Test Flashcards
What is international business?
An economic system of transactions between businesses located in different countries.
What are the methods companies use to engage in international business?
Companies engage via:
* Indirect exports
* Direct exports
* Management contracting
* Financing
* Licensing agreements
* Exclusive distribution rights
* Joint ventures
What is globalization?
The growing interdependence of the world’s economies, cultures, and populations due to cross-border trade.
What are the pros of globalization?
Opportunities include:
* Access to new customers
* Lowering costs
* Diversification of business risk
What are the cons of globalization?
Threats include:
* Political risk
* Economic risk
* Cultural risk
What is a multinational enterprise?
A business corporation with operations in at least one country other than its home country.
What is indirect exporting?
Indirect exporting refers to selling products to a domestic company that resells those products in foreign markets.
What is direct exporting?
When companies create formal plans to distribute and sell in other countries.
What is licensing in international business?
Allows another company the right to manufacture a particular product or service.
What is franchising?
Allows another company the right to sell a good, service, or use a brand name in exchange for a fee or royalty.
What is management contracting?
Selling management skills to other companies, often to assist in exporting.
What is exclusive distribution?
A form of licensing where a company is the only distributor allowed to produce and distribute a product in a specific region.
What is a joint venture?
An agreement between two businesses to form a new company with shared ownership.
What is foreign direct investment?
Occurs when a foreign company invests money to control some or all of another business’ operations.
What is a wholly-owned subsidiary?
A company that is 100% owned or controlled by a foreign company.
What is a partially-owned subsidiary?
A subsidiary limited to more than 50% but less than 100% foreign ownership.
What are some reasons a company conducts international business?
Reasons include:
* Cheaper production
* More money
* Outsourcing
* Offshoring
* Broadening the workforce
* Diversification
What is a trade surplus?
When exports are greater than imports.
What is a trade deficit?
When imports are greater than exports.
What is protectionism?
Governments set barriers to protect local businesses and citizens from harmful products.
What is a trade quota?
A government-imposed limit on the amount of product that can be imported in a certain period.
What is a tariff?
Taxes or duties charged on imported goods or services.
How to calculate trade deficit and trade surplus?
Use the formula: BOT = Total Exports - Total Imports.
What is Canada’s largest trading partner?
United States.
What are Canada’s major industries?
Major industries include:
* Natural Resources
* Agriculture
* Automotive
* Technology & Aerospace
* Pharmaceuticals & Chemicals
What is competitive advantage?
A country or business excels in producing a good or service better than others.
What is comparative advantage?
A country can produce a good at a lower opportunity cost than another country.
What is absolute advantage?
A country can produce more of a good using the same or fewer resources than another country.
What is currency?
The official money used in a country for trade and transactions.
What is an exchange rate?
The value of one currency compared to another.
How to calculate currency conversions?
Use the formula: Amount in New Currency = Amount in Original Currency × Exchange Rate.
What causes the value of a currency to fluctuate?
Factors include:
* Supply & Demand
* Interest Rates
* Inflation
* Economic Stability
* Political Events
What is currency appreciation?
When a currency increases in value compared to others.
What is currency depreciation?
When a currency loses value compared to others.
What are the winners of a high-valued currency?
Winners include:
* Canadian travelers
* Canadian importers
* Canadians investing abroad
What are the losers of a high-valued currency?
Losers include:
* Canadian exporters
* Tourism industry
What is the formula for calculating balance of trade?
BOT = Total Exports - Total Imports.
Fill in the blank: A _____ is a government-imposed limit on the amount of product that can be imported.
[trade quota]
Fill in the blank: A _____ is a tax charged on imported goods or services.
[tariff]
What is the impact of a low dollar on currency exchanges?
1 CAD gets you more USD.
What are the factors influencing currency demand?
Factors include:
* Exports & Imports
* Foreign Investment
* Interest Rates
* Tourism
