Chapter 2 Flashcards
absolute advantage
a country produces a product better than all other countries
balance of payments
difference between money coming into a country and money leaving the country
The US is the ____ largest exporting nation
Third
Importing
buying products from another country
Exporting
Selling products to another country
Free trade
Movement of goods and services among nations without political or economic obstruction
Comparative advantage theory
A country should sell to other countries those products that is produces most effectively and efficiently and should buy from other countries those products that it cannot produce as effectively or efficiently
The real potential in global markets may be _______ businesses
Small businesses generate about 1/3 of exports
What are the benefits of exporting?
Income and jobs
balance of trade
Total value of a nation’s exports compared to its imports measured over a particular period
Trade surplus
Exists when the value of a nation’s exports exceeds its imports measured over a particular period
Trade defecit
Exists when the value of a nation’s imports exceeds the value of its exports; unfavorable balance of trade
Since 1975, the US has run a trade _______
defecit
The U.S. has laws to prohibit practices such as ______…
the practice of selling products in a foreign country at lower prices than those charged in the producing country.
Licensing
global strategy in which a firm allows a foreign company to produce its products in exchange for a fee (royalty)
Advantages of licensing
- A company can gain additional revenues from a product it would not have produced domestically 2. The firm can sell start-up supplies, component materials and consulting services 3. The licensor spends little or no money to produce or market the product; licensees bear the cost.
Disadvantages of licensing
- Often a firm must grant licensing rights to its product for an extended period of time 2. If a product experiences remarkable growth in the foreign market, the bulk of the revenues goes to the licensee 3. If the foreign licensee learns the technology, it may break the agreement and begin to produce a similar product on its own
Franchising
Contractual arrangement whereby someone with a good idea for a business sells the rights to use the business name.
Forces affecting trade in global markets
- culture 2. ethnocentricity 3. religion
Never _______ what works in one _________ will work in another
assume; country
Exchange Rate
Value of one nation’s currency relative to the currencies of other countries
Devaluation
lowering the value of a nation’s currency relative to other currencies
Countertrading
Complex form of bartering where several nations maybe involved, each trading goods and services for services.
The FOREIGN CORRUPT PRACTICES ACT OF 1978 prohibits “_______” or “_______” payments to foreign officials to secure business contracts.
dubious or questionable
