Chapter 3. Doing Business in Global Markets Flashcards
Importing
buying products from another country
Exporting
selling products to another country
Free trade
the movement of goods and services among nations without political or economic barriers
Comparative advantage
a country should sell to other countries those products that it produces most efficiently and buy from other countries those products that it cannot 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
total value of a nation’s exports compared to its imports over a particular period
trade surplus (favorable)
when the value of a country’s exports exceeds that of its imports
balance of payments
the difference between money coming into a country (from exports) and money leaving the country (from imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment
Dumping
selling products in a foreign country at lower prices than those charged in the producing country
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)
Contract Manufacturing
a foreign company’s production of private-label goods to which a domestic company then attaches its own brand name or trademark; part of the broad category of outsourcing
Joint venture
a partnership in which two or more companies (often from different countries) 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 direct investment (FDI)
the buying of permanent property and businesses in foreign nations
Foreign subsidiary
a company owned in a foreign country by another company, called the parent company
Multinational corporation
an organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management
Sovereign wealth funds (SWFs)
investment funds controlled by governments holding large stakes in foreign companies
Culture
set of values, beliefs, rules, and institutions held by a specific group of people
ethnocentricity
an attitude that your own culture is superior to other cultures
exchange rate
the value of one nation’s currency relative to the currencies
devaluation
lowering the values 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.
tariffs
a tax imposed on imports
import quota
a limit on the number of products in certain categories that a nation can import
embargo
a 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 trade (GATT)
a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions
World trade organization
an independent entity of 164 member nations whose purpose is to oversee cross-border trade issues and global business practices; headquartered in geneva
common markets
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
North American Free Trade Agreement (NAFTA)
agreement that created a free-trade area among the United States, Canada, and Mexico; passed in 1993
United States-Mexico-Canada Agreement (USMCA)
New agreement to replace NAFTA; ratified in 2020
Outsourcing
Process whereby one firm contracts with other companies to do some or all of its functions
