Chapter 8 - Terms

Question 1

Global business

Answer 1

the buying and selling of goods and services by people from different countries

Question 2

Multinational corporation

Answer 2

a corporation that owns businesses in two or more countries

Question 3

Direct foreign investment

Answer 3

a method of investment in which a company builds a new business or buys an existing business in a foreign country

Question 4

Trade barriers

Answer 4

government-imposed regulations that increase the cost and restrict the number of imported goods

Question 5

Protectionism

Answer 5

a government’s use of trade barriers to shield domestic companies and their workers from foreign competition

Question 6

Tariff

Answer 6

a direct tax on imported goods

Question 7

Nontariff barriers

Answer 7

nontax methods of increasing the cost or reducing the volume of imported goods

Question 8

Quota

Answer 8

a limit on the number or volume of imported products

Question 9

Voluntary export restraints

Answer 9

voluntarily imposed limits on the number or volume of products exported to a particular country

Question 10

Government import standard

Answer 10

a standard ostensibly established to protect the health and safety of citizens but, in reality, is often used to restrict imports

Question 11

Subsidies

Answer 11

government loans, grants, and tax deferments given to domestic companies to protect them from foreign competition

Question 12

Customs classification

Answer 12

a classification assigned to imported products by government officials that affects the size of the tariff and the imposition of import quotas

Question 13

General Agreement on Tariffs and Trade (GATT)

Answer 13

a worldwide trade agreement that reduced and eliminated tariffs, limited government subsidies, and established protections for intellectual property

Question 14

World Trade Organization (WTO)

Answer 14

the successor to GATT; the only international organization dealing with the global rules of trade between nations; its main function is to ensure that trade flows as smoothly, predictably, and freely as possible

Question 15

Regional trading zones

Answer 15

areas in which tariff and nontariff barriers on trade between countries are reduced or eliminated

Question 16

Maastricht Treaty of Europe

Answer 16

a regional trade agreement among most European countries

Question 17

North American Free Trade Agreement (NAFTA)

Answer 17

a regional trade agreement among the United States, Canada, and Mexico

Question 18

Dominican Republic-Central America Free Trade Agreement (CAFTA-DR)

Answer 18

a regional trade agreement among Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States

Question 19

Union of South American Nations (UNASUR)

Answer 19

a regional trade agreement among Argentina, Brazil, Paraguay, Uruguay, Venezuela, Bolivia, Colombia, Ecuador, Peru, Guyana, Suriname, and Chile

Question 20

Association of Southeast Asian Nations (ASEAN)

Answer 20

a regional trade agreement among Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam

Question 21

Asia-Pacific Economic Cooperation (APEC)

Answer 21

a regional trade agreement among Australia, Canada, Chile, the People’s Republic of China, Hong Kong, Japan, Mexico, New Zealand, Papua New Guinea, Peru, Russia, South Korea, Taiwan, the United States, and all the members of ASEAN except Cambodia, Lao PDR, and Myanmar

Question 22

Tripartite Free Trade Agreement (TFTA)

Answer 22

a regional trade agreement among 27 African countries

Question 23

Global consistency

Answer 23

when a multinational company has offices, manufacturing plants, and distribution facilities in different countries and runs them all using the same rules, guidelines, policies, and procedures

Question 24

Local adaptation

Answer 24

modifying rules, guidelines, policies, and procedures to adapt to differences in foreign customers, governments, and regulatory agencies

Question 25

Exporting

Answer 25

selling domestically produced products to customers in foreign countries

Question 26

Cooperative contract

Answer 26

an agreement in which a foreign business owner pays a company a fee for the right to conduct that business in his or her country

Question 27

Licensing

Answer 27

an agreement in which a domestic company, the licensor, receives royalty payments for allowing another company, the licensee, to produce the licensor’s product, sell its service, or use its brand name in a specified foreign market

Question 28

Franchise

Answer 28

a collection of networked firms in which the manufacturer or marketer of a product or service, the franchisor, licenses the entire business to another person or organization, the franchisee

Question 29

Strategic alliance

Answer 29

an agreement in which companies combine key resources, costs, risks, technology, and people

Question 30

Joint venture

Answer 30

a strategic alliance in which two existing companies collaborate to form a third, independent company

Question 31

Wholly owned affiliates

Answer 31

foreign offices, facilities, and manufacturing plants that are 100 percent owned by the parent company

Question 32

Global new ventures

Answer 32

new companies that are founded with an active global strategy and have sales, employees, and financing in different countries

Question 33

Purchasing power

Answer 33

the relative cost of a standard set of goods and services in different countries

Question 34

Political uncertainty

Answer 34

the risk of major changes in political regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events

Question 35

Policy uncertainty

Answer 35

the risk associated with changes in laws and government policies that directly affect the way foreign companies conduct business

Question 36

National culture

Answer 36

the set of shared values and beliefs that affects the perceptions, decisions, and behavior of the people from a particular country

Question 37

Expatriate

Answer 37

someone who lives and works outside his or her native country