Mid-Term Answer’s

1. International Trade- International business can differ from domestic business for several
reasons, including the following. Domestic business involves transactions occurring within the
boundaries of a single country, whereas international business transactions cross national
boundaries. The countries involved may use different currencies, forcing at least one party to
convert its currency into another. The legal systems of the countries may differ, forcing one or
more parties to adjust their practices to comply with local law. The cultures of the countries may
differ, forcing each party to adjust its behavior to meet the expectations of the other. The
availability of resources differs by country. One country may be rich in natural resources but poor
in skilled labor, whereas another may enjoy a productive, well-trained workforce but lack natural
resources.

2. Exporting and importing activities often are divided into two groups:
Trade in goods—tangible products such as clothing, computers, and raw materials.
Official U.S. government publications call this type of trade merchandise exports and
imports; the British call it visible trade. Trade in services—intangible products such as
banking, travel, and accounting activities. In the United States, this type of trade is called
service exports and imports; in the United Kingdom, it is called invisible trade.

3. A tangible asset is an asset that has physical substance. Examples include inventory, a
building, rolling stock, manufacturing equipment or machinery, and office furniture.
There are two types of tangible assets: inventory and fixed assets.

4. An invisible trade is an international transaction that does not include an exchange of tangible
goods. Customer service outsourcing, overseas banking transactions, and the medical tourism
industry all are examples of invisible trade. Visible trade involves trading of goods which can be
touched and weighed. Examples include trade in goods such as Oil, machinery, food, clothes etc.
Visible exports: Selling of tangible goods which can be touched and weighed to other countries.

5. A just-in-time (JIT) inventory system is a management strategy that has a company receive
goods as close as possible to when they are actually needed. So, if a car assembly plant needs to
install airbags, it does not keep a stock of airbags on its shelves but receives them as those cars
come onto the assembly line.

6. Era of Globalization First globalization is known for increasing transfers of commodities,

people, capital and labour between and within continents. However, it is not only about the
movement of goods or factors of production. First globalization also includes technological
transfers and the rise of international cultural and scientific cooperation. 1870-1914 is also known
as the laissez-faire period. However, the trade policies lack of reciprocity.

7. Arbitrage is trading that exploits the tiny differences in price between identical assets in two or
more markets. The arbitrage trader buys the asset in one market and sells it in the other market at
the same time in order to pocket the difference between the two prices.
8. Sea ice plays an important role maintaining the Earth's energy balance while helping keep polar
regions cool due to its ability to reflect more sunlight back to space. Sea ice also keeps air cool by
forming an insulating barrier between the cold air above it and the warmer water below it.
9. The Arctic Council is the leading intergovernmental forum promoting cooperation, coordination
and interaction among the Arctic States, Arctic Indigenous peoples and other Arctic inhabitants
on common Arctic issues, in particular on issues of sustainable development and environmental
protection in the Arctic.
10. Hong Kong’s attractiveness to international businesses lies in its deep, sheltered harbor and its
role as an entry point to mainland China. Over seven million people are packed into Hong Kong’s
small land area. It offers highly educated, highly productive labor for industries such as textiles
and electronics and provides banking and financial services for much of East Asia. As a result of
common culture and geography, Hong Kong entrepreneurs often act as intermediaries for
companies around the world that want to do business with China. Hong Kong has also
traditionally served as a bridge between Taiwan and its political enemy, China. Accordingly,
Hong Kong has thrived as an entrepôt for China, receiving goods from it and preparing the goods
for shipment to the rest of the world, and vice versa. Export statistics for Hong Kong reflect its
role as a reexported. It exported $550 billion worth of goods in 2017, or 161 percent of its $341
billion GDP.
11. The Middle East includes the region between southwestern Asia and northeastern Africa. This
area is called the “cradle of civilization” because the world’s earliest farms, cities, governments,
legal codes, and alphabets originated there. The region was also the birthplace of several of the
world’s major religions, including Judaism, Christianity, and Islam. The Middle East has had a
history of conflict and political unrest; in the last half-century it has suffered through several
Arab-Israeli wars, the Iran-Iraq war, and two Persian Gulf wars, all of which raised the risk of
doing business in the region. In 2011, political unrest swept the area. Some of the oil-rich nations
of the Middle East are attempting to diversify their economies for “life after oil.”
12. Multinational Corporation (MNC) is a firm “that engages in FDI and owns or controls value-
adding activities in more than one country” Because some large MNCs, such as accounting
partnerships and Lloyd’s of London, are not true corporations, some writers distinguish between
multinational corporations and multinational enterprises (MNEs).
13. The government can boost demand by cutting tax and increasing government spending. Lower
income tax will increase disposable income and encourage consumer spending. Higher
government spending will create jobs and provide an economic stimulus.
14. Lingua Franca: To conduct business, international businesspeople must be able to communicate.
As a result of British economic and military dominance in the nineteenth century and U.S.
dominance since World War II, English has emerged as the predominant common language, or
lingua franca, of international business. Translation: Of course, some linguistic differences may
be overcome through translation. The process, however, requires more than merely substituting
words of one language for those of another. Translators must be sensitive to subtleties in the
connotations of words and focus on translating ideas, not the words themselves. Far too often,
translation problems create marketing disasters. Firms can reduce the chances that they are
sending the wrong message to their customers by using a technique known as backtranslation.
With backtranslation, one person translates a document, then a second person translates the
translated version back into the original language. This technique provides a check that the
intended message is actually being sent, thus avoiding communication mistakes
15. Licensing gives a licensee certain rights or resources to manufacture and/or market a certain
product in a host country. Licensing is a business arrangement in which one company gives
another company permission to manufacture its product for a specified payment.
16. The European Union is one of the most outward-oriented economies in the world. It is also the
world’s largest single market area. Free trade among its members was one of the EU's founding
principles, and it is committed to opening world trade as well. The EU actively engages with
countries or regional groupings to negotiate trade agreements. These agreements grant mutually
beneficial access to the markets of both the EU and the countries concerned. EU companies can
grow their business and can also more easily import the raw materials they use to make their
products.
17. Economic nationalism, also called economic patriotism and economic populism, is an ideology
that favors state interventionism over other market mechanisms, with policies such as domestic
control of the economy, labor, and capital formation, including if this requires the imposition
of tariffs and other restrictions on the movement of labor, goods, and capital. The core belief
of economic nationalism is that the economy should serve nationalist goals. Economic
nationalists oppose globalization or at least question the benefits of unrestricted free trade. They
favor protectionism and advocate for self-sufficiency. To economic nationalists, markets are to be
subordinate to the state, and should serve the interests of the. Economic nationalists tend to see
international trade as zero-sum, where the goal is to derive relative gains.

