Coordinating Committee for Multilateral Export Controls (COCOM):

Organization created by the Western allies to control the export of goods and technology with military value to the countries of the Soviet bloc.

Coordination:

Process of linking and integrating functions and activities of different groups, units, or divisions.

Core competence

Firm skills that competitors cannot easily match or imitate.

Corollary approach:

Approach whereby a firm delegates responsibility for processing international sales orders to individuals within an existing department, such as finance or marketing.

Corporate culture:

Set of shared values that defines for its members what the organization stands for.

Corporate governance:

The structures and processes by which corporations are managed.

Corporate social responsibility:

The idea that, out of enlightened self-interest, companies should go beyond the minimum of the law to anticipate or head off future legal developments.

Corporation:

An organization given a legal personality for carrying on certain activities. It may be closely held or publicly traded.

Corporatism:

A theory of democracy where government represents and is answerable to officially recognized organizations that act for their members.

Correspondent relationship:

Agency relationship whereby a bank in country A acts as an agent for a bank from country B, providing banking services in country A for both the B bank and its clients; typically done on a reciprocal basis.

Cost method:

Technique used to consolidate accounting records of subsidiaries in which the parent company's ownership stake is less than 10 percent.

Cost-insurance-freight:

A system of valuing imports that includes the cost of moving them from their port of embarkation to their destination. The Trade Agreements Act of 1979 required the US Department of Commerce to report c.i.f. import statistics "no later than 48 hours before the release of any other [import] statistics" (Sec. 1108). This provision was repealed in 1988.

Cost-of-living allowance:

Compensation for managers on international assignment designed to offer differences in living costs.

Council of Economic Advisors (CEA)

As a part of the Executive Office of the President, this council consists of three economists, appointed by the president with the advice and consent of the senate, who assist in making fiscal policy.

Council of the European Union:

Main decision-making body of the EU; composed of 15 members, who represent the interests of their home governments in Council deliberations.

Counterpurchase

A reciprocal buying agreement.

Counterpurchase:

Form of countertrade in which one firm sells its products to another at one point in time and is compensated in the form of the other's products at some future time.

Countertrade

The trade of goods and services for other goods services.

Countertrade:

Form of payment in which a seller accepts something other than money in compensation.

Countervailing duty (CVD) investigation:

An investigation instituted by an importing country when given evidence that foreign goods sold within its borders are subsidized by the government in the country of production. If a subsidy is found by the US Department of Commerce, and the US International Trade Commission finds that US firms have been materially injured, US law generally requires imposition of a duty to offset the subsidy. The Uruguay Round code on subsidies and countervailing measures, signed in 1994, aims to standardize and discipline national practices on subsidies and offsetting duties.

Countervailing duty (CVD):

Ad valorem tariff placed on imported goods to offset subsidies granted by foreign governments.

Countervailing duty:

A tax to offset the subsidies imports receive at home.

Country fund:

Mutual fund that specializes in investing in stocks and bonds issued by firms in a specific country.

Country similarity theory:

Theory stating that international trade in manufactured goods will occur between countries with similar income levels and at similar stages of economic development.

Covered-interest arbitrage:

Arbitrage that exploits geographic differences in interest rates and differences in exchange rates over time.

Criminal law:

The law on wrongs against society, such as tax evasion, false advertising, or reckless polluting.

Cross rate:

Exchange rate between two currencies, A and B, derived by using currency A to buy currency C and then using currency C to buy currency B.

Cross-cultural literacy

Understanding how the culture of a country affects the way business is practiced.

Cross-cultural literacy:

Ability to understand and operate in more than one culture.

Cultural attachés:

Experts in local culture and language who help foreign businesspeople in their dealings with local people and businesses.

Cultural cluster:

Group of countries that share many cultural similarities.

Cultural controls

Achieving control by persuading subordinates to identify with the norms and value systems of the organization (self-control).

Cultural convergence:

Convergence of two or more cultures.

Culture

The complex whole that includes knowledge, belief, art, morals, law, custom, and other capabilities acquired by man as a member of society.

Culture shock:

Psychological phenomenon arising from being in a different culture; may lead to feelings of fear, helplessness, irritability, and disorientation.

Culture:

Collection of values, beliefs, behaviors, customs, and attitudes that distinguish and define a society.

Cumulative translation adjustments:

Account created to balance any difference between a subsidiary's assets and its liabilities and stockholder's equity when the current rate method is used to value its balance sheet.

Currency future:

Publicly traded contract involving the sale or purchase of a specific amount of foreign currency at a specified price with delivery at a stated future date.

