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Terms in this set (104)
Free Trade
the movement of goods and services among nations without political or economic barriers
comparative advantage theory
Theory that states that a country should sell to other countries those products that it produces most effectively and efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently.
absolute advantage
The advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.
Although the United States has a market of over 300 million people, there are over 7.7 billion potential customers in the ________ market
global, world, or international
_________ trade is the movement of goods and services among nations without political or economic barriers.
Free
The guiding principle of free economic exchange is _________ _______ theory.
comparative advantage
Job seekers who want to work in global business should recognize that __________ businesses account for about 1/3 of the U.S. exports.
small
balance of trade
The total value of a nation's exports compared to its imports over a particular period.
trade surplus
A favorable balance of trade; occurs when the value of a country's exports exceeds that of its imports.
trade deficit
An unfavorable balance of trade; occurs when the value of a country's imports exceeds that of its exports.
balance of payments
The difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment.
dumping
Selling products in a foreign country at lower prices than those charged in the producing country.
Job seekers who want to work in global business should recognize that ________ businesses account for about 1/3 of the U.S.
small
Howard Schultz of Starbucks, spotted the opportunity to _______ the concept of neighborhood coffee bars from Italy while he was traveling there.
import
Which of the following are important reasons to do business globally?
-There are more people and countries in the world markets
-There are many potential customers in other countries
A benefit of exporting goods such as snowplows and sand to the Middle East is that:
-the product may be used differently than in the U.S.
-there is likely to be less competition
Free trade is the movement of goods and services among nations:
without political or economic barriers
The balance of trade is the total value of a nation's _______ compared to its _______ over a particular period of time.
exports, imports
The guiding principle of free economic exchange is:
comparative advantage theory
Job seekers should recognize that small businesses in the U.S.
account for about 1/3 of the total U.S. exports
Global trade is measured using two key indicators known as the:
-balance of payments
-balance of trade
Starting to import a product or type of business requires that an entrepreneur
-find producers to supply the goods needed
-risk time and money to get started
-observe a market opportunity
When the value of a country's exports exceeds that of its imports, the country exhibits a(n):
trade surplus
Goods or services from the U.S. can be _________ to many countries for different uses, such as snowplows to clear sand from driveways in Saudi Arabia.
exported
The definition of a _______ _______ states: an unfavorable balance of trade, which occurs when the value of a country's exports is less than its imports.
trade deficit
Balance of _______ is the total value of a nations exports compared to its imports measured over a particular period.
trade
The United States has spent more money on imports than it has made by exporting. Accordingly, the United States experiences:
a trade deficit
The guiding principle of free economic exchange is _______ ______ theory.
comparative advantage
The balance of ________ is the difference between money from exports and money from imports, as well as from other sources such as foreign investment and military expenses.
payments
When trying to decide where to expand his operations, a small business owner studied several different nations. He analyzed each nation's balance of trade and balance of payments. This small business owner was:
measuring global trade
licensing
A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty).
contract manufacturing
A foreign company's production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing.
joint venture
A partnership in which two or more companies (often from different countries) join to undertake a major project.
strategic alliance
A long-term partnership between two or more companies established to help each company build competitive market advantages.
foreign direct investment (FDI)
the buying of permanent property and businesses in foreign nations
foreign subsidiary
a company owned in a foreign country by another company, called the parent company
multinational corporation
An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management
sovereign wealth funds (SWFs)
investment funds controlled by governments holding large stakes in foreign companies
When it comes to getting involved in international business what are the three strategies that require the least amount of commitment and effort?
Licensing, exporting, franchising
The definition of _________ states: a global strategy in which a firm allows a foreign company to produce its product in exchange for a fee.
licensing
A trade deficit occurs when a country's:
exports are less than imports
True or false: A trade deficit occurs when the value of Germany's exports is greater than its imports.
false
Export Assistance Centers provide hands-on exporting assistance and trade-finance support for _______ and _______-sized businesses.
small, medium-sized
The definition of ______ states: a contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name and sell a product or service in a given territory in a specified manner.
...
Franchising
A contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name and sell a product or service in a given territory in a specified manner.
A foreign country's production of private-label goods to which a domestic company then attaches its brand name or trade mark is called:
contract manufacturing
The definition of ______ ______ states: a partnership in which two or more companies, often from different countries, join to undertake a major project.
joint venture
Which of the following are functions of export assistance centers (EACs)?
-Trade-finance support
-Hands-on exporting assistance
A foreign subsidiary is a company owned in a foreign country by another company called the:
parent company
A _________ is a contractual agreement whereby someone with a good idea for a business sells others the rights to use a business name and sell a product or service in a given territory in a specified manner.
franchise
The hurdles to success are higher and more complex in global markets than in domestic markets. Such hurdles include ________ forces, economic and financial forces, (political) legal and regulatory forces, and physical and environmental forces.
sociocultural, societal, cultural, or social
Contract manufacturing is a type of outsourcing when a _______ company produces private-label goods which a _________ company then markets under its own brand name.
foreign, domestic
U.S. business people are often accused of ethnocentricity which is a belief that:
your own culture is superior to other cultures
The _______ _______ is the value of one nation's currency relative to the currencies of other countries.
exchange rate
A company situated in a foreign country that is owned by a parent company located in a different country, is a foreign
subsidiary
Which of the following are considered to be a major hurdle to successful global trade?