18. Common law is the foundation of the legal systems in the United Kingdom and its former
colonies, including the United States, Canada, Australia, India, New Zealand, Hong Kong,
Barbados, Saint Kitts and Nevis, and Malaysia. Common law is based on the cumulative wisdom
of judges’ decisions on individual cases through history. These cases create legal precedents,
which other judges use to decide similar cases. Civil law is based on a codification, or detailed
listing, of what is and is not permissible. The civil law system originated in biblical times with the
Romans, who spread it throughout the Western world. Its dominance was reinforced by the
imposition of the civil law-based Napoleonic Code on territories conquered by French emperor
Napoleon Bonaparte during the early nineteenth century. Religious law is based on the officially
established rules governing the faith and practice of a particular religion. A country that applies
religious law to civil and criminal conduct is called a theocracy. In Iran, for example, a group of
mullahs, or holy men, determine legality or illegality through their interpretation of the Koran, the
holy book of Islam. The legal system in communist countries and in dictatorships is often
described as bureaucratic law. Bureaucratic law is whatever the country’s bureaucrats say it is,
regardless of the formal law of the land. Contracts can be made or broken at the whim of those in
power.

19. A trade restriction is an artificial restriction on the trade of goods and/or services between two
countries. It is the byproduct of protectionism. However, the term is controversial because what
one part may see as a trade restriction another may see to protect consumers from inferior,
harmful or dangerous products.

