexican central bank Even the wire transfer fees at banks are cheaper than Western Union’s For example, Wells Fargo charges a $6 fee to send $500 to Mexico, while Western Union charges $12 for the same transaction Many banks are moving toward eliminating exchange-rate spreads (the difference between the market rate and the rate they use for the wire transfer) and transfer fees to Mexico to provide more attractive alternatives to immigrant workers This new onslaught of competition by banks has forced Western Union to cut its fees and offer new services, including a home-delivery service, where money is delivered directly to the recipient’s door Western Union is also moving into countries such as China and India to boost its market share The increased competition has driven down remittance fees around the world The Mexican Connection (III) Immigrant workers complain about the high transfer fees and exchange-rate spread associated with Western Union, but many continue to use this service instead of the lower-cost method of remitting money through banks Mexico has a history of unstable currencies and widespread inflation, resulting in a ­traditional mistrust of banks Other immigrants base their choice on word of mouth or convenience and ­location Many are simply unaware of the variety of choices available for sending money and not know how to get the best deal Another reason why many continue to use Western Union is its worldwide availability For thousands of tiny villages, Western Union is the main link to the outside world Look at Coatetelco, a small village south M08_DANI6795_15_GE_C08.indd 341 01/04/14 3:05 PM Find more at http://www.downloadslide.com 342 PART    The Global Monetary Environment of Mexico City with no bank A few people grow maize, chiles, and fruit there, but it is ­remittances—mostly from agricultural or construction workers in Georgia and the Carolinas—that account for 90 percent of the villagers’ incomes Patricio, 49, says that at the end of each month he gets a call from his two sons, who are working illegally in Georgia They give him a code number, and he drives or rides his horse four miles to the nearest Western Union office, located in a government telegraph office, to pick up the $600 they spent $40 to wire to him Less expensive remittance services are available at the nearby Banamex bank in Mazatepec, but so far Patricio and his neighbors are not willing to travel the eight miles to get there Besides, he says, “we not trust the banks, and they make everything more difficult.” The Dubai Connection Dubai, one of the seven states in the United Arab Emirates (UAE), is an interesting point of comparison with Mexico Although workers from India and Pakistan go to Dubai to work because of higher wages, they are actually recruited by companies in Dubai Because of Dubai’s relatively small local Emirati population (only 19 percent of the total population), there is no way the country could develop without foreign ­workers—skilled, semi-skilled, and unskilled India is the natural source of workers, with Mumbai only about 1,200 miles (1,900 km) away Employees must have a permit to work in Dubai, typically for three years at a time, and they are not allowed to become citizens In addition, there is no illegal immigration, and workers can be sent home whenever their employers decide they are no longer needed But these workers are critical for the growth of the local economies They have increased the speed of urbanization, fast-tracked infrastructure and economic development, helped the GCC countries diversify from oil by helping construct hotels and tourist attractions, and contributed to solid economic growth Given that the migrant workforce in Dubai cannot own property or invest in business ventures, ­workers need to send the money back home Western Union, with a deep understanding of the remittance markets, its ethnic marketing expertise, diversified presence and resulting closeness to customers, and its rapid growth in Dubai, has developed high and growing brand awareness there and has worked hard to develop products and messages that appeal to the customers Dubai and the United States are different in terms of size and the demand for labor, while India and Mexico are different in terms of how and why they supply labor, but there is one constant: people need to move money, and that is where Western Union comes in ■ Questions 8-1 The United Emirates, of which Dubai is a member, is one of the Gulf Cooperation Council ­members How does it compare with the other GCC countries in terms of total population and the non-immigrant population as a percentage of total population? How important you think migration and therefore capital remittances are for each of the countries in the GCC? 8-2 Should the U.S government regulate the exchange rate that financial institutions charge Mexican migrant workers for sending money back to Mexico? Why or why not? Concept Check When we introduced the idea of a multinational enterprise (MNE) in Chapter 1, we emphasized that MNEs are firms that take a global approach to production and markets Here we add that the need to deal with foreign exchange is one of the important factors in the environment in which MNEs must conduct business M08_DANI6795_15_GE_C08.indd 342 Introduction Changing money from one currency to another and moving it around to different parts of the world is serious business, on both a personal and a company level To survive, MNEs and small import and export companies alike must understand foreign exchange and exchange rates In a business setting, there is a fundamental difference between making a payment in the domestic market and making one abroad In a domestic transaction, companies use only one currency; in a foreign transaction, they can use two or more A 01/04/14 3:05 PM Find more at http://www.downloadslide.com Chapter Markets for Foreign Exchange 343 U.S firm that exports, say, skis to a French distributor may ask the distributor to remit payment in dollars, unless the U.S firm has some specific use for euros, such as paying a French supplier Assume you’re a U.S importer who has agreed to purchase a certain quantity of French perfume and pay the French exporter €4,000 for it Assuming you had the money, how would you go about paying? First, you would go to the international department of your local bank to buy €4,000 at the going market rate If the euro/dollar exchange rate is, say, €0.6974 per dollar, your bank would then charge your account $5,736 ($4,000/€0.6974) plus the transaction costs and transfer the funds to the exporter’s bank through a wire transfer to complete the transaction What is Foreign Exchange? Foreign exchange—money denominated in the currency of another nation or group of nations Exchange rate—the price of a currency Foreign exchange is money denominated in the currency of another nation or group of nations.2 The market in which such transactions take place is the foreign-exchange market Foreign exchange can be in the form of cash, funds available on credit and debit cards, traveler’s checks, bank deposits, or other short-term claims.3  As an example, our opening case illustrates how Mexican immigrant workers in the United States often use Western Union to convert dollars to pesos and then wire the pesos to offices in Mexico where relatives can retrieve the cash.  An exchange rate is the price of a currency—specifically, the number of units of one ­currency that buy one unit of another currency The number can change daily On May 1, 2013, €1 could purchase US $1.3181 (or $1 could purchase €0.7587) Exchange rates make international price and cost comparisons possible Players on the Foreign-Exchange Market The Bank for International Settlements divides the foreign-exchange market into reporting dealers (also known as dealer banks or money center banks), other financial institutions, and nonfinancial institutions M08_DANI6795_15_GE_C08.indd 343 The foreign-exchange market is made up of many different players The Bank for International Settlements (BIS), a central banking institution in Basel, Switzerland, owned and controlled by 60 member central banks, divides the market into three major categories: reporting dealers, other financial institutions, and nonfinancial institutions.4 Reporting dealers, also known as money center banks, are financial institutions that actively participate in local and global foreign exchange and derivative markets Comprising mainly the large commercial and investment bank, they are widely assumed to include the 10 largest banks and financial institutions in terms of overall market share in foreign-exchange trading: Deutsche Bank, Barclays Capital, UBS, Citi, JP Morgan, HSBC, RBS, Credit Suisse, Goldman Sachs, and Morgan Stanley (In our closing case, we show how one money center bank, HSBC, was involved in the gradual internationalization of the Chinese yuan.) Because of the volume of transactions that the money center banks engage in, reporting dealers influence price-setting and are the market makers The other financial institutions are not classified as reporting dealers They include smaller commercial banks, investment banks and securities houses, hedge funds, pension funds, money market funds, currency funds, mutual funds, specialized foreign-exchange trading companies, and so forth  Western Union, whose current activities are detailed in our opening case, is a good example of a nonbanking financial institution that deals in foreign exchange As for nonfinancial customers, they comprise any counterparty other than those described above and include any non-financial end user, such as governments and companies (MNEs as well as small- and medium-size corporations and firms) Figure 8.1 shows the percentage of the counterparties—reporting dealers, financial institutions, and nonfinancial customers—represented in foreign currency transactions 01/04/14 3:05 PM Find more at http://www.downloadslide.com 344 PART    The Global Monetary Environment A woman standing in front of a counter at a money exchange booth in Mexico The flags represent the wide range of countries whose currencies are traded at the money exchange ▶ Source: Linda Whitwam, Dorling Kindersley Figure 8.1  Foreign-Exchange Markets: Turnover by Counterparty, September 2013 The counterparty segment that contributed the most to growth in global FX turnover between 2010 and 2013 was other financial institutions, which surpassed reporting dealers for the first time in the 2010 survey Source: Based on Bank for International Settlements, Central Bank Survey Report on Foreign Exchange Turnover in April 2013: Preliminary Global Results, September 2013 (Basel, Switzerland: BIS, September 2013, 6) Turnover by Counterparty 53.0% 39.0% 9.0% Reporting Dealers M08_DANI6795_15_GE_C08.indd 344 Non-financial Customers Other Financial Institutions 01/04/14 3:06 PM Find more at http://www.downloadslide.com Chapter Markets for Foreign Exchange 345 Dealers can trade foreign exchange How to Trade Foreign Exchange • Directly with customers, • Through voice brokers, • Through electronic brokerage systems, • Directly through interbanks Foreign exchange is traded using electronic methods (41.3 percent of all trades), customer direct (24.3 percent), interbank direct (18.5 percent), or voice broker (15.9 percent).5 Different kinds of electronic methods are involved One is an electronic broking system in which trades are matched up for foreign exchange dealers using electronic systems such as EBS, Thomson Reuters, and Bloomberg Another is an electronic trading system that is executed on a s­ ingle-bank proprietary system or a multibank dealing system One example of this type of system is FXConnect, a Boston-based U.S company that provides trading and settlement options for its clients Customer direct refers to trades between a reporting dealer and either a non-reporting dealer or customer, without a third party being involved Usually trades are executed by telephone or direct electronic trading Interbank direct refers to trades between dealer banks via telephone or direct electronic trading Voice broker is a trade via telephone communication with a foreign exchange voice broker.6 Electronic methods are pretty evenly split among three options: broking systems, multibank trading systems, and single-bank trading systems The electronic services provided for customers by EBS, Thomson Reuters, and Bloomberg also furnish a great deal of market data, news, quotes, and statistics about different markets around the world It is not uncommon for a trading room to have more than one electronic service and for traders to have different preferences within the same office Bloomberg and Reuters provide market quotes from a large number of banks, so their quotes are close to the market consensus EBS provides live trades through their system Deutsche Bank, UBS, and Barclays Capital are moving to dominate e-trading of foreign exchange on their proprietary