International business environment; some basic terms


International Business Environment Some Basic Terms

Floating exchange rates-
A system under which the exchange rate for converting
one currency into another is continuously adjusted
depending on the laws of supply and demand.

Free trade-
The absence of barriers to the free flow of goods and
services between countries.

Fronting loans-
A loan between a parent company and a foreign subsidiary
that is channeled through a financial intermediary.

General Agreement on Tariffs and Trade (GATT)-
International treaty that committed signatories to lowering barriers to the free flow of goods across national
borders led to the WTO.

Globalization of markets-
Moving away from an economic system in which national
markets are distinct entities.

Horizontal foreign direct investment-
Foreign direct investment in the same industry abroad as
a firm operates in at home.

Import quota-
A direct restriction on the quantity of a good that can be
imported into a country.

Infant industry argument-
New industries in developing countries must be temporarily protected from international competition to
help them reach a position where they can compete on
world markets with the firms of developed nations.

International Accounting Standards Committee (IASC)-
Organization of representatives of 106 professional
accounting organizations from 79 countries that is
attempting to harmonize accounting standards across

International Monetary Fund (IMF)-
International institution set up to maintain order in the
international monetary system.

International strategy-
Trying to create value by transferring core competencies
to foreign markets where indigenous competitors lack
those competencies.

law of one price-
In competitive markets free of transportation cost and
barriers to trade, identical products sold in different
countries must sell for the same price when their price is
expressed in terms of the same currency.

lead strategy-
Collecting foreign currency receivables early when a
foreign currency is expected to depreciate, and paying
foreign currency payables before they are due when a currency is expected to appreciate.

local content requirement-

A requirement that some specific fraction of a good be
produced domestically.

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