Chapter 3 Flashcards
(18 cards)
Importing
Buying products from another country. MOW: buying things from another countryEx: purchasing a Volkswagen that was made in Germany.
Exporting
Selling products to another country.MOW: selling something to another country Ex: Mexico selling avocados to the US.
Free trade
The movement of goods and services among nations without political or economic barriers. MOW: you are free to trade with whoever you wantEx: the U.S can trade with China.
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. MOW: selling what we produce and buying what we can’t or don’t produce.Ex: The u.s sells fords to china and buys bananas from Honduras.
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. MOW: when a country has power over a certain product or service because other countries can’t produce it as efficiently.
Balance of trade
The total value of a nations exports compared to its imports measured over a particular period. MOW: the value of exports and imports measured over a particular period.
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. MOW: exports - imports + factors Ex: like a formula. The difference between money spend and money coming in plus money from other sources
Dumping
Selling products in a foreign country at lower prices than those charged in the producing country. MOW: slick. A product from a foreign country that is priced cheaper than the one from the producing country creating competition. Ex: a Chinese company decides to sell tires cheaper in the U.S than the ones made in the US.
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). MOW: permission to produce a product in a foreign country with a fee.Ex: if A shoe company wants to produce its shoes in China it will need permission.
Strategies for reaching global markets fig. 3.4
(Least amount of risk, control, profit and commitment)Licensing, Exporting, Franchising, Contract manufacturing, International joint ventures and strategic alliances, Foreign direct investment (most amount of risk, control, profit and commitment)MOW: the bigger the risk the bigger the profits,Ex: franchising is in he middle because you invest a great amount of money and there is a chance it might not be successful but it most likely will and you have control but to complete control of it because you have to follow the rules that they set.
Contract manufacturing
A foreign country’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.MOW: a country produces something and attaches its brand name p or trademarkEx: Canada makes sugar cookies and Nestlé puts their logo
Joint venture
A partnership in which two or more companies (often from different countries) join to undertake a major project. MOW: teamwork with other companiesEx: Nestlé and mars working together to create a Halloween,
Strategic alliance
A long term partner ship between two or more companies established to help each company build competition market advantages. MOW: companies helping one another so that they may build competition market advantages Ex: yoshinoya and Nike team up so that you may get a discount on Nike shoes when you purchase a teriyaki bowl.
Exchange rate
The value of one nations currency relative to the currencies of other countriesMOW: the value of money from country to country Ex: one US dollar may be worth 2 Mexican pesos.
Tariff
A tax imposed in imports. MOW: taxes on imports Ex: to import shoes the tax may be 12%
Trade protectionism
The use of government regulations to limit the import of goods and services. MOW: a set amount of goods and services you may import that is set by the government.
Embargo
A complete ban on the import or export of a certain product or the stopping of all trade with a particular country. MOW: “ we don’t want your goods or services”Ex: North Korea
Import quota
A limit on the number of products in certain categories that a nation can import. MOW: “ you may only import this amount of that”Ex: the amount of shoes that can be imported is 10,000 per company.
