Chapter 3: Competing in Global Markets Flashcards
Exporting
Selling products to another country
Importing
Buying products from another company
Free trade
the movement of goods and services among nations without political or economic trade barriers
Comparative advantage theory
A country should sell to other countries those products that it produces most effectively and efficiently, and buy from others those that it can’t produce as effectively or efficiently
Absolute advantage
A country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.
Balance of trade
A nation’s ration of exports to imports
Trade deficit
Whenthe value of a nation’s imports exceeds that of its exports
Favorable balance of trade
The value of a nation’s exports exceeds that of its imports
Balance of payments
the difference between money coming into a country and money leaving the country
Foreign direct investment
The buying of permanent property and businesses in foreign nations
Dumping
Selling products in a foreign country at lower prices than those charged in the producing company
Licensing
A firm gives the right to manufacture its product or use its trademark to a foreign company for a fee
Contract manufacturing
A foreign company’s production of private-label goods to which a domestic company then attaches its own brand name or trademark
Joint venture
Partnership in which two or more companies join to undertake a major project
Strategic alliance
A long-term partnership between two or more companies established to help each company build competitive market advantages
Foreign subsidiary
A company that is owned in a foreign country by another company
Multinational corporation
an organization that manufactures and markets products in many different countries, with multinational stock ownership and management
Exchange rate
the value of one nation’s currency against another
Devaluation
Lowering the value of a nation’s currency relative to other currencies
Countertrading
A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.
Trade protectionism
the use of government regulations to limit the import of goods and services
Import quota
limits the number of products in certain categories that a nation can import
Tariff
A tax on imports
Embargo
a complete ban on the import or export of a certain product or the stopping of all trade with a particular country
GATT: General Agreement on Tariffs and Trade
Formed in 1948 and established an international forum for negotiating mutual reductions in trade restrictions
WTO: World Trade Organization
Established in 1995 and assumed the primary task of mediating future trade disputes
Common Market
regional group of countries that have a common external tariff, no internal tariffs, and the coordination of laws to facilitate exchange among member countries
NAFTA: North American Free Trade Agreement
Created a free trade area among the U.S., Canada, and Mexico