platforms If you are accepted to trade on their platforms, you have to trade at the rates they quote However, a quick check of the market consensus on Bloomberg or Reuters will let you know how good those quotes are Concept Check In discussing “The Political Environment” in Chapter 3, we observe that the relationships comprising a country’s political system—relationships among its institutions, organizations, and interest groups—depend on the “political norms and rules” over which its government exercises control As we’ll see in Chapter 10, these structures include rules for trading currency; moreover, governments are active traders of foreign currency through money center banks Reuters, EBS, and Bloomberg provide electronic services for their customers These services include market data, news, quotes, and statistics about different markets around the world Foreign-exchange market: • Over-the-counter (OTC) commercial and investment banks • Securities exchanges Global OTC foreign exchange instruments: • • • • • • Spot Outright forward FX swap Currency swaps Currency options Other foreign exchange products The spot rate is the exchange rate quoted for transactions that require delivery within two days Outright forwards involve the exchange of currency beyond three days at a fixed exchange rate, known as the forward rate M08_DANI6795_15_GE_C08.indd 345 Some Aspects of the Foreign-Exchange Market The foreign-exchange market has two major segments: the over-the-counter market (OTC) and the exchange-traded market The OTC market is composed of commercial banks as just described, investment banks, and other financial institutions The exchange-traded market comprises securities exchanges, such as the CME Group, NASDAQ OMX, and NYSE Liffe, where certain types of foreign-exchange instruments, such as futures and options, are traded Global OTC Foreign Exchange Instruments The phrase “global OTC foreign exchange instruments” refers to spot transactions, outright forwards, FX swaps, currency swaps, currency options, and other foreign exchange products These instruments are all traded in the markets mentioned above • Spot transactions involve the exchange of currency at an agreed-upon rate for delivery within two business days For example, a bank would quote an exchange rate for a transaction on May 1, but the transaction would actually be settled two days later, on May The rate at which the transaction is settled is the spot rate (Our opening case, which discusses Western Union’s policies on currency conversion, gives a good idea of how individuals can trade foreign exchange on the spot market.) • Outright forward transactions involve the exchange of currency on a future date beyond two business days It is the single purchase or sale of a currency for future delivery The rate at which the transaction is settled is the forward rate and is a contract rate between the two parties The forward transaction will be settled at the forward rate no matter what the actual spot rate is at the time of settlement 01/04/14 3:06 PM Find more at http://www.downloadslide.com 346 PART    The Global Monetary Environment An FX swap is a simultaneous spot and forward transaction Currency swaps, options, and futures contracts are other forms of transactions in foreign exchange • In an FX swap, one currency is traded for another on one date and then swapped back later Most often, the first or short leg of an FX swap is a spot transaction and the second or long leg a forward transaction Let’s say IBM receives a dividend in British pounds from its subsidiary in the United Kingdom but has no use for British pounds until it has to pay a U.K supplier in 30 days It would rather have dollars now than hold on to the pounds for a month IBM could enter into an FX swap in which it sells the pounds for dollars to a dealer in the spot market at the spot rate and agrees to buy pounds for dollars from the dealer in 30 days at the forward rate Although an FX swap is both a spot and a forward transaction, it is counted as a single transaction • Currency swaps deal more with interest-bearing financial instruments (such as a bond) and involve the exchange of principal and interest payments Options are the right, but not the obligation, to trade foreign currency in the future • A futures contract is an agreement between two parties to buy or sell a particular c­ urrency at a particular price on a particular future date, as specified in a standardized contract to all participants in a currency futures exchange rather than in the over-the-counter market Figure 8.2 illustrates the turnover in foreign exchange by each of the instruments above in the OTC market Outright forwards and FX swaps remain the dominant category of instruments, closely followed by spot transactions Size, Composition, and Location of the ForeignExchange Market Estimated daily foreign exchange turnover in 2010 was $5.3 trillion, up 32.5 percent from the 2010 survey Before we examine the market instruments in more detail, let’s look at the size, composition, and geographic location of the market Every three years, the BIS conducts a triennial survey of foreign-exchange activity in the world The ninth triennial survey was conducted in April 2013, and preliminary data was released in September 2013 As noted in Figure 8.3, in 2013 the BIS estimated daily foreign exchange turnover to be $5.3 trillion This reflects an increase of 32.5 percent over the 2010 survey, driven largely by increases in spot market transactions However, the rise in activity was much smaller than the 71 percent increase in trades from 2004 to 2007 The global economic crisis clearly slowed down the volume of foreign exchange transactions from 2007–2010, but global recovery from the crisis, though still a little slow, Figure 8.2  Foreign-Exchange Markets: Turnover by Instrument, September 2013 The spot market turnover increased by 38 percent since the 2020 survey This is largely due to other financial institutions participating in more active trading The rest of the markets grew as well but at more moderate paces Source: Based on Bank for International Settlements, Triennial Central Bank Survey Report on Foreign Exchange Turnover in April 2013 (Basel, Switzerland: BIS, September 2013): Foreign-Exchange Markets: Turnover by Instument 42.0% 38.0% 13.0% 6.3% Options and others Spot Transactions M08_DANI6795_15_GE_C08.indd 346 1.0% Outright Forwards Currency Swaps FX Swaps 01/04/14 3:06 PM Find more at http://www.downloadslide.com Chapter Figure 8.3  ForeignExchange Markets: Average Daily Volume, 1998–2013 Source: Based on Bank for International Settlements, Central Bank Survey Report on Foreign Exchange Turnover in April 2013: Preliminary Global Results (Basel, Switzerland, BIS, September 2013), p (Basel, Switzerland: BIS, December 2010): $5,300 $5,500 5,000 4,500 $4,000 4,000 U.S dollars (billions) The data compiled by the BIS include traditional foreign-exchange activity (such as spots, outright forwards, and FX swaps), as well as the volume of derivatives (such as hedge funds) traded in the OTC Markets for Foreign Exchange 347 $3,300 3,500 3,000 2,500 $1,900 2,000 1,500 $1,500 $1,200 1,000 500 1998 2001 2004 2007 2010 2013 Year Concept Check It’s interesting (though not necessarily surprising) to note that the most widely traded currencies in the world are those issued by countries that enjoy high levels of political freedom (see Chapter 3) and economic freedom (see Chapter 4) allowed foreign exchange activity to pick up even more As noted above, by 2013, the daily turnover was reported to be $5.3 trillion Some of the reasons for the increase in trading activity are the growing importance of foreign exchange as an alternative asset and a larger emphasis on hedge funds—funds ­typically used by wealthy individuals and institutions that are allowed to use aggressive strategies unavailable to mutual funds Using the U.S Dollar on the Foreign-Exchange Market  The U.S dollar is the most important currency on the foreign-exchange market; in 2013, it was one side (buy or sell) of 87 percent of all foreign currency transactions worldwide, as Table 8.1 shows (Numbers in the table are percentages and add up to 200 percent because there are two sides to each transaction.) There are five major reasons why the dollar is so widely traded:7 It’s an investment currency in many capital markets It’s a reserve currency held by many central banks Table 8.1  Global Foreign Exchange: Currency Distribution The U.S dollar is involved in 87 percent of all worldwide foreign-exchange transactions Because it’s so readily available, it’s a popular choice for exchanges between two countries other than the United States, and it’s involved in four of the seven most frequently traded currency pairs (the $/€ is number one, the $/¥ number two) Currency U.S dollar Euro Japanese yen Pound sterling Australian dollar Swiss franc All others April 2001 April 2004 April 2007 89.9 37.9 23.5 13.0  4.3  6.0 25.4 88.0 37.4 20.8 16.5  6.0  6.0 25.3 85.6 37.0 17.2 14.9  6.6  6.8 31.9 April 2010 84.9 39.1 19.0 12.9  7.6  6.4 30.1 April 2013 87.0 33.4 23.0 11.8  8.6  5.2 31.0 Source: Based on Bank for International Settlements, Central Bank Survey Report on Foreign Exchange Turnover in April 2013 (Basel, Switzerland: BIS, September 2013), p 10 M08_DANI6795_15_GE_C08.indd 347 01/04/14 3:06 PM Find more at http://www.downloadslide.com 348 PART    The Global Monetary Environment The dollar is the most widely traded currency in the world: • An investment currency in many capital markets, • A reserve currency held by many central banks, • A transaction currency in many international commodity markets, • An invoice currency in many contracts, • An intervention currency employed by monetary authorities in market operations to influence their own exchange rates The dollar is part of four of the top seven currency pairs traded: • The dollar/euro is number one, • The dollar/yen is number two The biggest market for foreign exchange is London, followed by New York, Tokyo, and Singapore M08_DANI6795_15_GE_C08.indd 348 It’s a transaction currency in many international commodity markets It’s an invoice currency in many contracts It’s an intervention currency employed by monetary authorities in market operations to influence their own exchange rates Because of the ready availability of U.S dollars worldwide, this currency is important as a vehicle for foreign-exchange transactions between two countries other than the United States Let’s say a Mexican company importing products from a Japanese exporter ­converts Mexican pesos into dollars and sends them to the Japanese exporter, who converts them into yen Thus, the dollar has one leg on both sides of the transaction—in Mexico and in Japan Why? One reason is that the Japanese exporter might have no need for pesos but can use dollars for a variety of reasons Or the Mexican importer might have trouble getting yen at a good exchange rate if the Mexican banks are not carrying yen ­balances However, the banks undoubtedly carry dollar balances, so the importer might have easy access to the dollars Thus, the dollar greatly simplifies life for a foreign bank because the bank doesn’t have to carry balances in many different currencies Note the rise in the euro and yen as a percentage of transactions, concurrent with a slight fall in the U.S dollar The currencies of the BRIC countries not show up on Table 8.1 because their trades are each less than percent of the total However, they are steadily rising in importance and the Mexican peso and Chinese renminbi entered the top 10 for the first time in the 2013 Survey  We’ll explore the situation involving the renminbi in the e­ nding case.  