Chapter 3 (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
Trade deficit (unfavorable)
When the value of a country’s imports
exceeds that of its exports
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)
Export Assistance Centers (EACs):
Help small- and medium-sized businesses with direct exporting by
providing exporting assistance and trade-finance support.
Franchising
contractual agreement whereby someone
with a good idea for a business sells others the rights to use
the name and sell a product or service in a given territory in a
specified manner
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
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
Exchange rate
The value of one nation’s currency relative
to the currencies of other countries
Devaluation
Lowering the value of a nation’s currency
relative to other currencies
Counter-trading
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
World Trade Organization (WTO)
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; it passed in 1993
Central American Free-Trade Agreements (CAFTA)
created a
free-trade zone with:
* Costa Rica
* Dominican Republic
* El Salvador
* Guatemala
* Nicaragua
* Honduras
Offshore outsourcing
Process whereby one firm
contracts with other companies abroad to do some or all of
its functions
