International Business Cheat Sheet

The core ideas of International Business distilled into a single, scannable reference — perfect for review or quick lookup.

PiqCue — piqcue.com/international-business/cheatsheet

Quick Reference

Comparative Advantage

David Ricardo's principle that countries benefit from trade when each specializes in producing goods for which it has the lowest opportunity cost, even if one country is more efficient at producing everything.

Foreign Direct Investment (FDI)

An investment made by a firm or individual in one country into business interests in another country, typically involving establishing operations or acquiring assets such as factories, equipment, or ownership stakes of at least 10 percent in a foreign company.

Dunning's Eclectic (OLI) Paradigm

A framework explaining why firms engage in FDI based on three advantages: Ownership (firm-specific assets like technology or brand), Location (host-country factors like resources or market size), and Internalization (benefits of controlling operations rather than licensing).

Modes of Entry

The various strategies a firm can use to enter a foreign market, ranging from low-commitment options like exporting and licensing to high-commitment options like joint ventures and wholly owned subsidiaries, each with different levels of risk, control, and resource requirements.

Exchange Rate Risk

The potential for financial losses arising from fluctuations in currency exchange rates, which can affect the value of international transactions, foreign investments, and the translated earnings of multinational companies.

Hofstede's Cultural Dimensions

A framework developed by Geert Hofstede that analyzes national cultures along dimensions such as power distance, individualism vs. collectivism, masculinity vs. femininity, uncertainty avoidance, long-term vs. short-term orientation, and indulgence vs. restraint.

Balance of Payments

A comprehensive record of all economic transactions between residents of a country and the rest of the world during a specific period, divided into the current account (trade in goods and services), capital account, and financial account.

Global Supply Chain Management

The coordination and oversight of materials, information, and finances as they move from raw material suppliers through manufacturers, distributors, and retailers across multiple countries to the end consumer.

Political Risk

The likelihood that political forces, events, or conditions in a country will adversely affect a firm's business operations, including expropriation, civil unrest, regulatory changes, currency controls, and corruption.

Regional Economic Integration

Agreements among countries in a geographic region to reduce or eliminate tariff and non-tariff barriers to the free flow of goods, services, capital, and labor, ranging from free trade areas to full economic unions.

Key Terms at a Glance

Absolute Advantage:The ability of a country to produce a good using fewer resources than another country.

Balance of Payments:A comprehensive record of all economic transactions between a country's residents and the rest of the world over a given period.

Comparative Advantage:The ability of a country to produce a good at a lower opportunity cost than another country.

Country Risk:The collection of risks associated with investing or operating in a particular country, including political, economic, and sovereign risks.

Cultural Intelligence:The capability to function effectively across national, ethnic, and organizational cultures.

Customs Union:An agreement among countries to eliminate tariffs between members and adopt a common external tariff.

Dumping:The practice of exporting goods at a price lower than the normal price in the domestic market or below cost of production.

Exchange Rate:The price of one country's currency expressed in terms of another country's currency.

Expropriation:Government seizure of foreign-owned assets, typically without adequate compensation.

Foreign Direct Investment:An investment involving at least 10% ownership stake in a foreign business entity, implying lasting management interest.

Franchising:An entry mode in which a firm grants rights to use its brand, business model, and systems in a foreign market in exchange for fees and royalties.

Free Trade Area:A region where member countries have eliminated tariffs among themselves but maintain separate external tariffs.

Greenfield Investment:A form of FDI where a company builds new facilities in a foreign country from scratch.

Hedging:A risk management strategy using financial instruments to offset potential losses from exchange rate fluctuations.

Hofstede's Dimensions:A framework for understanding cultural differences across countries based on six dimensions: power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence.

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