Frequently Traded Currency Pairs  Another way to consider foreign currency trades is to look at the most frequently traded currency pairs The top seven pairs in the 2013 BIS Survey involved the U.S dollar, with the top two being euro/dollar (EUR/USD)—24.1 percent of the total—and dollar/yen (USD/JPY).8 Because of the importance of the U.S dollar in foreign-exchange trade, the exchange rate between two currencies other than the dollar—for example, the exchange rate between the Swiss franc and the Brazilian real—is known as a cross rate The trade between the dollar and yen is very sensitive politically because the exchange rate is often a function of trade negotiations between Japan and the United States.9 The yen is an important currency in Asia because its value reflects the competitive positions of other countries in the region and because it is freely traded—unlike the Chinese yuan, which is more tightly controlled by the government but is moving to become more of a regional and eventually a global currency (as discussed in the ending case) The yen is also affected by what is called carry trade With interest rates being so low in Japan, investors will borrow in yen and invest the proceeds in other countries, such as Brazil However, at the slightest concern over a risky global economic environment, the investors will liquidate their investments in Brazil and“carry”the proceeds back to Japan This also occurs at the end of the fiscal year in Japan (March 31), when companies may need Japanese yen Other carry trades often ­followed by the market are the U.S dollar against the South African Rand and the Hong Kong dollar, the Australian dollar against the Japanese yen, and the New Zealand dollar against the Japanese yen The Euro  The euro is also in four of the top ten currency pairs Although the dollar is still more popular in most emerging markets, the euro is gaining ground, particularly in Eastern European countries Moreover, it is slowly rising in importance as a trading currency, even outside of Europe Given that the dollar is clearly the most widely traded currency in the world, you’d expect the biggest market for foreign-exchange trading to be in the United States As Figure 8.4 01/04/14 3:06 PM Find more at http://www.downloadslide.com 882 S u b j ect I nd ex Digitization, 496 Dim sum bonds, 419 Direct exporting, 576 Direct investment See Foreign ­direct investment Direct quotes, 351 Direction, forecasting and, 396 Disclosure, 782 Disclosure/assessment matrix, 783f Discrimination, trade without, 305–306 Dispersed, 489 Dissolution, of joint ventures, 636f Distance country-similarity theory and, 247 power, 106 Distance, silent language and, 111 Distribution, 717 of languages, 97m, 832t of legal systems, 154m of religions, 100m of rule of law, 158m of stock markets, 422m Distribution gap, 724 Distribution strategies, 717–723 challenges, 720–721 choosing channels/­distributors, 720 e-commerce and the Internet, 721–723 hidden costs and, 719–721 marketing mix and, 717–723 partnerships, 720 reliability of after-sales service, 720–721 self-handling, 719–720 Tommy Hilfiger case, 698–700 Distributive political risks, 149f, 150–151 Diversification developing an industrial base and, 278–279 exporting and, 570–571 importing and, 580 LEGO® Group case, 554–557 Diversification strategy, 550 Divesting, 552 Division of gains, 241 Divisional organization structure, 662, 664 Divisional structures, 662 DMAIC, 758 Doctors without Borders (Médecins Sans Frontières), 328, 545–546 Documentation, export, 588t, 589f Dodd-Frank Wall Street Reform and Consumer Protection Act, 409–410 Z04_DANI6795_15_GE_SIDX.indd 882 Doha Ministerial Declaration See Doha Round Dollar, U.S., 402 dollarization, 373, 374 El Salvador and, 372–374 foreign-exchange market and, 347–348 as safe-haven currency, 401 yen and, 387–388 Dollar/yen currency pair, 348 Dollarization, of currency, 380 Domestic business, international business vs., 62–65 Domestic consumption, 236, 556 Domestic law, 63 Dominican Republic, 106 Double taxation, 429–430 Dow Jones Sustainability Index, 444 Draft (or commercial bill of ­exchange), 357 Drugs, generic, 461 Dubai, 760 Dubai Financial Market, 423 Dubai, Western Union and, 342 Due diligence, 175n110 Dumping, 281 e-waste, 581–584, 581m prices, 281 unfair competition: dumping, 273 Duty, 286 Dynamic balance, 660–661, 693n19 Dynamic effects, 309 NAFTA, 317–318 e-Commerce, 577, 721–723, 754–755 E-waste, 581–584, 581m Early PwC International Challenge Program (EPIC), 815 Earthquake, 402–403 Earthquake/tsunami, Japan, 540 East African Council of Ministers, 384 Ecomagination case, 442–447 Economic analysis, 209–217 balance of payments, 215 debt, 211 Global Competitiveness Index (GCI), 216 global indices and, 215–217 Global Innovation Index (GII), 216 income distribution, 211–212 inflation, 209–210 poverty, 212–213 unemployment, 210–211 Where to be Born Index (WTBBI), 217 World Competitiveness Index (WCI), 216 Economic and Monetary Community for Central Africa (CAEMC), 384 Economic Community of Central African States, 384 Economic Community of West African States (ECOWAS), 326m, 384 Economic connections, business operations and, 234f Economic development, assessing alternative methods, 204–205 performance and potential, 199–206 Economic Development Board (EDB), 294, 295 Economic efficiency, specialization trade theories and, 240 Economic environments, 179–227, 184–186 accounting and, 781f, 783f economic freedom, 189–194 international economic analysis, 187–188 Economic exposure, 798 Economic factors, business operations in, 187f Economic freedom, 189–194 global distribution of, 191m Index, 190t, 196 by region with population, 192f standard of living and, 192f state capitalism vs., 197–198 today, 190–191 trends in, 191, 193 value of, 191 Economic Freedom Index, 189 Economic growth environmental stress and, 55 point/counterpoint feature, 207–208 Economic Integration Agreement, 309 Economic integration ­(cross-national agreements), 304 See also Regional trading groups; World Trade Organization (WTO) bilateral, 304, 307–308 in Central America and the Caribbean, 320m commodity agreements, 328–331 common market and, 309 cross-national cooperation and, 52, 327–328 European trade and, 313m global, 304 local responsiveness vs., 503–508 regional, 304 Toyota in Europe Case, 302–304 Unilever case, 332–336 Economic motives, factor-mobility theory and, 256 Economic performance, measures of, 200 gross domestic product (GDP), 203–204 gross national income (GNI), 200–201 gross national product (GNP), 201 Economic rationales, for ­government trade ­intervention, 279–282 Economic relationships with other countries, government ­intervention and, 279–282 Economic systems, 194–197 command economy, 195–196 market economy, 194 mixed economies, 196–197 test for, 193–194 types of, 194–197, 194f Economies of scale, 311, 492 The Economist, 392 Economist Intelligence Unit (EIU), 143–145, 157, 174n59, 174n67, 174n68, 174n74, 174n80 Ecuador currency of, 372–373 eCycling Leadership Initiative, 582 Education cultural awareness and, 94 global distribution of university students (top 52 countries), 491t learning abroad, 118 learning foreign languages, 829–831, 832f preparation programs for expatriates, 828–829 Educational toys, 556 Effective tariff, 287 Efficiency/cost global manufacturing strategies, 742 Efficiency, standardization and, 504–505 Egypt, 175n98 Mubarak regime, 153 El Salvador case, 371–374 Electronic Data Interchange (EDI), 753 Electronic trading, 345, 355, 359, 366 Elephant poaching, 283, 284f Embargoes, 290, 297f defined, 290 07/04/14 4:00 PM Find more at http://www.downloadslide.com Emerging economies, 199, 199t case, 180–183 economic situation, good/ bad, 183f emergence, 180–181 future of, 180 infant-industry argument, 277–278 leading, 183 map of, 181m precedents in, 181–182 predictions for, 181–182 Emerging markets, 199 challenges of, 185 comeback of, 182f differences in countries, 184–185 economic and political changes, 185 government and policies, 185–186 new perspectives and, 184 Employee involvement, TQM and, 756–757 Employment full employment as government objective, 276 social stratification and, 100–101 specialization trade theories and, 240 Endaka, 400–401 Energy, 220, 325, 442, 444 English language, 116, 829–831 culture and, 98 misspeaking in, 110t Enterprise Resource Planning (ERP), 753 Environmental and Natural Resources Defense Council, 442 Environmental issues e-wastes and, 581–584, 581m Ecomagination case, 442–445 economic growth and, 207 ethics and, 456–458 Environmental Protection Agency, U.S., 582 Environmental stress economic growth and, 55 global growth and cooperation and, 55–56 Equilibrium exchange rate, 385f Equity alliances, 618f, 634 Equity capital, 414 Equity-capital markets, 420–421 See also Stock markets Equity securities, 420–421 Eritrea, 115 ESADE, 815 Escalation of commitment, 532 Z04_DANI6795_15_GE_SIDX.indd 883 S u b j e c t I n d e x 883 Essential-industry argument, 282–286 Established market economies, 200 Esteem needs, 105, 105f Ethical behavior companies interest in, 447 corporate bribery and, 451 cultural foundations of, 447–449 environmental issues and, 456–458 foundations of, 446–447 legal foundations of, 449–451 moral development levels, 446–447 pharmaceutical industry and, 460–462 relativism/normativism and, 448–450 workers and, 462f Ethical dilemmas, 449 Ethical Trading Initiative (ETI), 462–463 Ethics, code of, 464–465 Ethnocentric framework, 818 Ethnocentric staffing framework, 818–819, 823t Ethnocentrism, 114, 726 Euro, 315, 381–382, 402 conversion to, 382–384 European Union (EU) and, 314–315 foreign-exchange market and, 348–349 global financial crisis and, 383–384 pluses and minuses of conversion to, 383–384 Euro/dollar currency pair, 348 Eurobonds, 416, 419–420 Eurocredit, 417 Eurocurrencies, 416–418 Eurocurrency market, 416–418 interest rates and, 417–418 Eurodollar, 416, 417 Euroequity market, 416, 423–424 Euromoney, 355, 355t Europe debt crisis and, 315, 383, 399 economic crisis in, 414 Parmalat case, 772–776 Toyota case, 302–304 European Central Bank (ECB), 145, 312, 376, 382–383, 386–387, 394, 402, 415 European Commission, 312, 453, 543, 775 European Community (EC), 311, 382 European Council, 312 European Court of Justice, 313 European Economic Area (EEA), 313m European Economic Community (EEC), 311 European Free Trade Association (EFTA), 308, 311, 313m European Monetary System (EMS), 382 European Monetary Union (EMU), 382 European Parliament, 312–313, 316 European Quality Award, 758 European terms, 351 European trade, economic ­integration and, 313m European Union (EU), 160, 169, 175n110, 280, 285, 290, 306, 308–309, 332, 376, 434, 545, 593, 717, 759, 784, 786 balancing “common ­denominators” with national ­differences, 316–317 bilateral agreements, 316 bribery and, 453 corruption and, 453 doing business with ­(implications for corporate strategy), 316 Euro and, 315 European trade and economic integration, 313m governing bodies, 312–313 milestones, 312t organizational structure, 312–313 predecessors, 311 Toyota in Europe case, 302–304 Evolution to floating exchange rates, 376–377 Jamaica Agreement, 377 Smithsonian Agreement, 377 Ex-Im Bank, 605n2 Exchange-rate changes business implications of, 397–398 risk and, 539 Exchange rates, 343, 396 arrangements, 377–384, 378–379m arrangements and anchors, 377t business implications of changes in, 397–398 capital structure/debt and, 415–416 circumstances, 397 competition and, 341 confidence factors, 397 determination of, 371–406 equilibrium, 385f factors to monitor, 396 floating, 376–377, 380–381 forecasting, 395–397 fundamental analyses of, 397 government intervention and, 388–389 interest rates and, 394–395 International Monetary Fund (IMF) and, 374–377 movement, diagram of, 385f purchasing power parity (PPP) and, 391–394 Sony case and, 399–404 technical analyses, 397 Exchanges, foreign-exchange ­trading and, 354–356 Expansion debt markets and, 416 European Union (EU) and, 315–317 Expatriate failure, 840–841 costs of, 840 exceptions and anomalies, 840 Expatriate selection, 824–826 adaptiveness, 824–826 technical competence, 824 Expatriates, 814 assignments, 814–817 benefits of the experience, 809f compensating, 833–839 concerns of, 827f demographics of, 815–816 failure of, 840–841 family and, 828 global career case and, 810–811 key competencies of, 826f management of, 823–829, 833–841 perspectives of, 814–818 preparation programs for, 828–829 repatriating, 837–839 reverse, 817 selection of, 824–826 trends in assignments, 814–817 types of, 814 Expectation, of success and ­reward, 104 Export Assistance Center, 590 Export documentation, 588t, 589f Export intermediaries, 591–593 Export Management Company (EMC), 591–592 Export Trading Company (ETC), 592–593 fees, 593 Export-led development, 279 Export license, 290 Export plan, 596–599 defined, 596 Export price escalation, 710–712 07/04/14 4:00 PM Find more at http://www.downloadslide.com 884 S u b j ect I nd ex Export processing zone (EPZ), 232 Export quotas, 289 Export tariffs, 286 Export Trading Company Act, 592–593 Exporting, 561–609 advantages of, 567–568 Alibaba case and, 602–604 approaches to, 575–578 assistance/resources and, 590–596, 591t collaborative arrangements vs., 619–620 country of origin and, 620 customer management, 585–586 defined, 566 direct, 575–576 e-waste, 581–584, 581m exporter characteristics, 568–569 exporter types, 567 factors influencing, 566f feasibility of, 619–620 government regulation, 586–587 indirect, 576 initiating/developing, 571–575 International Business Expertise, 586 leading barriers to, 585t marketing challenges, 586 merchandise, 60 problems and pitfalls, 584–588 reasons for, 569–571 resources and assistance, 588, 590–596, 591t serendipity in, 575 services, 60 SpinCent case and, 562–564 technology and, 578, 599–600 top management commitment, 586 trade documentation, 587–588 Exports laissez-faire/interventionist ­approaches, 233–234 passive, 701–702 planning framework, 598t prices and, 330–331, 712 quotas, 291 Voluntary Export Restraint (VER), 289–290 Exposure, management strategy, 798–800 External convertibility, 390 External debt, 211 External sources, of information, 544–545 