CH5 - Business in Global Environment Flashcards
(44 cards)
Under The concept of Global Trading what is absolute advantage?
A country has an absolute advantage if: 1. it’s the only source of particular product 2. it make more of a product using fewer resource than other countries.
Under The concept of Global Trading what is comparative advantage?
When a country can produce a product at a lower OPPORTUNITY COST than others it has a comparative advantage.
What does the term Opportunity Cost mean?
Economists use the term opportunity cost to indicate what must be given up to obtain something that is desired. In short opportunity cost is the value of the next best alternative.
How do we measure trade between nations?
The country’s balance of trade is determined by subtracting the value of its imports from the value of its exports. If a country sells more than it buys, it has a favorable balance.
What is a trade surplus?
If a country sells more than it buys, it has a favorable balance, which is called a trade surplus.
What is a trade deficit?
If a country buys more than it sells, it has a favorable balance, which is called a trade deficit.
Under the concept of international trade what does balance of trade measures?
Balance of trade measures only the import and export transactions.
One key measure of the effectiveness of international trade is balance of payments, what does balance of payment mean?
The difference over a period of time, between the total flow of money coming into a country and the total flow of money going out is called balance of payment.
What is the biggest contributor in a country’s balance of payment.
The biggest contributor is the money that flows as a result of import and exports.
What are some of the other factors in a country’s balance of payment.
Cash received from or paid for foreign investment, loans, tourism, military expenditures, and foreign aid.
What are some examples of opportunities in international business in the book? (5 examples)
- Importing & Exporting.
- Licensing & Franchising.
- Contract Manufacturing & Outsourcing.
- Strategic Alliances & Joint Ventures.
- Foreign Direct Investment & Subsidiaries.
- Multinational Corporations.
What is “Importing”?
Buying products overseas and reselling them in one’s own country.
What is “Exporting”?
Selling domestic products to foreign customers.
One way to get into an international market is through licensing agreement. What is a “Licensing agreement”?
Licensing agreement allows a foreign company (the licensee) to sell the products of a producer (the licensor) or to use its intellectual property in exchange for a royalty fee.
One way to get into an international market is through franchising. What is a “Franchising”?
Under an international franchise agreement, a company (the franchiser) grants a foreign company (the franchisee) the right to use its brand nae and to sell its product or services. The franchisee is responsible for all operations but agrees to operate according to a business model established by the franchiser. (McDonald’s)
One way to get into an international market is through contract manufacturing (outsourcing). What is a “Contract Manufacturing”?
Due to high domestic labor costs many US or Canadian companies manufacture their products in other countries with lower labor cost. This arrangement is called international contract manufacturing which is a form of outsourcing.
One way to get into an international market is through strategic alliances. What is a “Strategic Alliance”?
A strategic alliance is an agreement between two companies (or a company and a nation) to pool resources in order to achieve business goals that benefit both parties.
What are the main purposes that an alliance can serve?
- Enhancing marketing efforts.
- Building sales and market share.
- Improving products.
- Reducing production and distribution costs.
- Sharing tech
What is Joint Venture?
A joint venture is a form of strategic alliance in which the partners fund a separate entity to manage their joint operation.
One way to get into an international market is through foreign direct investment. What is a “Foreign Direct Investment”?
FDI refers to the formal establishment of business operations on foreign soil, the building of factories, sales offices, and distribution networks to serve local markets in a nation other than the company’s home country.
What is an “Offshoring”?
Offshoring occurs when the facilities set up in the foreign country replace Canadian manufacturing facilities and are used to produce goods that will be sent back to Canada for sale.
What is a common form of FDI and what does it mean?
A common form of FDI is “the foreign subsidiary” which is an independent company owned by a foreign firm (called the parent).
What is a “Multinational Corporation”?
A company that operates in many countries is called a multinational corporation (MNC).
What is the main approach by MNC’s?
MNC’s often adjust their operations, products, marketing, and distribution to mesh with the environments of the countries in which they operate. They are willing to accommodate cultural and economic differences.
