International Business Environment Terms

An economic philosophy advocating that countries
should simultaneously encourage exports and discourage

Minimum efficient scale-
The level of output at which most plant-level scale
economies are exhausted.

Mixed economy-
Certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors
have significant government ownership and government

Multinational enterprise (MNE)-
A firm that owns business operations in more than one

Multi domestic strategy-
Emphasizing the need to be responsive to the unique
conditions prevailing in different national markets.

Nonconvertible currency-
A currency is not convertible when both residents and
nonresidents are prohibited from converting their
holdings of that currency into another currency.

North American Free Trade Agreement (NAFTA)-
Free trade area between Canada, Mexico, and the United

Political risk-
The likelihood that political forces will cause drastic
changes in a country’s business environment that
adversely affect the profit and other goals of a particular
business enterprise.

Polycentric staffing-
A staffing policy in an MNE in which host-country
nationals are recruited to manage subsidiaries in their
own country, while parent-country nationals occupy key
positions at corporate headquarters.

Positive sum game-
A situation in which all countries can benefit even if some
benefit more that others.

Predatory pricing-
Reducing prices below fair market value as a competitive
weapon to drive weaker competitors out of the market .

Price discrimination-
The practice of charging different prices for the same
product in different markets.

Price elasticity of demand-
A measure of how responsive demand for a product is to
changes in price.

Smoot-Hawley Tariff-
Enacted in 1930 by the U.S. Congress, this tariff erected a
wall of barriers against imports into the United States.

Specific tariff-
Tariff levied as a fixed charge for each unit of a good

Structural Impediments Initiative-
A 1990 agreement between the United States and Japan
aimed at trying to decrease nontariff barriers restricting
imports into Japan.

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