Key Concepts in International Business

Jonathan Sutherland

• Publisher: Bloomsbury Academic
• Year: 2017
• Print ISBN:
  9781403915344
• eBook ISBN:
  9781350318243
• Edition: 1
• Topic: Study Aids
• Subtopic: Study Guides

Key Concepts in International Business is one of a range of comprehensive glossaries with entries arranged alphabetically for easy reference. All major concepts, terms, theories and theorists are incorporated and cross-referenced. Additional reading and Internet research opportunities are identified. More complex terminology is made clearer with numerous diagrams and illustrations. With over 500 key terms defined, the book represents a comprehensive must-have reference for anyone studying a business-related course or those simply wishing to understand what international business is all about. It will be especially useful as a revision aid.

Aa

Absolute advantage

Absolute advantage is considered to be one of the simplest measures of economic performance. The assumption is that a country, or a business, can produce more of a particular product, using the same effort and resources, than other producers, giving that country or business an absolute advantage over the competitors.

In terms of international trade and business, ‘absolute advantage’ often refers to business or country specialization and is used to describe the maximization of benefits. True cases of absolute advantage are rare, but the more commonly used term to describe the advantage a business or a country has, in production terms, over its competitors is comparative advantage. Both absolute and comparative advantage fluctuate over periods of time.

Absorption

‘Absorption’ is a term used to describe the total investment and consumption of all households, businesses and government bodies, in terms of both domestic and imported products and services. Absorption can be compared with the actual production levels in a given country; when absorption is greater than production, the excess shows up on the country’s current account as a deficit.

Acceptance

In international business terms, ‘acceptance’ has three different, but related meanings. Acceptance can apply to a bill of exchange that a drawee has accepted and is now unconditionally obliged to pay when it reaches maturity. The draft is presented for acceptance; the drawee becomes the acceptor and the date and place of payment are written on the draft.

‘Acceptance’ also refers to the drawee receiving a draft, thus entering into the obligation; or, more generally, an agreement to purchase goods or services under specific terms at a stated price.

Accession

‘Accession’ refers to the process of a country becoming a member of an international grouping or accepting an international agreement. The term has most commonly been used in relation to the General Agreement on Tariffs and Trade (GATT) or in relation to a country joining the European Community. In both cases the accession process involves a series of negotiations which aim to identify the obligations of the non-member country and what it must undertake or accept before it becomes a member of the international agreement. It is only when the accession process has been completed that the country will enjoy the full membership benefits.

Marcou, Gerard, Regionalisation for Development and Accession to the European Union. Budapest: Central European University Press, 2003.

Accounting

Accounting, in its more general sense, involves the communication of a business’s financial position to its providers of capital and, for tax purposes, to governments. It is also used to evaluate performance, control expenditure and make forecasts and plans.

In the field of international business, however, accounting is a far more complex discipline as businesses will need to adapt their accounting procedures to fall in line with the local demands in each environment in which they operate. There are a number of national differences in both accounting and auditing standards. While markets have become increasingly globalized over the past few decades, there may be a distinct lack of comparability between the accounting demands in each area in which a business operates. It can therefore be difficult for businesses to show why financial information appears to be different when based on the accounting practices of the various countries in which it has an interest.

Attempts have begun in order to institute a form of accounting standard harmonization, notably from the International Accounting Standards Committee (IASC). To date, their attempts have been rather limited. A multinational business, with subsidiaries in foreign countries, would be required to keep its accounting records and prepare financial statements in the currency of the country in which it is located. It is only when consolidated accounts of the multinational are compiled that the subsidiaries’ financial statements have to be translated into the home country’s currency. This, in itself, is a difficult task as exchange rates fluctuate and assets which are valued in a foreign currency also have to be translated into the home currency, but usually at the exchange rate in operation when assets were purchased. This leads to difficulties in making a multinational’s balance sheet balance.

Inevitably there are distortions in both budgets and performance data when the results are translated into another currency. Increasingly, multinational businesses are seeking ways in which they can streamline this process and make the assumptions required more transparent.

Madura, Jeff, International Financial Management. Mason, OH: South Western College Publishing, 2002.

Acquisition

The most common use of the term ‘acquisition’ is in describing the process of one business purchasing another business, or indeed individuals purchasing an existing business.

‘Acquisition’ can also refer to the process of obtaining a loan or another form of finance, or to the purchase of a property by a business.

In international business terms, all acquisitions are subject to local, regional (EU) and national laws and regulations in respect of how other businesses are acquired or shares are purchased. In many cases businesses which are acquired by another company continue to operate as independent organizations, maintaining their original name, personnel and organizational structure.

Weston, J. Fred and Weaver, Samuel C., Mergers and Acquisitions. New York: McGraw-Hill, 2001.

Ad valorem tariff

An ad valorem tariff is a tax, charge or duty which is applied to products or services as a percentage of their value. Ad valorem, literally, means ‘according to value’.

Administrative protection order

An administrative protection order is most commonly connected with anti-dumping and countervailing duty investigations, when it is used to prevent proprietary data being released. It is also used to control the disclosure of information related to national security in cases where businesses are being investigated for violations.

Gray, Rob and Bebbington, Jan, Accounting for the Environment. London: Paul Chapman, 2001.

Administrative (judicial) trade policy

Administrative or judicial trade policy instruments are used to deal with contentious issues on a case-by-case basis. They are often used to make market access investigations, deal with international trade disputes and investigate anti-dumping. These administrative trade policies have been widely criticized as further fragmenting domestic trade policy in various countries, notably the United States and within the European Union.

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Table of contents

• Cover
• Title Page
• Copyright
• Contents
• Introduction
• The Key Concepts
• Index