Sociocultural differences
exchange rate
the value of one nation's currency relative to the currencies of other countries
High value of the dollar
Dollar is trading for more foreign currency; foreign goods are less expensive.
devaluation
Lowering the value of a nation's currency relative to other currencies.
countertrading
A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.
Problems created by differences between countries' antitrust rules, labor laws, patents, copyrights, taxes, product liability, and child labor laws relate to which forces in the global business environment?
Legal and regulatory forces
Primitive transportation and storage systems that make local distribution ineffective if not impossible, the lack of clean water, and the lack of effective sewer systems are all examples of what type of barrier?
Physical and environmental
The definition of ______ states: an attitude that your own culture is superior to other cultures.
ethnocentricity
What is the definition of trade protectionism?
the use of government regulations to limit the import of goods and services
trade protectionism
the use of government regulations to limit the import of goods and services
tariff
tax on imports
protective import tariff
(import taxes) raise the retail price of imported products so that domestic goods are more competitively priced.
revenue tariff
a tax on imports for the purpose of raising money for the government
import quota
a limit on the number of products in certain categories that a nation can import
embargo
A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.
General Agreement on Tariffs and Trade (GATT)
A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions.
World Trade Organization (WTO)
The international organization that replaced the General Agreement on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations.
common market
A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc. An example is the European Union.
North American Free Trade Agreement (NAFTA)
Agreement that created a free-trade area among the United States, Canada, and Mexico.
United States-Mexico-Canada Agreement (USMCA)
Free-trade agreement among the United States, Mexico, and Canada that replaced NAFTA in an effort to create more balanced and reciprocal trade.
True or false: A
quota is a tax placed on imports.
True false question.
False
A company in another country that is owned by a U.S. company would be an example of a:
foreign subsidiary
Legal and regulatory forces can create problems in the global market because:
laws and regulations vary greatly between countries
Which of the following are functions of the World Trade Organization?
-To oversee cross-border trade issues
-To mediate trade disputes among nations
A weak transportation infrastructure results in a(n) _______ barrier to global business.
physical or environmental
A regional group of countries with a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members is the definition of:
a common market
The definition of a(n) ______ is a tax imposed on imports.
tariff
The U.S. free trade agreement with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Nicaragua, and Honduras is:
CAFTA
Global trade offers opportunities because there so many potential
customers
Distribution in many developing countries is difficult because of the lack of reliable transportation infrastructure due to natural disasters. This is an example of what type of forces affecting global trade?
Physical and environmental forces
U.S. business will experience increased ________ in the future due to the effects of globalization.
competition, challenges, opportunities, or outsourcing
A common market, also called a trading bloc, is a regional group of countries with:
-no internal
tariffs
-a common external tariff
Threats to global trade include
-terrorism
-rogue states
-income inequality
In what way will globalization impact U.S. businesses?
-Loss of jobs in manufacturing
-Concerns for product safety
-Increased competition
importing
buying products from another country
exporting
selling products to another country
pros of free trade
•The global market contains over 7.7 billion
potential customers for goods and services.
•Productivity grows when countries produce
goods and services in which they have a
comparative
advantage.
•Global competition and less-costly imports
keep prices down, so inflation does not
curtail economic growth.
•Free trade inspires innovation for new
products and keeps firms competitively
challenged.
•Uninterrupted flow of capital gives countries
access to foreign investments, which help
keep interest rates low.
cons of free trade
•Domestic workers (particularly
in
manufacturing-based jobs) can lose their
jobs due to increased imports or production
shifts to low-wage global markets.
•Workers may be forced to accept pay cuts
from employers, who can threaten to move
their jobs to lower-cost global markets.
•Moving operations overseas because of
intense competitive pressure often means
the loss of service jobs and growing
numbers of white-collar jobs.
•Domestic companies can lose their
comparative advantage when
competitors
build advanced production operations in
low-wage countries.
dumping is prohibited in the U.S.
true
What is the term for a global strategy in which a firm
allows a foreign company to produce its product in
exchange for a fee?
licensing
Licensing can benefit a firm by:
1. Gaining revenues it wouldn't have otherwise generated.
2. Spending little or no money to produce or market their products.
Export Assistance Centers (EACs)
Help small- and medium-sized businesses with direct exporting by providing exporting assistance and trade-finance support.
Export-trading companies (ETCs)
Help companies with indirect exporting by negotiating and establishing trading relationships.
Benefits of joint ventures
1. Shared technology and risk
2. Shared marketing and management expertise
3. Entry into markets where foreign companies are often not allowed unless goods are produced locally
drawbacks of joint ventures
1. stolen or obsolete technology
2. becoming too large to be flexible
3. one partner might break ties
Strategic alliances provide broad access to:
markets, capital, and technical expertise
advantages of foreign subsidiary
Parent company maintains complete control over
its
technology or expertise.
disadvantages of foreign subsidiary
Must commit funds and technology within foreign boundaries.
culture
Set of values, beliefs, rules, and institutions held by a specific group of people.
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