Extortion, 545–546 Extranet, 754 Extraterritoriality, 450 Z04_DANI6795_15_GE_SIDX.indd 884 Facets of the Diamond (of National Competitive Advantage), 251 Facilitating payments, 453 Factor conditions, diamond of ­national advantage, 251 Factor mobility, 315 Factor-mobility trade theory, 252, 254–255, 260 Factor movements, 256–258 Factor-proportions theory, 243–246 Fair Labor Association, 466, 739 Families, family-based groups, 103 Fascism, 139t Fatalism, 107–108 Favorable balance of trade, 236 FDI See Foreign Direct Investment (FDI) Federal Drug Administration, 170 Federal Reserve Bank (the Fed), U.S., 380, 417 Federal Rules of Civil Procedure, U.S., 497 Federation of International Trade Associations (FITA), 592 Fees, service exports/imports and, 60 Filière, 501 Finance, 771–806 accounting and, 776–778 decisions, exchange-rate changes and, 398 GPS case, 408–411 Finance function (multinational finance function) capital budgeting, 793–794 CFO’s role and, 413 foreign exchange risk ­management, 797–800 global capital markets and, 412–413 internal sources of funds, 794–795 offshore financial centers (OFCs), 430–431 taxation of foreign-source income, 425–426 Financial Accounting Standards Board (FASB), 780, 801 International Accounting Standards Board (IASB) and, 786 Financial crisis See Global ­financial crises Financial hedging strategies, 408–411 Dell Mercosur in Brazil case, 801–805 Financial institutions, 343 Financial risk, importing/­ exporting and, 584–585 Financial Stability Oversight Council, 410 Financial statements differences in, 778–781 foreign currency, 779–780, 790–792 language differences, 779 Financial Times, 850n135 Financial Times 500, 185, 514 Firm-specific assets, 742 Firms diamond of national advantage and, 251 as value chains, 487–489 First-mover advantage, 543 Fiscal dividend, economic growth and, 208 Fisher Effect, 394–395 Five-forces model, 482 Fixed/managed floating rates, 386–387 Flexibility, strategies, global manufacturing, 744 Flexpatriates, 815 Floating, 379 Flow of goods and services, 275f See also Trade Fluctuations, in currency value, 711 Focus strategy, 64 Following customers/ competitors, 542 Food and Drug Administration (FDA), U.S., 274, 705 Football, 46 Foreign bonds, 418 Foreign-change trading, banks and, 355t Foreign Corrupt Practices Act (FCPA), 450, 453–454, 456, 461 Foreign currency financial statements, 779–780, 790–792 Foreign currency transactions, 788–792 Foreign direct investment (FDI), 193, 304–305, 309–310, 621–623 acquisitions and, 622–623 defined, 61 greenfield investments and, 622–623 market failure and, 621 as noncollaborative foreign ­equity arrangements, 618f pharmaceutical, India and, 461–462 pursuit of global strategy and, 622 reasons for, 621–622 Foreign exchange, 343 cash flow and, 357–358 controls, 389–391 convertibility, 389–391 defined, 343 disclosing gains and losses, 792 financial flows, 358 risk, management of, 797–800 risk, scanning and, 539 usage of, companies and, 356–358 Foreign-exchange controls, 291 Foreign-exchange exposure, ­management strategy, 798–800 Foreign-exchange markets, 339–369 aspects of, 345–349 average daily volume 1998–2013, 347f composition of, 346–349 daily volume, 346f forward market, 352–353 future of, 353, 361 location of, 346–349, 349f major, 351–353 options, 346f, 353 players on, 343 size of, 346–349 spot market, 351 turnover, by counterparty, 344f turnover, by instruments, 346f types of, 797–798 Western Union case, 340–342 Foreign-exchange risk, 539 mobility of funds, 539 Foreign-exchange trading, 345, 353–356 banks and, 354–356 exchanges and, 354–356 geography and, 349 international time zones and, 349, 350f, 350m point/counterpoint feature, 359–360, 384–385 process, 353–356, 354f top dealers, 355–356 top exchanges, 356 Foreign Investment Advisory Service (FIAS), 233 Foreign languages, learning, 829–831, 832f Foreign niches, product orientation and, 702 Foreign service premium, ­expatriate compensation, 834 Foreign sourcing, risks, 757 Foreign subsidiary, 426–428 Foreign taxing branch, 426–428 07/04/14 4:00 PM Find more at http://www.downloadslide.com Foreign trade case, Costa Rica, 230–233 Foreign trade investment case, LUKOIL, 262–266 Foreign trade zones FTZs, 759–760 Fortune 100, 811 The Fortune at the Bottom of the Pyramid, 726 Forward discount, 352–353 Forward market, 352–353 Forward premium, 352–353 France, 104 Franchising, 61 collaborative arrangements and, 618f, 630–631 franchise organization and, 630–631 operational modifications, 631 “Free” country, 141 Free markets See also Economic freedom fear of, 193 the market test, 193–194 Free Trade Agreements (FTA), 309 impact of, 310f Free Trade Area (AFTA), 308 Free trade theories, 236–237 Freedom, 174n51 consequences of, 142 gains/declines in, 144f map of, 141m standard of, 140–142 in world, 144f Freedom House, 140–141, 144, 174n51 Freight forwarders, 595 French Open tennis tournament, 60 Fringe benefits, expatriate ­compensation, 835 Frugal innovation, 483 Fukushima Dai-ichi nuclear power station, 458 Fully convertible currencies, 389 Functional currency, 791f Functional structure, 662 Fundamental forecasting, 396 Funds, 794 internal sources, finance ­function and, 794–795 mobility, risk and, 539 sovereign wealth, 420–421 Future directions collaboration and innovation, 641–642 corporate universities, 685–687 ethical dilemmas in the global economy, 466 exports/imports and ­technology, 599–600 Z04_DANI6795_15_GE_SIDX.indd 885 S u b j e c t I n d e x 885 foreign-exchange markets, 361 GAAP (Generally Accepted Accounting Principles, U.S.), 800–801 global currencies, 398–399 global supply chain, 761 government efforts to increase tax revenue, 433–434 growth of capital markets, 433–434 IFRS, 800–801 international assignments, 841–842 international business and, 65–66 national cultures, 118–119 political ideologies, 146–148, 159 prime location changes, 553–554 rise of robots (automation), 498 robotics, 498 segment markets, 725–726 state capitalism, 197–198 trade, 260–261 trade agreements, 293–294 trade restrictions, 293 WTO and bilateral/regional integration efforts, 331–332 Future orientation, 107 Futures, 353 Futures contract, 346 FX swap, 346 FXpert software, 410–411, 79 G8 countries, 376, 458 GAAP See Generally Accepted Accounting Principles (GAAP) Gap, 59 Gap analysis, 723–725, 724f aggregating, 725 distribution and competition, 725 product line, 725 usage, 724–725 GDP See Gross domestic product (GDP) Gender-based groups, 102–103 Gender roles, 90–91 General Administration of Press and Publication (China), 831 General Agreement for Trade in Services, 307 General Agreement on Tariffs and Trade (GATT), 305–306 trade without discrimination, 305 World Trade Organization (WTO) and, 305–306 General Electric Ecomagination Initiative, 442–445, 443m General purpose FTZ, 759–760 Generally Accepted Accounting Principles (GAAP), 783–784, 787–788, 801 future of, 800–801 IFRS vs., 787–788 international tax practices and, 425–426 point/counterpoint feature, 787–788 reconciliation and, 784–787 usage differences, 780, 783–784 Generic, 717 Generic brand names, 717 Generic brands, 461 Genuine Progress Indicator (GPI), 205 Geocentric staffing framework, 821–822, 823t Geocentrism, 114 Geographic diversification, concentration vs., 541–542, 550–551 Geographic division structure, 664–665 Geography Artic sea ice, 188–189 culture and, 101 foreign-exchange trading and, 349 natural disasters and, 540 product demand and, 247–248, 718 trade flow and, 308–309 value-chain configuration and, 491–492 German Commercial Code (HGB), 784 Germany economic policies of, 173n32 reunification of, 48 Gini coefficient, 212 China and, 226n118 global, 226n119 Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria, 470 Global Business Council on HIV/ AIDS, 468 Global capital markets, 407–439 Global cash management, 795–797 Global competition, 51 Global Competitiveness Index (GCI), 216 Global convergence See Convergence Global economic crisis, 329 Global economic integration See Economic i­ ntegration; Economic integration ­(cross-national agreements) Global economy commodities and, 328 Global financial crises, 218, 365, 410, 483, 507, 604 emerging economies case and, 181–182 Euro and, 383–384 GPS case and, 410 international business risk and, 59 International Monetary Fund (IMF) and, 376 state capitalism and, 198 Global Foreign-Exchange Markets See Foreign-Exchange markets Global Greening of General Electric case, 442–445 Global Innovation Index (GII), 216 Global integration, 304, 503–505 Global integration, local responsiveness vs., 503–508 Global manufacturing strategies, 740–741 See also Manufacturing Global marketing See Marketing Global Positioning Solutions (GPS) case, 408–411 Global purchasing, 752 Global rivalry, importing and, 580 Global sourcing See Sourcing Global sports case, 44–47 Global stock markets See Stock markets Global strategy, 512–513 Global supply chain See Supply chain Global supply-chain ­management See Supply-chain ­management Global warming, 457–458 greenhouse gas emissions, 457 Kyoto Protocol and, 312t, 457–458 Globality, 661 Globalization, 545–546 See also International business costs of, 54–58 cultural imperialism and, 115–117 defined, 47 domestic vs international ­business, 62–65 ethical behavior and, 441–474 forces driving, 48–54 future of, 65–66 government policies and, 52 increased factors in, 49–52 inevitableness of, 65 international business and, 43–74 07/04/14 4:00 PM Find more at http://www.downloadslide.com 886 S u b j ect I nd ex Globalization (continued) local objectives and policies, 55 local responsiveness vs., 505–507 of markets, 504 national sovereignty vs., 55 regionalism vs., 65 slowing down of, 65–66 society and, 445 sports case, 44–47 technology and, 49–50 Globalizing career case, 810–811 GNI See Gross national income (GNI) GNM, 759 Go-no-go decision, 552 Government Accountability Office, U.S., 274 Government agencies import/export assistance and, 590–591 for information, 545 Government intervention exchange rates and, 386–387 pricing strategies and, 709 Government Pension Fund (Norway), 420 Government procurement, 626 Government trade intervention See Trade intervention Grameem Foundation, 727 Grameen/Danone Foods joint venture case, 726–732, 731m Grameen Foundation, 728, 732 Grameen Intel Social Business LTD., 732 Grandchild subsidiaries, 428f Gray market, 711 Grease money, 453 Great by choice, 484–485 Great Depression, 193 Great Leveling, 600 Greater Arab Free Trade Area (GAFTA), 308, 317t Greek debt crisis, 375 Green economics, 204 Greenfield investments, 622–623 Greenhouse emissions, 442 Greenhouse gas (GHG) emissions, 457–458 Grids country comparison tools and, 547, 547t simplified market-penetration grid, 547t Gross domestic product (GDP), 181, 201, 211 population size, 203–204 purchasing power parity (PPP), 203–204 Z04_DANI6795_15_GE_SIDX.indd 886 rate of economic growth, 202–203 real growth rate, 202f of top ten economies, 218f Gross National Happiness (GNH), 206 Gross national income (GNI), 200–201, 224n65, 226n108 largest economies, 201t largest economies, adjusted for PPP, 204t per capita, 203m, 225n67 per capita, adjusted for PPP, 205m population size, 203 purchasing power parity (PPP), 203–204 rate of economic growth, 202 Gross national product (GNP), 200 population size, 203 purchasing power parity (PPP), 203–204 rate of economic growth, 202 Group of Twenty (G20), 53, 53f Groups, social stratification and, 100–103 Growth stage, product life cycle trade theory, 249, 249t Guernsey, 175n116 Gulf Cooperation Council, 327 Guttenplan, D.D., 850n124 Hanke-Krus hyperinflation table, 225n94 Happynomics, 206 Hard currencies, 390 Hard peg exchange rate ­arrangements, 380 Hardship allowances, expatriate compensation, 836 Harmonized Index of Consumer Prices (HICP), 209 Harvesting, 551–552 Hazardous e-waste, 581–584, 581m Heading off competition, 542–543 Headquarters-based ­compensation, for ­ expatriates, 834 Hedge funds, 347, 359 Hedging strategies, 408–411, 799–800, 803–805 Heritage Foundation, 189 Hierarchy classical, 673f, 675f hierarchy-of-needs theory, 105–106, 105f hyperarchy vs., 673–674 Hierarchy-of-needs theory, 105–106, 105f High collectivism, 106 High-context cultures, 108 High individualism, 106 High power distance, 106 Hiring/firing, legal issues in, 162 HIV/AIDS, 327, 461, 706 Anglo American PLC and, 468–469 antiretroviral therapy and, 468 in South Africa, 467 Holding company income, 427, 428f Home-based compensation, for expatriates, 833–834 Home-country national, 814 Homogeneity, cultural, 55 Hong Kong, Legislative Council of, 174n69 Hong Kong Monetary Authority, 366, 418 Hong Kong Stock Exchange, 421 Hong Kong University of Science and Technology, 816 Horizontal alliances/links, 624–625 Horizontal differentiation, 662–666 Horizontally extended family, 107 Host-based compensation, for ­expatriates, 834 Host-government policies, 506–507, 522n107 Housing allowance, for expatriates, 836 HR, 820, 824 HRM See Human