20. Nationalization is the process of taking privately-controlled companies, industries, or assets and
putting them under the control of the government. Nationalization often happens in developing
countries and can reflect a nation's desire to control assets or to assert its dominance over foreign-
owned industries.
21. Chain store proliferation has weakened local economies, eroded community character, and
impoverished civic and cultural life. Moreover, consolidation has reduced competition and may
harm consumers over the long-term. Contrary to conventional wisdom, the decline of independent
businesses is not inevitable, nor is it simply the result of free market forces. Rather, public policy
has played a major role, particularly through tax incentives and other development subsidies that
give national chains a significant advantage. Meanwhile, a growing number of communities are
taking a different approach. They are adopting land use rules that deter chain stores and actively
encourage local ownership.
22. If a contract does not contain answers to the first two questions, each party to the transaction may
seek to have the case heard in the court system most favorable to its own interests, a process
known as forum shopping. Whether a foreign court order is enforced is determined by the
principle of comity. The principle of comity provides that a country will honor and enforce within
its own territory the judgments and decisions of foreign courts, with certain limitations.
Arbitration is the process by which both parties to a conflict agree to submit their cases to a
private individual or body whose decision they will honor. The U.S. Foreign Sovereign
Immunities Act of 1976 provides that the actions of foreign governments against U.S. firms are
generally beyond the jurisdiction of U.S. courts
23. Basic to every society is its social structure, the overall framework that determines the roles of
individuals within the society, the stratification of the society, and individuals’ mobility within
the society. Societies differ in the way they define family and in the relative importance they
place on the individual’s role within groups. Cultures also differ in the importance of the
individual relative to the group, Societies differ in their degree of social stratification. All
societies categorize people to some extent based on their birth, occupation, educational
achievements, or other attributes. However, the importance of these categories in defining how
individuals interact with each other within and between these groups varies by society. Social
mobility is the ability of individuals to move from one stratum of society to another. Social
mobility tends to be higher in less stratified societies
24. Time: Attitudes about time differ dramatically across cultures.
25. High-context cultures are more likely to be intuitive, contemplative, and concerned with the
collective. Communicators in high-context cultures pay attention to more than the words spoken –
they also pay attention to interpersonal relationships, nonverbal expressions, physical settings,
and social settings.
26. We define ethics as an individual’s personal beliefs about whether a decision, behavior, or action
is right or wrong. Hence, what constitutes ethical behavior varies from one person to another.
Although ethics is defined in the context of an individual’s belief, the concept of ethical behavior
usually refers to behavior that conforms to generally accepted social norms. Unethical behavior,
then, is behavior that does not conform to generally accepted social norms.

27. Many large multinationals have written guidelines that detail how employees are to treat
suppliers, customers, competitors, and other stakeholders. Others have developed formal codes of
ethics written statements of the values and ethical standards that guide the firms’ actions.
However, the mere existence of a code of ethics does not ensure ethical behavior. It must be
backed up by organizational practices and the company’s corporate culture.

28. Societal responsibility is defined as “translating the decisions and activities of the organization
towards society and the environment by adopting transparent and ethical behavior that contributes
 to sustainable development (including health and welfare in society) takes into account the
expectations of stakeholders, and conforms to international standards, so that this concept is
incorporated into the organization as a whole, and is practiced and applied at different
administrative levels”
29. Contract law originated from common law and doctrine of precedence, at a time when rapid
social and industrial changes were transpiring in England, and it became essential to regulate
legal relationships. The Indian Contract Act, enacted on 25th April 1872 had, at its core, the
elementary principles pertaining to Sales of Goods and Partnership. It is noteworthy henceforth,
that the ICA has since been amended only thrice since its conception, and the Judiciary has
instead espoused the expansion of scope and interpretations of the ICA in contemporary
judgments.
30. A free market is one where voluntary exchange and the laws of supply and demand provide the
sole basis for the economic system, without government intervention. A key feature of free
markets is the absence of coerced (forced) transactions or conditions on transactions.

31. The BOP of a country reveals its financial and economic status. A BOP statement can be used to
determine whether the country's currency value is appreciating or depreciating. The BOP
statement helps the government to decide on fiscal and trade policies.

32. The Heckscher-Ohlin model is a mathematical theory used in international trade to evaluate the
export pattern of a country relative to the natural resources at their disposal. According to this
model, countries majorly export items they can produce in abundance given their natural, land,
labor and capital endowments.

33. The theory, originating in the field of marketing, stated that a product life cycle has three distinct
stages: (1) new product, (2) maturing product, and (3) standardized product. The theory assumed
that production of the new product will occur completely in the home country of its innovation.

34. There are many types of economies around the world. Each has its own distinguishing
characteristics, although they all share some basic features. Each economy functions based on a
unique set of conditions and assumptions. Economic systems can be categorized into four main
types: traditional economies, command economies, mixed economies, and market economies.

35. There are five main investment types, or asset classes, that you can choose from, each with
distinct characteristics, risks, and benefits. Growth investments. This are more suitable for long
term investors that are willing and able to withstand market ups and downs. Shares. Shares are
considered a growth investment as they can help grow the value of your original investment over
the medium to long term. Property. Property is also considered as a growth investment because
the price of houses and other properties can rise substantially over a medium to long term period.
Cash. Cash investments include everyday bank accounts, high interest savings accounts and term
deposits. Fixed interest. The best-known type of fixed interest investments are bonds, which are
essentially when governments or companies borrow money from investors and pay them a rate of
interest in return.
36. Gold mining is one of the most destructive industries in the world. It can displace communities,
contaminate drinking water, hurt workers, and destroy pristine environments. It pollutes water
and land with mercury and cyanide, endangering the health of people and ecosystems
37. The dollar has been the world's principal reserve currency since the end of World War II and is
the most widely used currency for international trade

38. The international monetary system refers to the operating system of the financial environment,
which consists of financial institutions, multinational corporations, and investors.

