Chapter 2: Doing Business in Global Markets Flashcards
Selling products to another country.
Exporting
Buying products from another country.
Importing
The movement of goods and services among nations without political or economic barriers.
Free trade
The movement of goods and services among nations without political or economic barriers.
Free trade
Theory that states that a country should sell to other countries those products that it produces most effectively and efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently.
Comparative Advantage Theory
The advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.
ex: Saudi Arabia, a country with abundant oil supplies that provide it with an absolute advantage over other nations.
Absolute Advantage Theory
The total value of a nation’s exports compared to its imports over a particular period.
Blanace of Trade
A favorable balance of trade; occurs when the value of a country’s exports exceeds that of its imports.
Trade Surplus
An unfavorable balance of trade; occurs when the value of a country’s imports exceeds that of its exports.
Trade Deficit
The difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment.
Balance of Payments
Selling products in a foreign country at lower prices than those charged in the producing country.
Dumping
A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty).
Licensing
A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty).
Licensing
A foreign company’s production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing.
ex: parts for Apple, Xbox, Microsoft
Contract Manufacturing
Strategies for reaching global markets
Strategies for reaching global markets
A partnership in which two or more companies (often from different countries) join to undertake a major project.
ex: Often mandated by governments like China as a condition for doing business in their country. Disney and Shanghai’s Disney Group
Joint venture
A long-term partnership between two or more companies established to help each company build competitive market advantages.
Strategic alliance
The buying of permanent property and businesses in foreign nations.
Foreign direct investment (FDI)
A company owned in a foreign country by another company, called the parent company.
ex: 7-Eleven, a convenience store chain in the U.S. After 70% of the company was acquired by a Japanese affiliate in 1991, 7-Eleven is now a wholly-owned subsidiary held by Seven-Eleven Japan
Foreign subsidiary
An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management.
ex: Walmart, Nestle, BP, Volkswagen
Multinational corporation
Investment funds controlled by governments holding large stakes in foreign companies.
Sovereign wealth funds (SWFs)
What services are usually provided by an export-trading company?
An export-trading company not only matches buyers and sellers from different countries but also deals with foreign customs offices, documentation and even weights and measures conversions to ease the process of entering global markets.
What is the key difference between a joint venture and a strategic alliance?
In summary, a joint venture is a separate entity with shared ownership, while a strategic alliance is a cooperative agreement between two or more companies without shared ownership.
The value of one nation’s currency relative to the currencies of other countries.
Exchange rate
Currencies “float” in value according to the supply and demand for them in the global market for currency
Floating exchange rates
Lowering the value of a nation’s currency relative to other currencies.
Devaluation
Lowering the value of a nation’s currency relative to other currencies.
Devaluation
A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.
Countertrading
This law prohibits “questionable” or “dubious” payments to foreign officials to secure business contracts
Foreign Corrupt Practices Act of 1978
The use of government regulations to limit the import of goods and services.
Trade protectionism
The use of government regulations to limit the import of goods and services.
Trade protectionism
A tax imposed on imports.
Tariff
Raises the retail price of imported products so that domestic goods are more competitively priced
These tariffs are meant to save jobs for domestic workers and keep industries-especially infant industries that have companies in the early stages of growth-from closing down because of foreign competition
PROTECTIVE Tariff
Designed to raise money for the government
Revenue Tariff
A limit on the number of products in certain categories that a nation can import.
Import qutoa
A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.
Embargo
A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions.
General Agreement on Tariffs and Trade (GATT)
The international organization that replaced the General Agreement on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations.
World Trade Organization (WTO)
A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc. An example is the European Union.
Common market
Contracting with other companies (often in other countries) to do some or all of the functions of a firm, like its production or accounting tasks.
Outsourcing