resource management (HRM) Human Capital Index, 813 Human Development Index (HDI), 209 Human resource management (HRM), 807–851, 812f See also Expatriates career globalization case, 810–811 global company and, 812–813 staffing frameworks and, 818–823, 823t strategizing, 813–814 Human trafficking, 284 Hybrid cultures, 118–119 Iceland, 315 Idealism, 109 IMF See International Monetary Fund (IMF) Immigration, 292 Europe and, 315 map of, 257m money-transfer market and, 340 North American Free Trade Agreement (NAFTA) and, 319 Imperialism, cultural, 115–117 Import competition catfish case and, 272–274, 273m dealing with, 292 Import deposit requirements, 390 Import licensing, 290, 390 Import quotas, 289 Import substitution, 230 Import tariffs, 286 imports, 286 Importing, 561–609 assistance/resources and, 588–596, 591t characteristics of importers, 579 customer management, 585–586 diversification and, 580 factors influencing, 566f global rivalry and, 580 government regulation, 586–587 importer types, 578–579 International Business Expertise, 586 local unavailability and, 580 marketing challenges, 586 merchandise, 60 problems and pitfalls, 584–588 reasons for, 579–580 resources and assistance, 588 resources/assistance and, 588–596, 591t services and, 578 specialization of labor and, 580 top management commitment, 586 trade documentation, 587–588 trade restrictions and, 620 Imports laissez-faire/interventionist ­approaches, 233–234 prices, negotiating, 712t quotas, 289–290 services, 60 substitution, 258–260 Imposition, cultural change by, 96 Inaccuracy, 543 Income active vs passive, 427 determining subsidiary’s, 428 inequality, globalization and, 56 Income distribution, 211 benefits and costs, 212 distribution, 211–212 GNI and, 211, 212 Income elasticity, 533 Income inequality, 212, 226n112, 226n123, 533 07/04/14 4:00 PM Find more at http://www.downloadslide.com Incoterms, 608n94 Incremental internationalization, 571–572 Indentured, 463 India, 180, 199 BRICs and, 217–222 child labor and, 463 Gini coefficient and, 212 intellectual property and, 166–167 leisure/productivity trade-off, 104 offshoring and, 57 pharmaceutical FDI in, 461–462 World Trade Organization (WTO) and, 306 Indirect exporting, 576 Indirect quotes, 351 Individual qualifications, social stratification and, 101–102 Individualism, 106, 135–136 family and, 106–107 Individualized reports, for ­information, 544 Industrial base ­development, ­government trade ­intervention and, 278–279 Industrial clusters, 750 Industrial revolution, 497 Industrialization argument, 278 Industry essential-industry argument and, 282–286 infant-industry argument, 277–278 key, foreign control of, 628–629 quality standards, 759 Industry change, 483–484 Industry organization (IO) ­paradigm, 484–485 Industry structure, 482 strategy/value and, 482–484 Infant-industry argument, 277–278 Inflation, 209–210 cost of living and, 209 deflation vs., 209–210 measuring, 209 Inflation rates, 225n99 Information accounting, users of, 780f collecting/analyzing, country selection and, 543–545 exchange rates and, 395 external sources of, 544–545 internally generated data, 545 scanning and, 532–544 Z04_DANI6795_15_GE_SIDX.indd 887 S u b j e c t I n d e x 887 Information processing, cultures and, 108–109 Information technology (IT), 753 digital divide and, 754–755 global supply-chain management and, 753–755 magical organizations and, 676 Infrastructure, 480–481 Initial public offering (IPO), 420 Prada Group case and, 436–437 Innovation collaborative arrangements and, 641–642 outsourcing, 750–751 strategies, global ­manufacturing, 743 Input optimizers, importers as, 578 Institutional setting, 396 Intangible assets, 630 Integrated system approach, taxation, 426 Integration-Responsiveness (IR) Grid, 507, 509–510, 509f Intellectual property, 164–165, 168 theft of, 168 Intellectual property rights (IPR), 164–166, 170–171, 751 Interbank transactions, 351 Intercontinental Exchange (ICE), 422 Interest arbitrage, 358 Interest rates, 223n24 exchange rates and, 394–395 Interfaith Center on Corporate Responsibility (ICCR), 447 Internal debt, 211 Internal rate of return (IRR), 793 Internal Revenue Service (IRS), U.S., 162, 429 Internal sources of funds, 794–795 Internalization theory, 621, 649n10 Internally generated data, 545 International Accounting Standards Board (IASB), 775, 780, 783, 785–787, 801 convergence and, 784–787 Financial Accounting Standards Board (FASB) and, 786 International Financial Reporting Standards (IFRS), 785 International Accounting Standards Committee (IASC), 785 International Anti-Counterfeiting Coalition (IACC), 168 International bond market, 419 International bonds, 418–420 International business behavioral/cultural practices, 100–109 behavioral factors and, 63 competitive environment and, 64–65 cultural factors and, 92f cultural imperialism and, 115–117 defined, 47 domestic business vs., 62–65 economic forces and, 63–64 environment/operations relationship and, 47–48 future of, 65–66 geographic influences and, 62–63 globalization and, 43–74 individualism vs collectivism, 135–136 legal issues in, 160–163, 164–165 legal policies, 63 marketing and, 701f modes of operations in, 60–62 physical and social factors, 62–64 political and economic environments facing, 129–177 political and legal differences, 165–167 political changes and, 52 political policies and, 63 reasons companies engage in, 58–59 reasons for studying, 47–48 services for supporting, 51 slowing down of, 65 social business vs., 727 International business career case, 810–811 International Chamber of Commerce (ICC), 452 International Cocoa Organization, 329 International Coffee Organization (IC), 329 International collaborations See Collaborative arrangements International Commercial Terms (Incoterms), 588 International Copper Study Group, 329 International Court of Justice, 328 International division structure, 664 International economic analysis, 187–188 data overload, 187 market dynamism, 187 market interdependence, 187 system complexity, 187 International Electrotechnical Commission (IEC), 758 International Financial Reporting Standards (IFRS), 783, 787–788, 800 future of, 800–801 GAAP vs., 787–788 International Accounting Standards Board (IASB) and, 785 International Fisher Effect (IFE), 395 International human resources See Human resource ­management (HRM) International job market, sports and, 44–45 International Labor Organization (ILO), 323, 463, 495 International law, 63 International Monetary Fund (IMF), 180–181, 211, 225n65, 327, 380, 434, 545 assistance programs, 375 Bretton Woods and the Principle of Par Value, 375 BRICs and, 375 current status, 375–376 evolution to floating exchange rates, 376–377 exchange-rate anchors/­ arrangements, 377t exchange rates and, 374–377 global financial crisis and, 376 origin and objectives, 374–375 quotas, 375 special drawing rights (SDRs), 375–376 International Organization for Standardization (ISO), 758 International Organization of Securities Commissions (IOSCO), 785, 801 International organizations See also Organizations types of, 61 International organizations and agencies, 545 International Red Cross, 328 International sports case, 44–47 International strategy, 509–511 International Tax Practices, 425–426 International Telecommunications Union, 758 International trade See Trade International Trade Administration, 590 International Trade Zones, 350m 07/04/14 4:00 PM Find more at http://www.downloadslide.com 888 S u b j ect I nd ex International transaction chain, 597f Internationalization See also Country evaluation and ­selection born-global and, 572–573 incremental, 571–572 usual pattern of, 549f Internet, 50, 219, 500 communications and, 50 e-commerce and, 721–723 organizations’ design and, 669f value chains and, 491–492 Intervention, 386–387 attitude towards, 388 central banks and, 387 challenges of, 388 Interventionism, 235–236 Interventionist approach to ­exports/imports, 233–234 Interventionist trade theories, 235–236 neomercantilism, 236 Intranet, 754 Inuits, 101 Investments, 61 See also Foreign direct investment inflows, 278–279 international business and, 61 IO paradigm, 485 iPads, 579, 580, 738, 744, 751 iPhones, 47, 738–740, 744, 751 IPO, 421, 423–424 Iran, 175n98 economic sanctions and, 283 Iron Curtain, 218 Islam, Saudi Arabia and, 88–89 ISO 14000, 758–759 ISO 9000, 758–759 Itaipu Dam, 53f Italian Corporate Governance Code, 775 iTunes, 740 Ivory trade, 283, 284f Jamaica Agreement, 377 Japan, 180, 744 age-based groups and, 102 Agency of Industrial SCIENCE and Technology, 608n102 collectivism in, 106 earthquake and, 399 earthquake/tsunami, 540 first Endaka and, 400 international business risk and, 59 kanban system, 757 Ministry of International Trade and Industry (MITI), 608n102 Z04_DANI6795_15_GE_SIDX.indd 888 second Endaka and, 401 Small and Medium Enterprise agency, 608n102 Sony case and, 399–404 Toyota in Europe Case (SUB), 302–304 TQM and, 756–757 tsunami and earthquake and, 399, 402–403, 761 yen, 385 Japanese yen, 387–388 Sony case and, 399–404 Jenbacher Biogas Engine, 443 Jensen index, 520n21 Jersey Islands, 175n116 Job market, international, sports case and, 44–45 Johnson & Johnson case, 654–657 Joint ventures (JV), 61, 634 See also Collaborative arrangements AA-JAL Joint Venture, 646–647 collaborative arrangements and, 618f, 634 dissolving, 636f Grameen/Danone Foods, 726–732, 731m Trans-Atlantic Joint Venture, 645–646 Just-in-Time (JIT) inventory ­management, 757 Kanban system, 757 Keiretsu, 670–671, 693n46, 750 Key industries, foreign control of, 628–629 Kidnapping, 545–546 Kinesics (body language), 111 Knowledge collaborative arrangements and, 625 HDI and, 209 Korduglu, 529 Korea, 308 intellectual property and, 166 North Korea, 156 U.S Korea-FTA, 308 Kyoto Protocol, 312t, 457–458 La Familia, 169 Labels, 290 Labor child, 464 conditions, ethical dilemmas and, 460–464 costs of across the world, 492–496, 493t distribution of, 495t scanning and, 534–535 specialization, importing and, 580 Labor Developments Abroad, 850n135 L’Académie franỗaise, 831 Lag strategy, 800 Laissez-faire, 135, 195, 224n41 interventionist approaches vs., 233–234 Land/people, factor proportions theory and, 244 Languages, 116 See also Communications; English language body language, 111 brand names and, 716 culture and, 96–99 financial statements and, 790–792 humor and, 110 population/output, 98f silent, 111–112 spoken and written, 109–110 translation of, 109–110 world distribution of, 97m, 832t Latin America income per capita, 225n66 regional economic integration and, 321m Lead strategy, 800 Leads and lags, 800 Lean manufacturing, 756–757 Leapfrogging, of products, 533 Leasing, 623 Legal environments, 153–165 Legal issues, in international ­business, 153–165 operational concerns, 160–163 Legal jurisdiction, 164 Legal systems, 153 basis of rule in, 156–157 trends in, 154–155 types of, 154–155 world map of, 154m Leisure/productivity trade-off, 104 Letter of credit (L/C), 357–358 confirmed, 358 Levels of moral development, 446–447 Leverage, 413–414 Liability of foreignness, 539 LIBOR Scandal, 418 Licensing, 629–630 motives for, 629 payment, 629–630 selling to subsidiaries, 630 Licensing agreements, 61, 618f, 629–630 See also Collaborative arrangements LIFFE CONNECT, 356 Link alliances, 623, 625 Liquidity preference, 539, 559n31 Lisbon Treaty, 314–315 Liz Claiborne Inc., 169, 540 Local brands, worldwide brand vs., 716–717 Local content regulations, 163 Local economies, 489 Local responsiveness, global ­integration vs., 503, 505–508 Local unavailability, importing and, 580 Localization, 817 Location advantages, exporting and, 568 Location decisions, 489–490, 495t allocating among locations and, 548–552 competitive risk and, 539–543 international operations and, 530f prime locations and, 553–554 process, 531f violent areas and, 545–546 Location-specific assets, 741 Locations, 495t Logging industry, 56 Logistics (materials management), 479, 496–497, 600 digitization and, 496–497 value chains and, 496–497 Logistics platforms, trade and, 600 London, foreign exchange markets and, 349 London Inter-Bank Offered Rate (LIBOR), 417–418 LIBOR scandal, 418 London International Financial Futures and Options Exchange (LIFFE), 356 London Stock Exchange, 419 Longevity, economic growth and, 207 HDI and, 208 Los Zetas, 169 Low-context cultures, 108 Low-cost strategy, 486, 487, 489–490 Low power distance, 106 Luggage, 762 Lukashenka, President (Belarus), 143 LUKOIL, 262–266 Luxury goods, 435–436, 512 M&A, 335 Magical organizations, 659 Magna Carta, 157 Magnitude, forecasting and, 396 07/04/14 4:00 PM Find more at http://www.downloadslide.com Make-or-buy decision, 750 Malaysia, employment quotas in, 102 Malaysian Board of Engineers, 587, 812 Malcolm Baldridge National Quality Award, 758 Managed/fixed floating rates, 386–387 Management contracts, 60, 618f, 631–632 See also Collaborative arrangements Management, orientations, ­cultures and, 114 Management team, 776, 804, 844–845 