Key Terms Unit 3

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Absolute advantage
exists if the real resource cost of a product is lower in one country than another
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Backward innovation
developing low cost products that will appeal to people with relatively low incomes, usually they will have the most basic functions of sophisticated manufactured products
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BRIC
Brazil, Russia, India and China; the world's 4 largest fast-growing economies, all are often described as emerging economies
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Commodities
raw materials or semi-manufactured products that are traded in bulk, e.g. oil, iron ore
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Common markets
have completely free trade internally and a single unified trade policy covering all member countries' trade with the rest of the world, there is free movement of goods, service, people and capital
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Corporate culture
the set of important assumptions that are shared by people working in a particular business and influence the ways in which decisions are taken there
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Corporate social responsibility
taking decisions in a way that takes into account all stakeholders’ interests, treating employees, customers and suppliers fairly, avoiding polluting activities and contributing to the local community might all be part of this
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Cultural imperialism
the practice of promoting, distinguishing, separating or artificially injecting the culture of one society into another
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Developed countries
include Europe, USA, Canada and Australia, all have high incomes and have acquired sophisticated production facilities
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Developing countries
have relatively low standards of living compared to the developed countries, may have small manufacturing sectors, limited infrastructure and levels of investment are often low
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Diversifying
selling more than one product, or the same product in more than one market
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Economies of scale
a reduction in the average costs of production brought about by an increase in the size and scale of the business
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Emerging economies
characterised by rapid economic growth, they have seen big increases in manufacturing output and standards of living are rising
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Ethical decision making
following codes of practice that embody moral values
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Ethnocentric Model
an approach to marketing based on the tendency to look at the world primarily from the perspective of one’s own culture, a business believes that what was a success story in the domestic market will also be so in other countries
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Extension strategies
aim to extend the life of a product, either by making small changes to it, finding new uses for it, or finding new markets
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Foreign direct investment (FDI)
investing in a country other than the one where the head office is, e.g. building factories in other countries
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Free trade areas
groups of countries that trade completely freely with each other, with no trade barriers, but each member country retains its own independent trade policies in relation to the rest of the world
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Geocentric approach
sees the world as a potential market with both similarities and differences in domestic and foreign markets
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Global market niches
smaller, more specialised parts of a global market where customers in more than one country have particular needs that are not fully met by the global mass market
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Globalisation
: the process through which an increasingly free flow of ideas, people, goods, services and capital leads to integration of the economies and societies
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Glocalisation
businesses operating on a global basis may adapt or change its products and marketing plans to suit individual countries or market segments
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The Human Development Index
provides a measure of development based on access to healthcare and education as well as national income
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International Monetary Fund
co-ordinates the international monetary system, it tries to provide adequate finance for world trade to continue without interruption
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Infrastructure
includes all transport and communication facilities, the provision of basic services such as energy and water supplies
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Inorganic growth
when a business expands by taking over or merging with another company
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Organic growth
when a business expands its own capacity by investing directly
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Intellectual Property Rights (IPR)
the rights to own and exploit ideas or inventions, they give legal protection to the owners of ideas or inventions and prevent others from copying them
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Joint ventures
involve collaboration between 2 businesses, typically one will provide finance from abroad, while the other provides the local contacts and local knowledge to get the business going
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Market saturation
occurs when it becomes impossible to expand sales further in that particular market
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Merger
the combining of 2 or more firms
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Multinational corporations
businesses which are active in more than one country
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Offshoring
locating production in a foreign country, the objective is to exploit cost savings, e.g. lower wage rates
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Outsourcing
buying inputs from an independent supplier to exploit cost savings
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Polycentric model
approach which considers each host country to be unique
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The product life cycle
the phases which many product go through; development, introduction to the market, growth, maturity and decline
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Protectionism
any government policy aimed at protecting the domestic economy from the effects of imports that might otherwise damage domestic industries and employment
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Pressure groups
organisations that attempt to influence public policy and government legislation, regarding their particular concerns and priorities
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Purchasing Power Parity (PPP)
way of adjusting monetary values to allow for differences in prices between countries
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Quotas
physical limits on the level of specific imports in any one year
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Race to the bottom
phrase used to describe the way MNCs move to the country that offers the lowest tax rates of the weakest environmental controls
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Risks
threats that may or may not occur, they can be quantified using probabilities
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Social and cultural differences
individual societies and groups within them may have a distinctive way of life, this will affect their patterns of consumption and the products that they favour
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Specialisation
people (or an economy) make the most of their skills by concentrating on what they do best
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Stakeholders
people who have an interest in a particular business, e.g. customers, employees, suppliers, government
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Subcultures
groups of people who have interests and values in common, may be based on hobbies, religious background etc.
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Synergy
idea that after a merger or takeover, the performance of a combined enterprise will exceed that of its previously separate parts
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Takeover or acquisition
where one company buys another
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Tariffs
taxes on imported goods, they make the price higher and sales will generally be lower
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Theory of comparative advantage
states that if 2 countries each specialise in the product with the lowest opportunity cost, and then trade, real incomes will increase for both countries
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Trade blocs
group of countries where barriers to trade are reduced or eliminated between member states
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Trade creation
occurs when there is an increase in the total amount of goods and services traded because of reduced trade restrictions within a trading bloc
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Trade diversion
occurs when a trading bloc reduced imports from non-member countries, enabling businesses within member countries to increase sales inside the trading bloc
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Trade liberalisation
the process of reducing barriers to trade so that economies can move gradually closer to free trade
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Transfer pricing
occurs when one part of an MNC in one country sells (transfers) good or services to another part in another country, the price charged is the transfer price
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Uncertainty
possibilities that may appear without warning and cannot be quantified
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The World Bank
lends to developing countries in order to fund projects which will help them to raise incomes and make their economies more efficient
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The WTO
supervises world trading agreements and trade negotiations and helps to resolve disputes between governments
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Card 2

Front

developing low cost products that will appeal to people with relatively low incomes, usually they will have the most basic functions of sophisticated manufactured products

Back

Backward innovation

Card 3

Front

Brazil, Russia, India and China; the world's 4 largest fast-growing economies, all are often described as emerging economies

Back

Preview of the back of card 3

Card 4

Front

raw materials or semi-manufactured products that are traded in bulk, e.g. oil, iron ore

Back

Preview of the back of card 4

Card 5

Front

have completely free trade internally and a single unified trade policy covering all member countries' trade with the rest of the world, there is free movement of goods, service, people and capital

Back

Preview of the back of card 5
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