Chapter 3: Copeting In Global Markets Flashcards
Exporting
Selling products to another country
Importing
Buying products from another country
Free trade
Movement of goods and services among nations without political or economic barriers
Comparative advantage theory
States that a country should sell to other countries those products that it produces most efficiently, and buy from other countries those products it cannot produce as efficiently
Absolute advantage
If it has a monopoly or is able to produce it more efficiently than all other countries
Balance of trade
Nations ratio of exports to imports
Trade surplus
Occurs when the value of the countries exports exceeds that of its inputs
Trade deficit
Occurs when the value of the countries imports exceeds that of its exports
Balence of payments
Difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flow from other factors (foreign aid, military, tourism)
Strategies for reaching global markets
(Least amount of commitment, control, risk, and profit potential) Licensing Exporting Franchising Contract manufacturing International joint venture and strategic alliance Foreign direct investment (Most)
Licensing
Global strategy in which a firm (the licensor) allows a foreign company (the licensee) to procure its products in exchange for a fee
Contract manufacturing
A foreign countries production of private label goods to which a domestic company than attaches its brand name or trademark
Joint venture
A partnership in which two or more companies (often in different countries) join to undertake a major project
Strategic alliance
Long term partnership between two or more companies established to help each company build competitive market advantages
Foreign direct investment
The buying of permanent property and businesses in foreign nations
Foreign subsidiary
Company owned in a foreign country by the parent company
Multinational corporation
An organization that manufactures and market products in many different countries and has multinational stock ownership and management
Investment Canada act
Legislation that provides rules to review significant investment in Canada by non Canadians
Exchange rate
Value of one nations currency relative to the currencies of other countries
Devaluation
Lowering the value of a nations currency relative to other currencies
Counter trading
Complex form of bartering in which several countries may be involved, each tradings goods or services for services
Trade protectionism
The use of government regulations to limit the import of goods and services
Dumping
Selling products in a foreign country at lower prices than those charged in the producing country
Tariffs
Tax imposed on imports
Embargo
Complete ban on the import or export of a certain product
Or the stopping of all trade with a particular country
General agreement on tariffs and trades
1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions
Globalization
Companies manufacture, finance, and market worldwide
7 strategies for reaching global market (KNOW THIS IN ORDER)
Licensing Exporting Franchising Contract manufacturing International joint ventures Strategic alliances Foreign direct investment
(LEFCISF)
Culture
Set of values, beliefs, rules, and instructions held by specific group of people
Ethnocentrism / ethnocentrcity
Attitude the ones culture is superior to all others
Protective tariffs
Designed to raise retail prices of imported products
Revenues tariffs
Designed to raise money for the government
Import quota
Limits number of products in certain catagories that a nation can import
Only so many medial supplies
Non-tariff barriers
Include restrictive standards or paperwork that detail exactly how a product most be sold in a country
GATT
General agreement on tariffs and trade
What does General agreement on tariffs and trade do
1948 agreement that established international forum for negotiating mutual reductions in trade restrictions
WTO
World trade organization
World trade organization
International organization, was assigned the duty to mediate trade disputes among nations
International Monetary Fund (IMF)
International bank that makes short term loans to countries
The world bank
United Nations agency that borrows money from richer countries and gives it to poorer countries
Common markets
Regional group of countries that have a common external tariff, no internal tariffs, and a cordination of laws to facilitate exchange among countries
NAFTA and US-Mexico-Canada agreement
North American free trade agreement
Agreement that created free trade among Canada, Uniates states, and Mexico
BRIC
Brazil, Russia, India, China