Manufacturing, 737–770 configurations, 744–746 factors in, 744–746 foreign trade zones and, 759–760 global, strategies for, 744–746 global supply-chain management and, 753–755 global supply chain strategies and, 741–746 growth in manufactured goods, 279 information technology and, 753–755 locations, factor-proportions theory and, 244 plant, 334, 496, 803 quality, 755–759 standards, 556 supplier networks, 746–750, 752–753 transportation networks and, 760–761 Margin, 369n19 Market capitalization, 421, 422m Market control, 679 Market diversity, 709–710 currency value fluctuations, 710–711 export price escalation, 710 pricing strategies and, 709–712 pricing tactics, 709 supplier relations, 712 Market economies, 194–195 method and means of, 195t Market-penetration grid, 547t Marketing, 480, 697–736 branding strategies, 715–717 competitive environment and, 701f decisions, exchange-rate changes and, 397 distribution strategies, 717–723 Z04_DANI6795_15_GE_SIDX.indd 889 S u b j e c t I n d e x 889 gap analysis of, 723–725 Grameen/Danone Foods joint venture and, 726–732, 731m international business and, 701f managing, 723–725 physical factors and, 701f pricing strategies, 709–712 product policies, 704, 708–709 promotion strategies, 713–715 regulation of, in developing countries, 705–706 segment markets, 703–704, 725–726 social factors and, 701f strategies, 700–704 target, 408–409 Tommy Hilfiger case, 698–700 Marketing mix branding strategies in, 715–717 distribution strategies and, 717–723 gap analysis of, 723–725 managing, 723–725 pricing strategies in, 709–712 product policies in, 704, 708–709 promotion strategies in, 713–715 Marketing orientations, 701–703 Marketing Week, 716 Markets eurocurrency, 416–418 euroequity, 423–424 globalization of, 504 growth rate in, 550 market penetration grid, 547t sales stability in, 550 segment markets, 703–704, 725–726 target, 408–409, 703–704 Masculinity-femininity index, 105 MASDAR, 459–460 Mass markets, 704 Massive open online courses (MOOCs), 685 Master franchise, 630 Material requirements planning (MRP), 753 Materialism, 726 work motivation and, 103–106 Matrices, 693n28 country attractiveness/company strength, 638–639, 639f country comparison tools and, 547 disclosure/assessment, 783f matrix organizational structure, 665–666 Secrecy-Transparency/ Optimism-Conservatism Matrix, 783, 783f Matrix structure, 665 Maturity stage, product life cycle trade theory, 249–250, 249t McKinsey Global Institute, 158, 494, 567, 672 “McParity,” 393t See also Big Mac index Measurement, 782 Mechanisms, 680–681 Médecins Sans Frontières (Doctors Without Borders), 545–546 Medicare, 290 Medicines, counterfeiting and, 169–170 Meliá Hotels International case, 612–618, 613m, 614f, 616f, 623, 632 Mercantilism, 235–236 Merchandise exports/imports, 60 See also Exporting Mercosur, 322, 332, 534 Mexico bribery and, 451 collectivism and, 107 as a consumer market, 320 drug cartels, 169 family and, 107 money-transfer market and, 340–342 NAFTA and, 320 time/punctuality and, 111 Walmart and, 116, 160 Micro loans, 727 Micro-payments, 516 Migration See immigration Milan Stock Exchange, 435 Milk, Parmalat case, 772–776 Misery index, 210 Misspeaking, in English language, 110t Mixed economies, 196–197, 224n50 Mixed legal system, 154m, 155 Mixed organizational structure, 666 Mixed structure, 666 Mobile banking, 515–518 Mobile money revolution, 515–518 Mobile telephony, 516, 842, 844 Mobility factor-mobility trade theory and, 252, 255–256 of funds, risk and, 539 specialization trade theories and, 241 Mobility premium, 834 Monetary Authority of Singapore, 296, 399 Monetary policy, 382, 398–399 Money center banks, 343 Money laundering, OFCs and, 432 Money-transfer market, 340–342 converting currency, 340 Monochronic cultures, 109 Moral development levels, 446–447 Moral stability, economic growth and, 207 Morocco, 106 Most-favored-nation (MFN) clause, 305–306 Motivation hierarchy of needs theory, 105, 105f materialism and, 103–104 work, behavioral practices and, 103–105 Mubarak, 153 Multicultural, 95, 118 Multidimensional Poverty Index, 213t Multidomestic manufacturing strategy, 744–745 Multidomestic strategy, 511–512 Multilateral development banks (MDBs), 153 Multilateral netting, 796, 797f Multinational corporation or company (MNC), 61 Multinational enterprises (MNEs), 58, 61, 151, 628 cash flows and, 794–795, 796f in China, 130–131 clusters and, 491, 492f defined, 61 English language and, 98 internal funds and, 795f net positions and, 796t offshoring and, 56–57 piracy and, 170–171 political ideologies and, 146–148 staffing frameworks and, 818–823, 823t strategy types used by, 510t supply chain networks and, 741 trade groups and, 304 Multinational problem-solving, 52–53 Multiparty democracy, 138t Multiple exchange-rate system, 390 Multiple exchange rates, 390 Mutual adjustment, coordination by, 677–679 Mutual recognition, 784 See also convergence Myanmar, 104, 324 07/04/14 4:00 PM Find more at http://www.downloadslide.com 890 S u b j ect I nd ex NAFTA (North America Free Trade Agreement), 289, 304, 317t NASDAQ OMX, 356, 420, 424 NASDAQ Options Market, 356 Nation, 95 culture and, 95 Nation building, 279 National borders ethnic differences and, 119 success/reward across, 104 National cultures, 95 See also Cultures future of, 118–119 governmental trade ­intervention and, 282–286 hybridization and, 118–119 National Football League (NFL), 46 National Institutes of Health (NIH), 706 National Retail Federation, 481 National sovereignty, ­globalization and, 55 National sports case, 44–45, 45m, 55 National territories, areas outside, 53–54 National Trade Data Bank, 545 Nations, cultures vs., 95 Natural advantage, 237, 252 diamond of national advantage theory, 250–252, 251f, 255 Natural disasters, 540 Japanese earthquake/tsunami, 540, 761 Natural gas, 29, 50, 66, 261, 281 NatWest Bank, 355 NBA, 46, 48 Near-generic brand names, 717 Needs, hierarchy of, 105–106, 105f Neoclassical organizational ­ structures, 666–672 change and, 667–668 network structures, 669–671, 669f pitfalls of, 671–672 virtual organization, 671 Neoclassical structures, 666 Neomercantilism, 236 Net National Product (NNP), 205 Net present value (NPV), 793 Netease.com, 175n98 Netting, 797f Networks See also Supply-chain management structure of, 669–671, 669f supplier, 746–750, 752 transportation, 760–761 Z04_DANI6795_15_GE_SIDX.indd 890 New York Federal Reserve Bank, 386 Nigeria, 44, 535, 538, 560n60 Nokero solar light case, 744, 746 Non-comparability of data, 544 Non-exporters, 567 Noncollaborative foreign equity arrangements, 618f Noncontrolling financial ­ interest, 61 Noneconomic rationales, for government intervention in trade, 282–286 Nonfinancial institutions, 343 Nongovernmental Organizations (NGOs), 328 Nonintervention, 385–386 Nonresident convertibility, 390 Nontariff barriers direct price influences, 287–289 other direct-price influences, 289 quantity controls, 289–292 Nontradable goods, 242 Normativism, 449 relativism vs., 448–450 North American Free Trade Agreement (NAFTA), 308, 311, 384, 398, 574, 593 doing business with ­(implications for corporate strategy), 319 immigration and, 319 impact of, 319 rationalization of production and, 319–320 reasons for, 317–318 rules of origin and regional ­content, 318 special provisions, 318 trade diversion and, 318 North Korea, 156 Northeast Passage, 188, 189f Northern Sea Route, 187–188, 223n27 Northwest Passage, 188, 189f, 223n27 Not-for-profit services, 291 “not free country,” 141 Nuclear energy, 458 Nuclear family, 107 Nuclear plant failure, Japan, 458 Obsolescence, of products, 533 Occasional exporters, 567 Oceans, 53–54 OECD, 288, 434, 545 OECD Centre for Tax Policy and Administration, 429 Off-balance-sheet financing, 772–773 Offer, 351 Office of Antifraud (OLAF), 453 Official Languages Act (Canada), 831 Offsets, 291, 601t Offshore currency, 416 Offshore financial centers (OFCs), 430–431 Offshore financing, 425, 430–431 Offshore manufacturing, 742, 745–746, 747 Offshoring, 56–58 point/counterpoint feature, 56–58 Oligopolistic reaction, 542 Olympics, 44, 46, 62 oneworld Airline Alliance case, 642–647, 643m AA-JAL Joint Venture, 643m Trans-Atlantic Joint Venture, 643m oneworld Alliance, 646f Online platforms, trade and, 599–600 OPEC See Organization of the Petroleum Exporting Countries (OPEC) Operating exposure, 798 Operating income, 804 Operating modes, 618f, 639 See also Collaborative ­arrangements Operational centers, 431 Operational concerns, 160–162 Operational hedging strategies, 799–800 Operational obstacles, 500 Operations (international business operations), 480 compatibility and, 539–541 cultural factors in, 92f economic connections and, 234f economic factors in, 187f factors in, 47–48, 48f location decisions and, 530f regulation of, 163t supply chain and, 741f Operations management, 741 Opportunistic, importers as, 579 Opportunities, scanning for, 532–533 Opportunity-risk matrix, 548f Optimum tariffs, 281–282 Optimum-tariff theory, 281 Options, 346f, 353 Organization, 659 Organization culture, 681–685 building, 683–684 importance of, 682–683 Johnson & Johnson case and, 654–657 performance and, 681–682 strategy and, 684–685, 684f Organization for Economic Cooperation and Development (OECD), 452–453 Anti-Bribery Convention, 452 Organization of the Petroleum Exporting Countries (OPEC), 289, 328–331 exports and, 329–330 prices and, 329–331 Organization structures, 659–661 classical, 662, 663f divisional, 662, 664 dynamic balance in, 660–661 functional, 662 hierarchy vs hyperarchy, 673–674 horizontal differentiation, 662–666 Hyundai Motor Company case, 687–691 international division, 664 matrix, 665–704 mixed, 666 neoclassical, 666–672 network structure and, 669f vertical differentiation, 660 Organizations, 653–695 change and, 657–659 competitive environment and, 657f control systems, 679–681 coordination systems, 672–679 corporate universities and, 685–687 design, internet and, 658, 669f hierarchy vs hyperarchy, 673–674 international business ­expansion and, 658 Johnson & Johnson case, 654–657 magical, 659, 676 management standards and, 658–659 physical factors and, 657f size and, 61–62 social contract, 659 social factors and, 657f types of, 61 Orientations, marketing, 701–703 07/04/14 4:00 PM Find more at http://www.downloadslide.com OTC (over-the-counter) foreignexchange instruments, 345–349 Outer space, 53–54 Outright forward transactions, 345, 346f Outsourcing, 57, 747 innovation, 750–751 Over the counter bond, 419 Ownership advantages, exporting and, 568 Pacific Alliance, 322 Pakistan, 538 Pan Arab Free Trade Area (PAFTA), 316, 317t, 327 Papua New Guinea, 101 Par value, 375 Paraguay, 53 Paris Convention for the Protection of Industrial Property, 165, 167 Parliamentary democracy, 138t Parmalat case, 772–776, 782, 783 “Partly free” country, 141 Partnering Against Corruption Initiative (PACI), 454 Partners, dealing with, 640–641 controlling through Contracts and Trust, 640–641 finding and evaluating, 640 negotiating, 640 secrecy and, 640 Passive exports, 701–702 Passive income, 427 Past patterns, political risk and, 538 Payback period, 793 Payment considerations, 629–630 Payroll to population, 211 Peace, dividend, economic growth and, 207 Penetration pricing strategy, 709 People factor-mobility theory and, 255–256 land, factor-proportions theory and, 246 Perception of cues, 108 Performance, masculinity­femininity index and, 105 Persian Gulf War, 401 Personal stress, globalization and, 56 Pew Center on Global Climate Change, 442–443 Pharmaceutical industry, 507–507 ethical dilemmas and, 460–462 Philadelphia Stock Exchange, 356 Z04_DANI6795_15_GE_SIDX.indd 891 S u b j e c t I n d e x 891 Philippines, child labor and, 464f PHLX, 356 Photoshop, 168 Physical factors marketing and, 701f operating modes and, 618f organizing operations and, 657f Physiological needs, 105, 105f Piracy case, 168–171 China and, 132–133 counterfeiting and, 168–169 fighting against, 169–170 global health and safety and, 169 intellectual property and, 169–170 medication and, 169–170 medicines and, 460 pervasiveness of, 170–171 software and, 169–170 Plan, coordination by, 675–677 Pluralism, 136, 173n33 Point/counterpoint feature Africa and common currency, 384–385 CAFTA-DR, 322–324 corruption/bribery, 455–456 cultural imperialism and, 115–117 economic growth, 207–208 Exporting e-waste, 581–584, 581m foreign control of key ­industries, 628–629 GAAP (Generally Accepted Accounting Principles, U.S.), 787–788 hierarchy vs hyperarchy, 673–674 learning foreign languages, 829–831, 832f offshore financial centers and tax practices, 432–433 offshoring, 56–57, 58 outsourcing innovation, 750–751 political risk management, 151–153 regulation of marketing in ­developing countries, 705–706 speculation on currency, 359–360 strategic trade policies, 253–254 value chains, 501–503 violent locations, 545–546 Political and legal difference, basis of, 165–167 cross-national convergence, 167 cultural orientation, 166–167 economic