Chapter 3: Competing in Global Markets Flashcards Preview

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Flashcards in Chapter 3: Competing in Global Markets Deck (28):
1

Exporting

Selling products to another country

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Importing

Buying products from another company

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Free trade

the movement of goods and services among nations without political or economic trade barriers

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Comparative advantage theory

A country should sell to other countries those products that it produces most effectively and efficiently, and buy from others those that it can't produce as effectively or efficiently

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Absolute advantage

A country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.

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Balance of trade

A nation's ration of exports to imports

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Trade deficit

Whenthe value of a nation's imports exceeds that of its exports

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Favorable balance of trade

The value of a nation's exports exceeds that of its imports

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Balance of payments

the difference between money coming into a country and money leaving the country

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Foreign direct investment

The buying of permanent property and businesses in foreign nations

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Dumping

Selling products in a foreign country at lower prices than those charged in the producing company

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Licensing

A firm gives the right to manufacture its product or use its trademark to a foreign company for a fee

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Contract manufacturing

A foreign company's production of private-label goods to which a domestic company then attaches its own brand name or trademark

14

Joint venture

Partnership in which two or more companies join to undertake a major project

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Strategic alliance

A long-term partnership between two or more companies established to help each company build competitive market advantages

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Foreign subsidiary

A company that is owned in a foreign country by another company

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Multinational corporation

an organization that manufactures and markets products in many different countries, with multinational stock ownership and management

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Exchange rate

the value of one nation's currency against another

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Devaluation

Lowering the value of a nation's currency relative to other currencies

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Countertrading

A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.

21

Trade protectionism

the use of government regulations to limit the import of goods and services

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Import quota

limits the number of products in certain categories that a nation can import

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Tariff

A tax on imports

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Embargo

a complete ban on the import or export of a certain product or the stopping of all trade with a particular country

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GATT: General Agreement on Tariffs and Trade

Formed in 1948 and established an international forum for negotiating mutual reductions in trade restrictions

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WTO: World Trade Organization

Established in 1995 and assumed the primary task of mediating future trade disputes

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Common Market

regional group of countries that have a common external tariff, no internal tariffs, and the coordination of laws to facilitate exchange among member countries

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NAFTA: North American Free Trade Agreement

Created a free trade area among the U.S., Canada, and Mexico