Flashcards in Chapter 5 Deck (46):
The ability to recognize and react to international business opportunities, be aware of threats from foreign competition, and effectively use international distribution networks to obtain raw materials and move finished products to customers.
corporations that move resources, goods, services, and skills across national boundaries without regard to the country in which their headquarters are located.
goods and services produced in one country and sold in other countries.
goods and services bought from other countries
balance of trade
the difference between the value of a country's exports and the value of its imports during a certain time.
a favourable balance of trade that occurs when a country exports more than it imports.
an unfavourable balance of trade that occurs when a country imports more than it exports.
balance of payments
a summary of a country's international financial transactions showing the difference between the country's total payments to and total receipts from other countries.
floating exchange rates
a system in which prices of currencies move up and down based on the demand for and supply of the various currencies.
a lowering of the value of a nation's currency relative to other currencies.
the situation when a country can produce and sell a product at a lower cost than any other country or when it is the only country that can provide the product.
principle of comparative advantage
the concept that each country should specialize in the products that it can produce most readily and cheaply and trade those products for those that other countries can produce more readily and cheaply.
the policy of permitting the people of a country to buy and sell where they please without restrictions.
the policy of protecting home industries from outside competition by establishing artificial barriers such as tariffs and quotas.
A tariff that is lower for some nations than for others.
free trade zones
an area where the nations allow free, or almost free, trade with each other while imposing tariffs on goods of nations outside the zone.
North American Free Trade Agreement (NAFTA)
A 1993 agreement creating a free-trade zone that includes Canada, Mexico, and the United States.
Trade agreement between Brazil, Argentina, Uruguay, Paraguay and Venezuela.
European Union (EU)
Trade agreement between 27 European nations.
Association of Southeast Asian Nations (ASEAN)
The Association of Southeast Asian Nations, which, as of 2012, included 10 member states.
the practice of selling domestically produced goods to buyers in another country.
The legal process whereby a company agrees to allow another company to use a manufacturing process, trademark, patent, trade secret, or other proprietary knowledge in exchange for the payment of a royalty.
the practice in which a foreign company manufactures private label goods under a domestic company's brand name.
an agreement in which a domestic company buys part of a foreign company or joins with a foreign company to create a new entity.
foreign direct investment
active ownership of a foreign company or of manufacturing or marketing facilities in a foreign country.
a form of international trade in which part or all of the payment for goods or services is in the form of other goods and services.
the practice of charging a lower price for a product in foreign markets than in the company's home market.
World Trade Organization (WTO)
An organization established by the Uruguay Round in 1994 to oversee international trade, reduce trade barriers, and resolve disputes among member nations. A trade agreement covering services, intellectual property rights, and exchange controls.
An international bank that offers low-interest loans, as well as advice and information, to developing nations to help build infrastructures.
International Monetary Fund (IMF)
An international organization, founded in 1945, that promotes trade, makes short-term loans to member nations, and acts as a lender to last resort for troubled nations.
a sense of national consciousness that boosts the culture and interests of one country over those of all other countries.
the basic institutions and public facilities on which an economy's development depends.
a tax imposed on imported goods.
tariffs that are imposed to make imports less attractive to buyers than domestic products.
a limit on the quantity of a certain good that can be imported; also known as a quantitative restraint.
A total ban on imports or exports of a product
regulations on products that are different from generally accepted international standards.
Laws that require a company earning foreign exchange (foreign currency) from its exports to sell the foreign exchange to a control agency, such as a central bank.
Two concepts important to global trade
The balance of trade (imports versus exports) and the balance of payments
The best known economic communities
Are NAFTA, European Union, ASEAN, and Mercosur.
ways to enter the global market
exporting, licensing, contract manufacturing, joint ventures, and direct investment.
When entering the international market, companies needs to consider
the politics, economies, and culture of the countries where they plan to do business.
Three major barriers to international trade are
natural barriers, (distance and language), tariff barriers, or taxes on imported goods; and non-tariff barriers.
Non-tariff barriers to trade are
import quotas, embargoes, customs regulations, and exchange controls.
the main argument against tariffs are
they discourage free trade and keep comparative advantages from working efficiently