Currency option:

Publicly traded contract giving the owner the right, but not the obligation, to sell or buy a specific amount of foreign currency at a specified price at a stated future date. (see also call option; put option.)

Currency translation

Converting the financial statements of foreign subsidiaries into the currency of the home country.

Current account

In the balance of payments, records transactions involving the export or import of goods and services.

Current account:

BOP account that records exports and imports of goods, exports in imports of services, investment income, and gifts.

Current account balance

The portion of a nation's balance of payments that is a record of all trade (exports and imports) between a nation and the rest of the world.

Current account balance:

A measure of a country's international transactions which includes trade in goods and services and unilateral transfers. A "negative" balance on current account, or current account deficit, means that outflows of currency resulting from these transactions exceed inflows. (A current account deficit is offset and financed by a capital account surplus, representing a net inflow of investment funds.)

Current account balance:

Net balance resulting from merchandise exports and imports, service exports and imports, investment income, and unilateral transfers.

Current account deficit

The current account of the balance of payments is in deficit when a country imports more goods and services than it exports.

Current account surplus

The current account of the balance of payments is in surplus when a country exports more goods and services than it imports.

Current rate method

Using the exchange rate at the balance sheet date to translate the financial statements of a foreign subsidiary into the home currency.

Current rate method:

Approach used to consolidate the financial statements of a foreign subsidiary when the subsidiary's functional currency is the subsidiary's home currency.

Customs duty:

A tax on imports or exports.

Customs union

A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy.

Customs union:

Form of regional economic integration that combines features of a free trade area with common trade policies toward nonmember countries.

Customs value:

A method of valuing imported goods which, in traditional United States practice, excludes shipping costs from their price.

Date draft:

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Draft that requires payment at some specified date.

Debt-equity swaps:

Reduction of debtor nations' debts in return for equity investments in their domestic companies.

Debt-for-nature swaps:

Reduction of debtor nations' debts in return for protection of sensitive environmental habitats.

Decision making:

Process of choosing one alternative from among a set of alternatives in order to promote the decision maker's objectives.

Deferral principle

Parent companies are not taxed on the income of a foreign subsidiary until they actually receive a dividend from that subsidiary.

Deferral rule:

Rule permitting U.S. companies to defer paying U.S. income taxes on profits earned by their foreign subsidiaries.

Deindustrialization:

The loss of basic industries and industrial jobs in mature economies.

Delegated arrangement:

Management arrangement in which partners in a strategic alliance play little or no management role, delegating responsibility to the executives of the alliance itself.

Democracy

Form of government in which rule is by the people, implying that elections are held to determine the popular will.

Democracy:

A system of government where citizens make political decisions through their representatives. Also called liberal democracy when the system has a constitution that protects individual rights.

Depression

An extended period of economic restructuring and institutional change that is marked by stagnant growth or decline (unemployment levels are usually higher and the inflation rates lower than in a recession).

Deregulation:

Efforts to end government regulation of economic activities and sectors, allowing firms to make more decisions alone.

Design standard

A pollution standard in which the polluter must use a particular pollution abatement device in a given facility.

Development:

General education aimed at preparing managers for new assignments and/or higher-level positions.

Differentiation strategy:

Business-level strategy that emphasizes the distinctiveness of products or services.

Diminishing returns

Applied to international trade theory, the more of a good that a country produces, the greater the units of resources required to produce each additional item.

Direct exchange rate:

Price of a foreign currency in terms of the home currency; also called a direct quote.

Direct exporting:

Product sales to customers, either distributors or end-users, located outside the firm's home country.

Direct foreign investment:

Investment in overseas business operations over which the investor has control, as opposed to portfolio investment in bonds or small shares of stock.

Direct quote:

See direct exchange rate.

Direct sales:

Selling products to final consumers.

Dirty float:

See managed float.

Discrimination:

Treatment of someone less favorably than another because of a physical or cultural attribute.

Distinctive competence:

Component of strategy that answers the question "What do we do exceptionally well, especially as compared to our competitors?"

Distribution:

Process of getting a firm's products and services to its customers.

Distributive Policy:

Government activities such as tariffs and government contracts that give benefits to specific groups.

Documentary collection:

Form of payment in which goods are released to the buyer only after the buyer pays for them or signs a document binding the buyer to pay for them.

Domestic-content requirement:

A requirement that firms selling a particular product within a particular country must use, as a certain percentage of their inputs, goods produced within that country. The United Auto Workers sought unsuccessfully to limit imports of foreign cars and parts through enactment of domestic-content legislation for automobiles sold in the United States.

