Chapter 3 - Doing Business in Global Markets Flashcards
What is Importing?
Buying products from another country
What is Exporting?
Selling products to another country
What is Free Trade?
The movement of goods and services among nations without political or economic barriers
What is Comparative Advantage Theory?
Theory that states that 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.
What is Balance of Trade?
The total value of a nation’s exports compared to its imports over a period.
What is a Trade Surplus?
A favorable balance of trade; occurs when the value of a country’s exports exceeds that of its imports.
What is a Trade Deficit?
An unfavorable balance of trade; occurs when the value of a country’s imports exceeds that of its exports.
What is the Balance of Payments?
The difference between money coming into a country (from exports) and money leaving a country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment,
What is dumping?
Selling products in a foreign country at lower prices than those charged in the producing company
What are the two main arguments favoring the expansion of U.S. businesses into global markets?
- Competition abroad is not as intense as at home.
- Exporting is a terrific boost to the economy at home.
What is 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)
How can a Licensing Agreement benefit a firm (3 responses)?
- the firm can gain revenues it would not otherwise generate in its home market.
- Foreign licensees will purchase start-up supplies, materials, and consulting services from the licensing firm.
- The licensors spend little or no money to produce and market their product.
What is the EAC?
Export Assistance Centers to provide hands-on exporting assistance and trade-finance support for small and medium-sized businesses that wish to directly export goods and services.
What do export-trading companies do for US businesses?
They match buyers and sellers from different countries and deal with foreign customs offices, documentation, and weights and measures conversions to ease the process of entering global markets.
What is Franchising?
A contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name and sell a product or service in a given territory in a specified manner.
What is Contract Manufacturing?
A foreign company’s production of a private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing.
What are Joint Ventures?
A partnership in which two or more companies (often from different countries) join to undertake a major project.
What are the three benefits of a Joint Venture?
- Shared technology and risk.
- Shared marketing and management expertise.
- Entry into markets where foreign companies are often not allowed unless goods are produced locally.
What is a Strategic Alliance?
A long-term partnership between two or more companies established to help each company build a competitive market advantage.
What is Foreign Direct investment (FDI)?
the buying of permanent property and businesses in foreign nations.
What is a Foreign Subsidiary?
The most common form of FDI. A company owned in a foreign country by another company, called a parent company. This subsidiary operates like a domestic firm.
What is a Multinational Corporation?
A corporation that manufactures and markets products in many different countries and has multinational stock ownership and management.
What are Sovereign Wealth Funds (SWF)?
Investment funds controlled by government holding investment stakes in foreign companies, real estate, and other investments.
What is the exchange rate?
The value of one nation’s currency relative to the currencies of other countries.
