Chapter 5 Flashcards
Global Vision
The ability to recognize and react to international business opportunities, be aware of threats from foreign competition, and effectively use international distribution networks to obtain raw materials and move finished products to customers
Multinational corperations
Corporations that move resources, goods, services, and skills across national boundaries without regard to the country in which their headquarters are located
Exports
Goods and services produced in one country and sold in other countries
Imports
Goods and services bought from other countries
Balance of trade
The difference between the value of a country’s exports and the value of its imports during a certain time
Trade surplus
A favourable balance of trade that occurs when a country exports more than it imports
Trade defecit
An unfavourable balance of trade that occurs when a country imports more than it exports
Balance of payments
A summary of a country’s international financial transactions showing the difference between the country’s total payments to and total receipts from other countries
Floating exchange rates
A system in which prices of currencies move up and down based on the demand for and supply of the various currencies
Devaluation
A lowering of the value of a nation’s currency relative to other currencies
Absolute advantage
The situation when a country can produce and sell a product at a lower cost than any other country or when it is the only country that can provide the product
Principle of comparative advantage
The concept that each country should specialize in the products that it can produce most readily and cheaply and trade those products for those that other countries can produce more readily and cheaply
Free trade
The policy of permitting the people of a country to buy and sell where they please without restrictions
Protectionism
The policy of protecting home industries from outside competition by establishing artificial barriers such as tariffs and quotas
Preferential tariff
A tariff that is lower for some nations than others
Free trade zone
An area where nations allow free, or almost free, trade with each other while imposing tariffs on goods of nations outside the zone
NAFTA
North American Free Trade Agreement:
A 1993 agreement creating a free-trade zone that includes Canada, Mexico, and the United States
Mercosur
Trade agreement between Brazil, Argentina, Uruguay, Paraguay, and Venezuela
EU
European Union:
Trade agreement among 27 European nations
ASEAN
Association of Southeast Asian Nations:
The ASEAN as of 2012 included 10 member states
Exporting
The practice of selling domestically produced goods to buyers in another country
Licensing
The legal process whereby a company agrees to allow another company to use a manufacturing process, trademark, patent, trade secret, or other proprietary knowledge in exchange for the payment of a royalty
Contract manufacturing
The practice in which a foreign company manufactures private label goods under a domestic company’s brand name
Joint venture
An agreement in which a domestic company buys part of a foreign company or joins with a foreign company to create a new entity
Foreign direct investment
Active ownership of a foreign company or of manufacturing or marketing facilities in a foreign company
Countertrade
A form of international trade in which part or all of the payment for goods or services is in the form of other goods and services
Dumping
The practice of charging a lower price for a product in foreign markets than in the company’s home market
WTO
World Trade Organization:
An organization established by the Uruguay Round in 1994 to oversee international trade, reduce trade barriers, and resolve disputes among member nations
World Bank
An international bank that offers low interest loans, as well as advice and information, to developing nations
IMF
International Monetary Fund:
An international organization, founded in 1945, that promotes trade, makes short-term loans to member nations, and acts as a lender of last resort for troubled nations
Nationalism
A sense of national consciousness that boosts the culture and interests of one country over those of all other countries
Infrastructure
The basic institutions and public facilities on which an economy’s development depends
Tariff
A tax imposed on imported goods
Protective tariffs
Tariffs that are imposed to make imports less attractive to buyers than domestic products
Import quota
A limit on the quantity of a certain good that can be imported; also known as a quantitative restraint
Embargo
A total ban on imports or exports of a product
Exchange controls
Laws that require a company earning foreign exchange (foreign currency) from its exports to sell the foreign exchange to a control agency, such as a central bank
