Chapter 9 Flashcards
Why do nations trace
No national economy can produce all the goods and services that its people need
Absolute advantage
That country is the Only source of that product
It can make that product more efficiently than other countries
Comparative advantage
Country Can produce product @ lower cost
Balance of trade
Difference between the value of a nations imports and its exports during a specific period
Balance of payments
Difference, over a period of time, between the total flow of money coming into a country and the total flow of money going out
Trade deficit is good when
Economy is strong enough to keep growing and generating jobs ant incomes so that its citizens can continue buying
Trade deficits bad when
- Causes the government to keep borrowing
- creditor countries become reluctant to take IOU’S
International licensing agreement
Allows foreign company to sell products of a producer or to use its patents in exchange for royalty fees
International franchise agreement
Company groats foreign company the right to use its brand name and sell its products or services
Contract manufacturing
Company contracts W/ a local company in a foreign country to manufacture and design its products
Strategic alliance
Agreement between 2 companies to pool resources in order to achieve business goals that benefit both partners
Joint venture
Alliance in which partners fund a separate entity to manage their joint operation
Foreign direct investment
Formal establishment of business operations on foreign soil
Foreign subsidiary
Independent company owner and controller by a foreign firm
The culture environment
Culture
Language
Sociability
Intercultural communication
Sociability: High-context cultures
Personal/family connections affect business interactions
Sociability: low-context cultures
Personal and work relationships more compartmentalized
Factors of developing better economically
- Reliable bank
- strong stock market
- Gov. Policies encourage investing
- strong infrastructure
Exchange rate
Value of one currency relative to another
Foreign corrupt practices act
Prohibited US companies from offering bribes, giving kickbacks, and distributing other factors
Trade controls
Government polices that restrict free trade
Protectionism
Use of trade controls to reduce foreign competition to protect domestic industries
Subsidies
Government payments given to certain industries to help offset some of their costs
Quota
Government restriction on the quantity of a good that can be imported