39. The foreign exchange market, commonly referred to as the Forex or FX, is the global
marketplace for the trading of one nation's currency for another. The forex market is the largest,
most liquid market in the world, with trillions of dollars changing hands every day.

40. Capital inflows are defined as net purchases (difference between purchases and sales) of
domestic assets by non-residents. Capital outflows equal net purchases of foreign assets by
domestic agents excluding the central bank.

41. The most direct barrier to trade is an embargo– a blockade or political agreement that limits a
foreign country’s ability to export or import. Embargoes still exist, but they are difficult to
enforce and are not common except in situations of war. The most common barrier to trade is a
tariff–a tax on imports. Tariffs raise the price of imported goods relative to domestic goods.
Another common barrier to trade is a government subsidy to a particular domestic industry.
Subsidies make those goods cheaper to produce than in foreign markets. This results in a lower
domestic price. Both tariffs and subsidies raise the price of foreign goods relative to domestic
goods, which reduces imports. Barriers to trade are often called “protection” because their stated
purpose is to shield or advance particular industries or segments of an economy.

42. In commodities futures markets, a spot rate is the price for a commodity being traded
immediately, or "on the spot". A forward rate is the settlement price of a transaction that will not
take place until a predetermined date.

43. A nontariff barrier is a way to restrict trade using trade barriers in a form other than a tariff.
Nontariff barriers include quotas, embargoes, sanctions, and levies. As part of their political or
economic strategy, some countries frequently use nontariff barriers to restrict the amount of trade
they conduct with other countries.

44. an exchange rate is defined as the rate at which the market converts one currency into another.
Any company operating globally must deal in foreign currencies. It has to pay suppliers in other
countries with a currency different from its home country's currency.’

45. The foreign exchange market is a global decentralized or over-the-counter market for the
trading of currencies. This market determines foreign exchange rates for every currency. It
includes all aspects of buying, selling, and exchanging currencies at current or determined prices.

46. A cross rate is a foreign exchange market quote between two currencies (not involving the U.S.
dollar) that are then valued against a third currency. If used as a base currency, the U.S. dollar is
always seen to assume the value of one.
47. Direct quotation is where the cost of one unit of foreign currency is given in units of local
currency, whereas indirect quotation is where the cost of one unit of local currency is given in
units of foreign currency.

48. A Free trade Agreement (FTA) is an agreement between two or more countries where the
countries agree on certain obligations that affect trade in goods and services, and protections for
investors and intellectual property rights, among other topics.

49. A tariff is an extra fee charged on an item by a country that imports that item

50. Foreign-Trade Zones (FTZ) are secure areas under U.S. Customs and Border Protection (CBP)
supervision that are generally considered outside CBP territory upon activation. Located in or
near CBP ports of entry, they are the United States' version of what are known internationally as
free-trade zones

51. Emerging markets are countries with some characteristics of a developed market but are not yet
fully developed. These countries have rapid GDP growth and industrialization, growing per capita
income, increasing debt and equity markets liquidity, and established financial system
infrastructures.

52. Foreign direct investment (FDI) is a category of cross-border investment in which an investor
resident in one economy establishes a lasting interest in and a significant degree of influence over
an enterprise resident in another economy.

53. An economic activity takes place when resources such as capital goods, labor, manufacturing
techniques or intermediary products are combined to produce specific goods or services. Thus, an
economic activity is characterized by an input of resources, a production process and an output of
products (goods or services).

54. The Group of Seven (G7), Group of Eight (G-8), and Organization for Economic Cooperation
and Development (OECD) represent efforts by high-income nations to promote democratic
ideals and free-market policies throughout the rest of the world. Most of the world’s income is
located in the Triad, which is comprised of Japan, the United States, and Western Europe.
Companies with global aspirations generally have operations in all three areas. Market potential
for a product can be evaluated by determining product saturation levels considering income
levels.

55. The Freedom of Information Act (FOIA) gives any person the right to request access to records
of the Executive Branch of the United States Government. The records requested must be
disclosed unless they are protected by one or more of the exempt categories of information found
in the FOIA.

56. Social mobility is the movement in time of individuals, families, or other social units between
positions of varying advantage in the system of social stratification of a society. Classical authors
have studied social mobility primarily in its contribution to class or status group formation.
57. Social status is the level of social value a person is considered to possess. More specifically, it
refers to the relative level of respect, honor, assumed competence, and deference accorded to
people, groups, and organizations in a society.

58. CAP is a system of agricultural subsidies and programmer’s covering farming, environmental
measures and rural development. New schemes are being implemented in 2015. Current scheme
guidance including Basic Payment and Rural Development Programmed for England schemes is
available under rural grants and payments.