Chapter 3 Flashcards
International business*
All business activities that involve exchanges across national boundaries
Absolute advantage*
The ability to produce a specific product more efficiently than any other nation
Comparative advantage*
The ability to produce a specific product more efficiently than any other product
Exporting*
Selling and shipping raw materials or products to other nations
Example: The Boeing Company exports its airplanes to a number of countries for use by their airlines
Importing*
Purchasing raw materials or products in other nations and bringing them into one’s own country
Example: Buyers for Macy’s department stores purchase rugs in India and have them shipped back to the United States for resale
Balance of trade*
The total value of a nation’s exports minus the total value of its imports over a specified period of time
Trade deficit*
A negative balance of trade
Balance of payments*
The total flow of money into a country minus the total flow of money out of that country over a specified period of time
Trading company*
Provides a link between buyers and sellers in different countries
Countertrade*
An international barter transaction
Licensing*
A contractual agreement in which one firm permits another to produce and market its product and to use its brand name in return for a royalty or other compensation
Contract manufacturing*
An arrangement in which one firm contracts with another business, often in another country, to manufacture products or product components to its specifications
Outsourcing*
An arrangement in which one firm contracts manufacturing or other activities to a firm in another country that specializes in those activities and can offer them at a lower cost than domestic firms
Joint venture
A partnership formed to achieve a specific goal or to operate for a specific period of time
Strategic alliance*
A partnership formed to create competitive advantage on a worldwide basis
Multinational corporation*
A firm that operates on a worldwide scale without ties to any specific nation or region
Tariff*
A tax levied on a particular foreign product entering a country
Dumping*
Exportation of large quantities of a product at a price lower than that of the same product in the home market
Nontariff barrier*
A nontax measure imposed by a government to favor domestic over foreign suppliers
Import quota*
A limit on the amount of a particular good that may be imported into a country during a given period of time
Embargo*
A complete halt to trading with a particular nation or of a particular product
Exchange control*
A restriction on the amount of a particular foreign currency that can be purchased or sold
Currency devaluation*
The reduction of the value of a nation’s currency relative to the currencies of other countries
General Agreement on Tariffs and Trade (GATT)*
An international organization of 164 nations dedicated to reducing or eliminating tariffs and other barriers to world trade
World Trade Organization (WTO)*
Powerful successor to GATT that facilitates world trade among member nations by mediating disputes and fostering efforts to reduce trade barriers
Economic community*
An organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies
Export-Import Bank of the United States*
An independent agency of the U.S. government whose function is to assist in financing the exports of American firms
Multilateral development bank (MDB)*
An internationally supported bank that provides loans to developing countries to help them grow
World Bank*
A cooperative banking institution with 189 member countries
International Monetary Fund (IMF)*
An international bank that makes short-term loans to developing countries experiencing balance-of-payment deficits