circumstances, 166 historical legacies, 165 Political disruptions, 483–484 Political factors, accounting and, 781f Political freedom, 137 Political ideologies, 136–140, 142–146 authoritarianism, 145 democracy, 138, 142–143 spectrum analysis, 137–138 totalitarianism, 139 Political motives, factor-mobility theory and, 256 Political risks, 148–151, 538–539 classifying, 149–151 management of, 151–153 point/counterpoint feature, 151–153 predicting, 538–539 types and outcomes of, 149–151, 149f Political spectrum, 137f Political system, 135 Politics/political environments, 134–152 Polycentric framework, 819 Polycentric staffing framework, 823t Polycentrism, 114 Polychronic cultures, 95, 109 POPClocks, 225n68 Population, 174n70 language groups, 98f Portfolio investment, 61 Postconventional moral ­development level, 446 Poverty, 212–215 consequences of, 213–214 economic growth and, 207 Multidimensional Poverty Index, 213t potential and, 214 prevalence of, 213–214 success standards and, 214–215 Power distance, 94, 106 PPP See Purchasing power parity (PPP) PPR, 435 Prada Group case, 434–437 Prada SpA., 435 Pragmatism, 109 Preconventional moral ­development level, 446 Premium, 352–353 Preparation programs, expatriates, 828–829 Prestige, silent language and, 112 Price-control objectives, of ­government trade ­intervention, 280–281 Prices, 533 import/export, negotiating, 712t OPEC (Organization of the Petroleum Exporting Countries) and, 330–331 Price stability, 68, 395 Pricing strategies, 709–712 fixed vs variable, 711–712 marketing mix and, 709–712 obstacles in, 709–712 potential obstacles in international pricing, 709–712 Tommy Hilfiger case, 699 Primary activities, 488 Prime locations, changes in, 553–554 Principled moral development level, 446 Prior company expansion, collaborative arrangements and, 627 Private technology exchange (PTX), 754 Privatization, 151, 195, 376, 506 Problem-solving, multinational, 52–53 Procedural political risks, 149f, 150 Process disruptions, 483 Process technology, 237 factor-proportions theory and, 243–246 Product disruptions, 483 Product diversification, 551 Product diversion, 711 Product division structure, 663f Product Life Cycle (PLC) trade theory, 248–250, 249t Changes over the cycle, 248–250 Product line extent and mix of, 708 product life-cycle considerations, 708–709 sales and cost considerations, 708 Product line gaps, 725 Product policies, 707–709 altering products, 704–707 marketing mix and, 704, 707–709 The Product Line: Extent and Mix, 708 Tommy Hilfiger case, 699 Product safety and liability, 164, 704 Product technology, 237 factor-proportions theory and, 245–246 07/04/14 4:00 PM Find more at http://www.downloadslide.com 892 S u b j ect I nd ex Production, 479 decisions, exchange-rate changes and, 398–399 Production factors, factor-mobility theory and, 255–256 Production, marketing orientation and, 701–702 Production networks, 241 Production orientation, 701–702 Productivity, exporting and, 570 Productivity/leisure trade-off, 104 Products, 704 altering, 704–707 competitive strategy for, 64 cultural considerations, 707 economic considerations, 707 environmental-protection ­regulations, 704 income level and distribution, 707 indirect legal considerations, 705 infrastructure, 707 issues of standardization, 706 labeling requirements, 704 legal considerations in altering, 704 Products, demand, climate and, 718 Professional sports players, as brands, 46 Profitability, exporting and, 569–570 Proletariat, 224n43 Prominent types of totalitarianism, 139t Promotion international, 714–715 sports/teamwork and, 46 strategies, 713–715 Tommy Hilfiger case, 698–699 Property rights, 157 Protectionism, 275 Protestant ethic, 103 Public Company Accounting Oversight Board (PCAOB), 787–788 PUIG Beauty and Fashion group, 435 Pull, 713 Punctuality, cultures and, 111 Purchasing function, 752 Purchasing power parity (PPP), 203–204, 225n70, 226n108, 405 Big Mac Index and, 392, 393t exchange rates and, 225n71, 391–394 Starbucks Index and, 392–394 Push, 713 Push-pull mix, 713–714 Z04_DANI6795_15_GE_SIDX.indd 892 Qatar Investment Authority, 47 Quality, 755, 755–759 standards, 758–759 strategies, global manufacturing, 743 Quantity controls, 289–292, 390 quotas, 289–290 Quotas, 289–290, 375 See also ­embargoes R&D, 460 Race in Brazil, 102 ethnic groups and, 102 ethnic/racial groups and, 102 ethnicity and, 102–103 social stratification and, 102 Radio Frequency Identification (RFID), 754 chips, 169 rationalization, 746 REACH (Registration, Evaluation, and Authorization of Chemicals) (in Europe), 586–587 Recession See Global financial crises Recession/retreat, of democracy, 143–145 Reciprocal advantages, globalization and, 52 Reconciliation, 784 mutual recognition vs., 784 Recycling, e-wastes and, 581–584, 581m Red Cross, 546 Reflation, 210 Regional economic integration, 304, 308–311 Africa, 326–327, 326m Americas, 320–322, 321m Asia, 324–325 economies of scale and, 310–311 effects of, 310–311 geography and, 308–309 increased competition and, 311 static and dynamic effects of, 309–310 trade creation and, 310 trade diversion, 310 Regional integration, 304 Regional manufacturing strategy, 744 Regional trade agreements (RTAs), 308, 317–318 Regional trading groups, 311–322 See also European Union in Africa, 326–327 in the Americas, 320–322 in Asia, 324–325 comparisons of, 317t European Union (EU), 311–317 NAFTA, 317t North American Free Trade Agreement (NAFTA), 317–320 other forms of international cooperation and, 327–328 Regular exporters, 567 Regulation of international business operations, 161t, 163t of marketing, in developing countries, 705–706 wealth and, 162 Reinvestment, 551–552 Reinvestment decisions, 552 Relationship-focus (RF) culture, 109 Relationships preferences, cultural environments and, 106–107 Relativism, 457 bribery and, 451 normativism vs., 448–450 Religions as cultural stabilizer, 99–100 Saudi Arabia and, 88–89 worldwide distribution of, 100m Renewable energy, 458 Renminbi, 366–367 Repatriation, 837 Reporting dealers, 343, 344f Representative democracy, 138t Research and development (R&D), 51 Reserve assets, central bank, 386–387 Reshoring, 57, 58 Resource acquisition, 534–536 cost considerations, 534–536 scanning and, 534–536 Resource acquisition, international business and, 59 Resource-based view (of the firm), 625 Resource efficiency, 237–238 Resources See also Human ­resource management (HRM) assistance, for exporting/ ­importing, 590–596 movements, liberalization of, 50–51 Responsibility, corporate, 464–466 Responsiveness-Integration Grid, 509–510, 509f Retaliation, from government trade intervention, 276–277 Retreat/recession, of democracy, 143–145 Reverse culture shock, 114 Reverse engineering, 461 Reverse-expat, 817 Rewards, success and, 104 Risk-taking behavior, 107–108 Risks, 537–543 See also specific risks factors to consider in analyzing, 537 foreign exchange risk, 539 foreign sourcing, 757 international business and, 59 mobility of funds and, 539 return and, 520n19 scanning and, 537–543 Robotics, 490, 496, 498 Rounds, 307 Royalties, 61 RQFII, 296 Rule of law, 156 basis of rule and, 156–157 implications of, 157 world distribution of, 158m Rule of man, 156–157 Rules of origin, 318 Rules of regional content, 318 Russia, 180, 199 BRICs and, 217–222 Burger King in, 526–528 political environment in, 134 World Trade Organization (WTO) and, 306 Sales expansion, scanning and, 532–533 international business and, 59 Sales income, 427 Sales, marketing orientation and, 702 Samsonite, 762–767 Sarbanes-Oxley Act (SOX), 424, 454, 787–788, 801 Saudi Arabia, 101, 180 background, 88 case, 88–92 cultural dynamics, 91 gender roles, 90–91 map of, 89m religion and, 88–89 traditions, 89–90 Scale alliances, 623, 625 Scanning, 531–532 cost considerations and, 534–536 description of, 531–532 vs detailed analysis, 532 economic and demographic variables, 533–543 foreign exchange risk and, 539 information and, 532–544 labor and, 534–535 07/04/14 4:00 PM Find more at http://www.downloadslide.com opportunities and, 532–533 resource acquisition and, 534–536 risks and, 537–543 sales expansions and, 532–533 Schengen Agreement, 315 Schengen area, 314–315 Second-tier subsidiaries, 428f Secrecy-Transparency/OptimismConservatism Matrix, 783, 783f Secular totalitarianism, 139t Securities and Exchange Commission (SEC), 454, 774, 784, 800 Security needs, 105, 105f Segment markets, 703–704, 725–726 Seisan keiretsu, 670 Self-actualization, 105, 105f Separate entity approach, taxation, 426 September 11, 2001 terrorist ­attacks, 761 Serendipity, in exporting, 575 Serious Fraud Office (UK), 418, 454 Service companies, for ­information, 544 Service income, 427 Services exports, 60 imports, 60 international trade and, 51, 291–292 performance of, 60 Severe acute respiratory syndrome (SARS), 540 Shanghai Maritime Court, 110 Shari’a law, 155 Shipping, 596–597, 600 Sight draft, 357 Silent language, 111–112 Silk Market, of Beijing, 168 Sina.com, 175n98 Singapore International Monetary Exchange (SIMEX), 360 Singapore Stock Exchange, 419 Single European Act, 314–315, 381 Singularity Principle, 490 Six Sigma, 757–758 Skimming pricing strategy, 709 Small and medium-sized enterprise (SME), 408, 562, 568, 577 defined, 568 exporting and, 584 Small and mid-sized firms (SMMs), 59 Small Business Administration, 590 Z04_DANI6795_15_GE_SIDX.indd 893 S u b j e c t I n d e x 893 Small economies’ ­overdependence, 55 Smart tags, 754 SMEs, 584–588, 590–591, 594 Smithsonian Agreement, 377 Soccer, 47 Social business, 727–728 Social connections, 102 Social democracy, 138t Social factors marketing and, 701f operating modes and, 618f organizing operations and, 657f Social marketing orientation, 703 Social networks, 54, 175n98 Social stratification ethnic/racial groups and, 102 family-based groups and, 103 gender-based groups and, 102–103 issues in, 100–101 Socialism, 196 Société Générale, 694n79 Societies Ecomagination case, 443m host society acceptance, 112 Soft currencies, 390 Soft peg exchange rate arrangements, 380 Software, piracy and, 169–171 Software platforms, trade and, 600 Solar energy, 184–185 China and, 184–185 Sony case, 399–404 Sourcing, 479, 746 concerns in, 749 configurations, 749–750 defined, 746 global, 747–749 production strategy and, 747f strategies, 753 South Africa AIDS in, 461 Anglo American PLC in, 466–471 Southern African Development Community (SADC), 326m, 327, 384 Southern Common Market (MERCOSUR), 308, 320, 322 Sovereignty, 55 Sovereign wealth funds (SWFs), 420–421 Soviet Union, 48, 196 Spain map of, 478m Meliá Hotels International case, 612 wine academy in, 726 Zara case, 476–481 Special Drawing Rights (SDRs), 375 Specialization acquired advantage and, 246 labor, importing and, 580 Specialization trade theories, 240–246 Specialized studies, for information, 544 Specific duty, 287 Specific permission requirements, 290–291 Spectrum, political, 139 Speculation, 358 point/counterpoint feature, 359–360 Speed money, 453 Spider-Man 2, 715 Spillover effects, 551 SpinCent case, 562–564 Spoken language issues, 109–110 Sports case, 44–47 Spot market, 351 Spot rate, 345 Spot transactions, 346f Spouse allowance, expatriate compensation, 836 Spread, 351 Stability, 206 Gross National Happiness (GNH), 206 Happy Planet Index (HPI), 206–207 Your Better Life Index (YBLI), 206 Stability and growth pact, 382 Staffing frameworks, 818–823, 823t Stakeholders, 275 trade policies and, 275–276 Standardization, 714–715 coordination by, 672, 675 distribution strategies and, 718–719 efficiency and, 504–505 legality and, 715 message needs and, 715 promotion strategies and, 714–715 translation and, 714–715 Standards, 290, 291–292 of living, HDI and, 209 Stanley Cup, 45 Starbucks Index, 392–394 Stare decisis, 155, 175n114 Starting businesses, operational concerns, 160–161 State Administration of Foreign Exchange (SAFE), 364 State capitalism, 185, 197–198 State Department, U.S., 850n135 Statement of International Transactions See Balance of payments (BOP) Static effects, 309 NAFTA, 317–318 Stock markets, 421–424 delisting and, 424 emerging, 423 NASDAQ OMX, 356 size of, 421–424 trends in, 422–423 world distribution of, 422m Stockholm Convention on Persistent Organic Pollutants, 449 Strategic alliances, 61, 623–627 Strategic concerns, legal issues in, 160–165 Strategic marketing orientation, 702–703 Strategic trade policies (industrial policies), 232, 253–254 See also Trade policies Strategies for instituting change, 115–118 cultural bridges, 118 learning abroad, 118 opinion leadership, 117–118 participation, 117 resistance to change, 117 reward sharing, 117 value systems, 115 Strategizing HRM, 813–814 case in point: GE’s Evolution, 813–814 Strategy (international business strategy), 475–523 See also Branding strategies; Distribution strategies; Value chains apparel industry case, Zara, 476–481 characteristics of types used by, 510t cost leadership, 486 differentiation, 486–487 global, 512–513 global manufacturing strategies, 740–741 hallmarks of, 485 industry structure and, 482–484 international, 509–511 marketing, 700–704 multidomestic strategy, 511–512 organization culture and, 684f perspectives on, 484–485 role of, 482f transnational, 513–514 types of, 508–514 07/04/14 4:00 PM Find more at http://www.downloadslide.com 894 S u b j ect I nd ex Strategy-structure-systems model, 693n32 Strike price, 353 Subpart F income, 427 Subsidiaries networks, 499 U.S.