Draft

See Bill of Lading

Draft:

Document demanding payment from the buyer.

Drawee

The party to whom a bill of lading is presented.

Due process:

A constitutional principle requiring that judicial and similar proceedings be done in a consistent and orderly way.

Dumping:

The sale of commodity in a foreign market at "less than fair value." Fair value is usually considered to be the price at which the same product is sold in the exporting country or to third countries, but under US law dumping can also be established by comparing the export price to the estimated costs of production of the merchandise in question. When dumping occurs, the legal remedy is imposition of a special duty equal to the "margin" of dumping, the difference between fair value and the actual sales price.

Dumping

Sale of imported goods either (1) at prices below what a company charges in its home market or (2) at price below cost.

Dumping:

Predatory pricing practices in international trade, where goods are sold below cost in a foreign market, or at a cost lower than in the home market.

E. U. (European Union):

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Formerly the E.C. (European Community), this is Europe's Common Market, first established in 1957 and strengthened in 1986 and 1991.

Earned Income Tax Credit (EITC)

Federal legislation permitting payroll tax reduction for the working poor, who are allowed to pay lower taxes (a tax credit) as a result of income level and family size. Amended several times since 1975 as a means of providing federal cash assistance to persons whose income falls below the poverty line.

EC ‘92:

Common name given to the process of completing the internal market mandated by the Single European Act, which was to be finalized by December 31, 1992.

Eclectic theory:

Theory that foreign direct investment occurs because of location advantages, ownership advantages, and internalization advantages.

Economic and monetary union (EMU):

Organization created by the Maastricht Treaty whose goal is to create a single currency for the EU, thereby eliminating exchange-rate risks and the costs of converting currencies for intra-EU trade.

Economic Community for West African States (ECOWAS):

Organization promoting regional economic cooperation created by 16 West African countries.

Economic Community of Central African States (CEEAC):

Organization promoting regional economic cooperation created by Central African countries.

Economic development:

The process of material and social betterment resulting from increased economic production and productivity.

Economic exposure:

Impact on the value of a firm's operations of unanticipated exchange-rate changes.

Economic man:

The idea that human beings behave rationally, making choices that will give them the best chance to obtain desired values.

Economic rent:

Excess payment to a factor of production (land, labor, or capital) beyond what is needed to keep it in its present use.

Economic rights:

Government services to meet the material needs of its citizens, provided as a social obligation. Also called social rights.

Economic risk

The likelihood that events, including economic mismanagement, will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a particular business enterprise.

Economic union

A group of countries committed to (1) removing all barriers to the free flow of goods, services, and factors of production between each other, (2) the adoption of a common currency, (3) the harmonization of tax rates, and (4) the pursuit of a common external trade policy.

Economic union:

Form of regional economic integration that combines features of a common market with coordination of economic policies among its members.

Economies of scale

Cost advantages associated with large-scale production.

Economies of scale:

Conditions that occur when average costs of production decline as the number of units produced increases.

Economies of scope:

Conditions that occur when a firm's average costs decline as the number of different products it sells increases.

Economy of scale

The reduction in average unit cost associated with the increase in the size of plant or activity up to a point and thereafter an increase in such cost.

Ecu

A basket of EU currencies that serves as the unit of account for the EMS.

Edge Act corporation:

Bank that is domiciled outside the parent bank's home state and provides international banking services.

Efficiency price:

See scarcity price.

Efficiency:

The production of goods at minimum cost (productive efficiency) and their allocation according to people's desires, so there is no waste (allocative efficiency).

Efficient market

A market where prices reflect all available information.

Embargo:

Ban on the exporting and/or importing of goods to a particular country.

Employer mandate:

A requirement by government that employers spend money for certain purposes.

Employment at will:

The legal doctrine that permits employers and employees to end their relationship at any time.

Entitlement program:

A program of individual benefits whose funds are automatically approved, such as government pensions and unemployment compensation.

Entrepreneur:

Proprietor of an enterprise who sees opportunities to introduce a new product, production process, or organizational setup.

Environmental Protection Agency (EPA)

Federal agency created to permit coordinated and effective governmental action on behalf of the environment. The primary mission of the EPA is to abate and control pollution systematically by proper integration of a variety of research, monitoring, standard setting, and enforcement activities.

Equal Employment and Opportunity Commission (EEOC)

Created by Title VII of the Civil Rights Act of 1964, the EEOC's mission is to end discrimination based on race, color, religion, sex or national origin in hiring, promotion, firing, wages, testing, training, apprenticeship, and all other conditions of employment and to promote voluntary action programs by employers, unions, and community organizations to make equal employment opportunity an actuality.

