prelim♥️ Flashcards
motive of earning profit
business
enterprising entity engaged in commercial activities
business
exchange of goods and services between countries
international business
all transactions that occur between nations
international business
allows better use of available resources
international business
stimulate the growth of economy worldwide
international business
benefits of international business - benefit to. . .
benefits to nations
benefits to firms
benefits to nations
- earning of foreign exchange
- more efficient use of resources
- improving growth prospects and employment potential
- increase in standards of living
benefits to firms
- Prospect for higher profit
- Increased capacity utilization
- Prospect for growth
- Decrease competition
- Improved business vision
helps a country to earn foreign exchange
earning of foreign exchange
the goods they produced efficiently with their own resources and import the rest of the goods
more efficient use of resources
countries can increase their production capacity to supply goods to foreign countries
Improving growth prospects and employment potential
it becomes possible for people to consumer goods and services of other countries and improve their standard of living
increase in standards of living
firms can sell their product in other countries where prices are higher
prospect for higher profit
it increases the firm’s production capacity
increased capacity utilization
can enhance or expand their business by approaching the international market
prospects for growth
companies can sell their products in the international market or in any other country where there is less competition
decrease competition
makes firm’s competitive and diversified
improved business vision
where short-term financial assets are bought and sold
money market
transferring short-term funds from lenders to borrowers
money markets
where securities that mature in a year or less are traded
money markets
over-the-counter market for trading of currencies
foreign exchange market
determine foreign exchange rates for every country
foreign exchange market
all aspects of buying selling and exchanging currencies at current or determined prices
foreign exchange market
it is by far the largest market in the world
foreign exchange market
factors driving exchange rate movements
- balance of payments position
- speculation over future currency values
- domestic economic and political conditions
- central bank interventions
trade deficit usually faces downwards
balance of payments position
buy or sell currencies when they see profitable opportunities
speculation over future currency values
deteriorating economic conditions and inflations
domestic economic and political conditions
buy or sell currencies to influence the value of their currency
central bank interventions
foreign trade purchase or sale of goods and services outside the national geographic borders
international trade
satisfy the demand of local consumers allows countries to expand their markets
international trade
purchase and sale of goods and services by companies in different countries
international trade
supply and demand and thus prices both impact and are impacted by global events
global economy
sold to the global market
export
bought from the global market
import
if a country can efficiently produce an item, it can obtained by trading with another country that can
specialization
two types of trade that complement each other
foreign trade and international business
classical theory of international trade
- theory of mercantilism
- theory of absolute advantage
- theory of comparative cost advantage
- endowment theory/ Hecksher-Ohlin model
-encourage export and discourage import
-expert minus import
theory of mercantilism
adam smith book
“an enquiry into the nature and causes of the wealth of nations” 1776
when one country can produce a unit of good with less cost than another countries
theory of absolute advantage
nation’s wealth shouldn’t be judged by how much gold and silver it had
theory of absolute advantage
by david ricardo: if the opportunity cost of producing that goods in terms of other goods is lower in the country compared to other country
theory of comparative cost advantage
whereas absolute advantage looks at the absolute productivity
theory of comparative cost advantage
assumes that labor is the only factor of production in two countries
theory of comparative cost advantage
nation with export the commodity whose production requires intensive use of the nations relatively abundant
endowment theory/ Hecksher-Ohlin model
with an abundance of cheap labor would export labor intensive products vice versa
endowment theory/ Hecksher-Ohlin model
trade of all goods and services worldwide
international trade
fundamental to transactions of a country with the rest of the world
foreign trade
covers much broader scope since it refers to commercial transactions that are carried out in the world
international business
encompasses socio-economic reform process of eliminating trade investment, information technology. .. . across the world
globalization
how trade and technology have made the world into a more connected and interdependent place
globalization
countries that are implementing more open trade and free market policies
emerging economies
fundamental global shift in which industrialized country dependent developing economies begin to grow
decoupling
two-way flow of export and imports of goods and services
trade
in flow of capital from abroad for investing in domestic plant and equipment for the production of goods or services
foreign direct investment
investment made by a company or individual in one country into business interests located in other country (example mcdonald)
foreign direct investment
corporate practice of acquiring or producing quality goods or services abroad at a lower cost thereby eliminating domestic production
outsourcing