-owned foreign, tax status of, 428f visits to, 694n82 Subsidies, 287–288, 305 agricultural, 287–288 overcoming marketimperfections and, 288 Substitution, 533 Substitution, import, 258–260, 279 Subzones, 759–760 Success and reward, across borders, 104 Suppliers networks, 746–750, 752–753 relations, sourcing and, 752 Supply chain, 740, 741–746, 741f, 747 defined, 740 sources of worker-related ­pressures in, 462f strategies, 741–746 Supply-chain management, 740–741 Apple case and, 738–740 defined, 740–741 foreign trade zones and, 759–760 future of, 761 global manufacturing strategies, 741–746 global strategies, 741–746 information technology, 753–755 quality and, 755 Samsonite case, 762–767 supplier networks and, 746–750, 752–753 transportation networks and, 760–761 uncertainty and, 761 Support activities, 489 Supported/related industries, diamond of national advantage, 251 Surplus workers, 278 Sustainability, 199, 204–206, 278, 398–399, 456 economic growth and, 208 ethical behavior and, 456–457 Genuine Progress Indicator (GPI), 205 Human Development Index (HDI), 206 Z04_DANI6795_15_GE_SIDX.indd 894 Net National Product (NNP), 205 Sustainable development, 205 Swap trading, 601t Switch trading, 601t Syndication, 417 Synergy, 522n81 Systemic political risks, 149–150, 149f Taliban, 196 Taoism, 693n20 Target markets, 703–704 GPS Capital Markets and, 408–409 segment markets and, 703–704 Tariffs, 286–287, 305 criteria for assessing, 287 import, 286 optimum, 281–282 as revenue source, 286 Tax credit, 429 Tax havens, 428f, 431 Tax haven subsidiary, 428f Tax treaties, 429–430 Taxation, 834–835 dodging, 430 double, 429 international tax practices and, 425–426, 783–784 OFCs (offshore financial centers) and, 430–433 transfer prices and, 428–429 of U.S.-owned foreign subsidiaries, 428f Technical forecasting, 396 Technology foreign-exchange markets and, 361 globalization and, 49–50 Technology, Entertainment, Design (TED), 674 Telecommunication, 288, 398, 427 Teleological approach, 446 Televised sports, worldwide, 45–46 Temporal method, of translation, 790–792, 791f Tennis, 44–45 Terms currency, 351 Terms of trade, 279 Terrorism 9/11 terrorist attacks, 761 bombings and, 546 kidnapping and, 546 Tesco PLC case, 120–124, 122m Textbooks, 711 Theocratic law, 139t, 154m, 155 Theocratic totalitarianism, 139t Theory of country size, 242 “Think globally, act locally,” 55 Third-country national, 814, 816–817 Third-party logistics (3PL), 596 Third Wave of Democratization, 142, 145, 155, 159 Third World Countries, 199 Tiered pricing, 460–461 Time, cultures and, 111 Time draft, 357 Time zones, foreign exchange trading and, 349 Timing of change, 118 forecasting and, 396 Tokyo Stock Exchange, 400 Tomatoes example, factor-mobility theory, 259f, 260 Tommy Hilfiger case, 698–700, 716 Torts, customary law and, 155 Total cost analysis, 742 Total Quality Management (TQM), 673, 679, 756–757 Totalitarian system, 139 Totalitarianism, 139–140, 142, 159 business implications of, 140 types of, 139t Tourism transportation and, 60 Toyota in Europe case, 302–304, 316 Trade administrative delays, 291 choice of trading partner and, 246–247 Costa Rica foreign trade case, 230–233 countertrade and, 601–602, 601t economy size and, 242 factor mobility and, 258–260 factor-mobility theory and, 229–270 foreign-exchange trading ­process, 353–356, 354f foreign trade zones, 759–760 international, 565f liberalization, 50–51 physical and social factors, 275f product types, 243–246 reciprocal requirements, 291 services and, 51, 60, 241, 291 statics/dynamics of, 248–252, 317–318 strategic trade policies, 253–254 technology and, 599–600 without discrimination, 305–306 Trade agreements, regional, 318–319 Trade associations, 545 Trade barriers, 65 Trade control instruments, 286–292 See also Trade ­restrictions Trade deficit, 236 Trade diversion, NAFTA and, 317–318 Trade intervention, governmental, 271–300 changes in the competitive ­environment, 293 dealing with, 292–293 decision makers, 292–293 economic rationales for, 276–282 economic relationships with other countries, 279–282 essential-industry argument and, 282–286 industrial base development, 278–279 infant-industry argument, 277–278 interventionist trade theories and, 235–236 noneconomic rationales for, 282–286 preserving national cultures and, 286 price-control objectives and, 280–281 promoting acceptable practices abroad, 282–284 reasons for, 276t risks in designating industries, 277–278 Singapore model, 294–297 spheres of influence and, 285 unemployment and, 276–277 Trade-offs, 627 Trade pattern theories, 234, 242–248 Trade policies conflicting results of, 275–276 strategic, 253–254 Trade-Related Aspects of Intellectual Property Rights (TRIPS), 165, 171 Trade restrictions, 275f, 594t as a bargaining tool, 280 catfish case and, 272–274, 273m trade-control instruments, 286–292 Trade surplus, 236 Trade theories, 252 absolute advantage, 236–237, 238f business and, 234 checklist, 235t comparative advantage, 239–240 07/04/14 4:00 PM Find more at http://www.downloadslide.com country-similarity, 246–247 country size, 242 diamond of national advantage theory, 250–252, 251f, 255 factor mobility, 234, 252, 254, 255–256 factor-proportions, 243–246 free trade, 236–237 interventionist, 235–236 mercantilism, 235–236 product life cycle, 248–250 specialization, 240–246 trade pattern, 234, 242–248 Trademark squatters, 626 Trading blocs, 534 Traditional factors, Saudi Arabia, 89–90 Trans-Pacific Partnership (TPP), 325 Transaction exposure, 797–798 Transactions cost theory, 621 Transactions, foreign currency, 788–789 Transatlantic Trade and Investment Partnership (EU), 316 Transfer prices, 428–429 Transit tariffs, 286 Translation exposure, 797–798 Translation methods, 790–792 Translations, 790 foreign-currency financial ­statements, 790–792 Transnational company (TNC), 61 Transnational organization, 693n33 Transnational strategy, 513–514 Transparency Secrecy-Transparency/ Optimism-Conservatism Matrix, 783, 783f Transparency International, 135 Transport costs, 241 Transportation, 535–536, 595, 596 globalization and, 50 networks, 760–761 tourism and, 60 Treasurer, role of, 412f Treaty of Maastricht, 315, 381, 382 Triad, 304 Trust, cultures and, 107 Tsunami/earthquake, Japan, 402–403, 540, 761 Turkey, 315 Turnkey operations, 60, 618f, 632–634 See also Collaborative arrangements Z04_DANI6795_15_GE_SIDX.indd 895 S u b j e c t I n d e x 895 UK Bribery Act, 454 UN Conference on Trade and Development (UNCTAD), 328 Special Unit on Commodities, 329 UN Framework Convention on Climate Change, 457 UNASUL See Union of South American Nations (UNASUR) Uncertainty avoidance, 107 UNCTAD See UN Conference on Trade and Development UNCTAD Unemployment government trade intervention and, 276–277 measuring, 210–211 Unemployment rate, 210 UNESCO, 286 Unfavorable balance of trade, 236 UNICEF, 464 Union of South American Nations (UNASUR), 320 Unit of account, 375 United Kingdom (UK) customary law and, 175n116 misspoken words and, 110t Tesco PLC in, 121–122 uncertainty avoidance and, 107 United Nations, 55, 169, 185, 199, 327–328, 452, 503, 545 See also Nongovernmental Organizations (NGOs) Committee on NonGovernmental Organizations (NGOs), 328 Conference on Trade and Development (UNCTAD), 328 cross-national cooperation and, 327–328 Economic and Social Council, 327–328 Food and Agriculture Organization, 226n126 General Assembly, 328 International Court of Justice, 328 organization and membership, 327–328 sanctions and, 285 Security Council, 328 World Bank and, 327 United Nations Convention against Corruption (UNCAC), 452 United Nations Convention on Contracts for the International Sale of Goods, 161 United Nations Development Programme, 540 United Nations General Assembly, 174n53 United Nations Global Compact, 465 United Nations Office on Drugs and Crime (UNCAC), 453 United Nations World Food Program, 115 United States (U.S), 306, 307, 385 Caribbean Basin Initiative, 232 collapse of housing market, 402 common law and, 155 Costa Rica/U.S trade examples, 236–240, 238f Cuba/U.S Relations, 247 debt crisis and, 402 Foreign Corrupt Practices Act (FCPA) and, 453–454 import quotas, 289 individualism and, 106 Internal Revenue Service, 162 leisure/productivity trade-off, 104 misspoken words and, 110t piracy laws and, 170 pragmatism and, 109 state economies compared to national, 243m tax loopholes, 226n107 top trade partners of, 574t Vietnam/U.S catfish ­controversy, 272–274, 273m wheat/coffee example, 238–240, 238f, 239f Unity-of-command principle, 666 Universal Declaration of Human Rights, 174n53 Universal language, body ­language vs., 111–112 Universities, corporate, 685–687 U.S Commercial Service, 590 U.S Commercial Service Export Assistance Center, 563 U.S Customs Service See Bureau of Customs and Border Protection (CBP) U.S Korea-FTA, 308 U.S Population Clock, 225n68 Usage gaps, 724 Users, of accounting information, 780f Utilitarianism, 446 Value, 485, 520n22 Value-added networks (VANS), 754 Value-added tax (VAT), 425 Value chains, 488, 488f change and, 500–501 clusters and, 491–492 configuration and, 489–496 coordination and, 497–500 firms as, 487–489 Internet and, 502 logistics and, 496–497 managing, 489–500 point/counterpoint feature, 501–503 virtuality vs reality, 501–503 Value creation, 476–481, 485–487 Values, 275f industry structure and, 482–484 Vehicle Dependability Study (VDS), 755 Venezuela, 538 black markets in, 390 Vertical alliances/links, 623–625 Vertical differentiation, 660 Vertical integration, 749–750 Vertically extended family, 107 Vietnam/U.S catfish controversy, 272–274, 273m Violent areas, location and, 545–546 Virtual organization, 671 Virtuality, value chain and, 501–503 Voice-over-Internet-protocol (VoIP), 584 Voluntary Export Restraint (VER), 289–290 Walmart, 160, 304, 333 Washington Consensus, 146–148, 159 Web, 500 West African Economic and Monetary Union (WAEMU), 384 Western Union case, 340–342, 345, 351 Where to be Born Index (WTBBI), 217 Wine Academy of Spain, 726 Women expatriates and, 816 micro loans and, 728 Saudi Arabia and, 90–91 Workflow software, 753 Working age population, 226n102 Workplace motivation, behavioral practices and, 103–105 Saudi Arabian women and, 91 World Bank, 327 International Finance Corporation, 233 07/04/14 4:00 PM Find more at http://www.downloadslide.com 896 S u b j ect I nd ex World Competitiveness Index (WCI), 216 World Competitiveness Project, 216 World Cup, 44, 46 World Economic Forum, 160 World Fact Book, CIA, 317t World Health Organization, 448, 460, 466, 540, 705 World Intellectual Property Organization (WIPO), 164 The World Is Flat (Thomas Friedman), 747, 753 World Luxury Association, 434f World maps economics, 186m GNI per capita, 203m immigration, 257m Z04_DANI6795_15_GE_SIDX.indd 896 languages, 97m legal systems, 154m religions and, 100m rule of law, 158m stock markets, 422m World Population Clock, 225n68 World Trade Organization (WTO), 133, 160, 167, 180, 304–305, 308, 314, 318, 461, 504–505, 545, 602, 709, 758 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), 461 bilateral economic integration and, 331–332 BRICs and, 306 Council for Trade in Goods, 307 Council for Trade-Related Aspects of Intellectual Property Rights, 307 dispute settlement and, 306–307 Doha Round and, 307 functions of, 306–307 GATT and, 306–307 General Agreement for Trade in Services, 307 global integration and, 305–307 Most Favored Nation (MFN) and, 306 regional economic integration and, 331 Trade-Related Aspects of Intellectual Property Rights (TRIPS), 165, 171 World War II, 193, 304, 374 Worldwatch Institute, 219 Worldwide brand, local brands vs., 716–717 Worldwide televised sports, 45 Worldwide Trade by Major Sectors (FIG), 246f Yen, Japanese, 399, 402, 403–404 Your Better Life Index (YBLI), 206 Yuan, Chinese, 366–367, 402 Zara case, 476–481, 478m, 485 Zero Defects, 756 Zimbabwe, 389 black market in, 389 07/04/14 4:00 PM ... Europe 14.57% 12. 26% 10.95% 10.48%  6. 72%  6.60%  5.86%  4.68%  3. 52%  3. 12% 12. 40% 11.03% 10.08% 13 .21 %  7 .26 %  5.53%  7. 92%  5.67% 2. 74% Market Share in North America 13.16% 12. 31% 12. 89%  9.39%... April 20 01 April 20 04 April 20 07 89.9 37.9 23 .5 13.0  4.3  6.0 25 .4 88.0 37.4 20 .8 16.5  6.0  6.0 25 .3 85.6 37.0 17 .2 14.9  6.6  6.8 31.9 April 20 10 84.9 39.1 19.0 12. 9  7.6  6.4 30.1 April 20 13... “FX Survey 20 12: Overall results,” Euromoney (May 20 12) - Estimated Market Share source; and Market Share by Region source: “FX Survey 20 12: Market Share by Region,” Euromoney (May 20 12) M08_DANI6795_15_GE_C08.indd