Equity method:

Technique used to consolidate accounting records of subsidiaries in which the parent's ownership stake is between 10 and 50 percent.

Errors and omissions:

BOP account that results from measurement errors; equals the negative of the sum of the current account, the capital account, and the official reserves account.

Escape clause (Section 201, Article XIX):

A provision of the GATT articles, and of US law, authorizing import relief as a temporary "safeguard" for domestic producers injured by import competition. Originally limited to those whose losses resulted from prior US trade concessions, escape clause eligibility was extended in Section 201 of the Trade Act of 1974 to all who could establish that imports were "a substantial cause of serious injury, or the threat thereof." The Omnibus Trade and Competitiveness Act of 1988 stipulated that the goal of any relief must be "positive adjustment." If the US International Trade Commission finds injury and recommends relief, the president must grant it or report to Congress why, after reviewing the "national economic interest of the United States," he has decided there is "no appropriate and feasible action to take." Congress may then override his decision through enactment of a joint resolution, imposing thereby the remedy recommended by the USITC.

ESOP (employee stock ownership plan)

A profit-sharing plan that allows employees to invest in the company for which they work.

Ethnocentric approach:

Managerial approach in which a firm operates internationally the same way it does domestically.

Ethnocentric staffing

A staffing approach within the MNE in which all key management positions are filled by parent-country nationals.

Ethnocentric staffing model:

Approach that primarily uses PCNs to staff upper-level foreign positions.

Eurobond:

Bonds denominated in one country's currency but sold to residents of other countries.

Eurobonds

A bond placed in countries other than the one in whose currency the bond is denominated.

Eurocurrencies:

Currency on deposit in banks outside its country of issue.

Eurocurrency

Any currency banked outside of its country of origin.

Eurodollar

Dollar banked outside of the United States.

Eurodollars:

U.S. dollars deposited in banks outside the borders of the United States.

European Commission:

Twenty-person group that acts as the EU's administrative branch of government and proposes all EU legislation.

European Community (EC)

A forerunner of the European Union (see below).

European Court of Justice:

Sixteen-member court charged with interpreting EU law; also interprets whether the national laws of the 15 EU members are consistent with EU laws and regulations.

European Currency Unit (ECU):

Weighted "basket" of EU currencies used for accounting purposes within the EU.

European Free Trade Association (EFTA)

A free trade association including Norway, Iceland, and Switzerland.

European Free Trade Association (EFTA):

Second major trading bloc in Europe that works closely with the EU to promote intra-European trade and whose current members are Iceland, Liechtenstein, Norway, and Switzerland; has shrunk in size over time as many of its members have joined the EU.

European Monetary Institute (EMI):

Organization created by the Maastricht Treaty as first step in establishing a European Central Bank; plays a critical role in promoting economic and monetary union among EU members.

European Monetary System (EMS)

A voluntary system of semifixed exchange rates between several of the member countries of the European Union.

European Monetary System (EMS)

EU system designed to create a zone of monetary stability in Europe, control inflation, and coordinate exchange rate policies of EU countries.

European Monetary System (EMS):

System based on 1979 agreement among members of the European Union to manage currency relationships among themselves.

European Parliament:

Legislature with 626 members elected from districts in member countries that has a consultative role in EU decision making.

European Union (EU)

An organization of 15 Western European nations designed to foster economic cooperation and common development, with the eventual aim of economic and monetary union together with a measure of political unity.

European Union (EU)

An economic group of 15 European nations: Austria, Belgium, Great Britain, Denmark, Finland, France, Germany, Greece, the Netherlands, Ireland, Italy, Luxembourg, Portugal, Spain and Sweden. Established as a customs union, it is now moving toward economic union. (Formerly the European Community.)

Exchange rate

The price of one currency in terms of another currency.

Exchange rate

The rate at which one currency is converted into another.

Exchange rate:

Price of one currency in terms of a second currency.

Exchange Rate Mechanism (ERM):

Agreement among European Union members to maintain fixed exchange rates among themselves within a narrow band.

Exchange rate mechanism (ERM)

Mechanism for aligning the exchange rates of EU currencies against each other.

Excise:

A tax on the sale or manufacture. of a specific product.

Excludability:

The degree to which goods or services change hands only if both buyers and sellers agree on the terms.

Exclusive channels

A distribution channel that outsiders find difficult to access.

Exit interview:

Interview with an employee who is leaving the organization.