Lesson 3, Chapter 7

Question 1

global business

Answer 1

the buying and selling of goods and services by people from different countries

Question 2

foreign direct investment

Answer 2

a method of investment in which a company builds a new business or buys an existing business in a foreign country

Question 3

multinational corporations

Answer 3

corporations that own businesses in two or more countries

Question 4

trade barriers

Answer 4

government-imposed regulations that increase the cost and restrict the number of imported goods

Question 5

protectionism

Answer 5

a government’s use of trade barriers to shield domestic companies and their workers from foreign competition

Question 6

nontariff barriers

Answer 6

nontax methods of increasing the cost or reducing the volume of imported goods

Question 7

tariff

Answer 7

a direct tax on imported goods

Question 8

quotas

Answer 8

limits on the number or volume of imported products

Question 9

voluntary export restraints

Answer 9

voluntarily imposed limits on the number or volume of products exported to a particular country

Question 10

customs valuation/classification

Answer 10

a classification assigned to imported products by government officials that affects the size of the tariff and imposition of import quotas

Question 11

government subsidies

Answer 11

government loans, grants, investments, and tax deferments given to domestic companies to protect them from foreign competition

Question 12

government import standards

Answer 12

standards ostensibly established to protect the health and safety of citizens but, in reality, often used to restrict imports

Question 13

General Agreement on Tariffs and Trade (GATT)

Answer 13

a worldwide trade agreement that reduced and eliminated tariffs, limited government subsidies, and established protections for intellectual property

Question 14

World Trade Organization (WTO)

Answer 14

the successor to GATT, the only international organization dealing with the global rules of trade between nations; its main function is to ensure that trade flows as smoothly, predictably, and freely as possible

Question 15

North American Free Trade Agreement (NAFTA)

Answer 15

a regional trade agreement between the United States, Canada, and Mexico

Question 16

regional trading zones

Answer 16

areas in which tariff and nontariff barriers on trade between countries are reduced or eliminated

Question 17

Europe’s Maastricht Treaty

Answer 17

a regional trade agreement between most European countries

Question 18

Central America Free Trade Agreement (CAFTA-DR)

Answer 18

a regional trade agreement between Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States

Question 19

Union of South American Nations (UNASUR)

Answer 19

a regional trade agreement between Argentina, Brazil, Paraguay, Uruguay, Venezuela, Bolivia, Colombia, Ecuador, Peru, Guyana, Suriname, and Chile

Question 20

Association of Southeast Asian Nations (ASEAN)

Answer 20

a regional trade agreement between Bruinei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam

Question 21

global consistency

Answer 21

when a multinational company has offices, manufacturing plants, and distribution facilities in different countries and runs them all using the same rules, guidelines, policies, and procedures

Question 22

Asia-Pacific Economic Cooperation (APEC)

Answer 22

a regional trade agreement between Australia, Canada, Chile, the People’s Republic of China, Hong Kong, Japan, Mexico, New Zealand, Papua New Guinea, Peru, Russia, South Korea, Taiwan, the United States, and all members of ASEAN except Cambodia, Lao PDR, and Myanmar

Question 23

exporting

Answer 23

selling domestically produced products to customers in foreign countries

Question 24

local adaptation

Answer 24

when a multinational company modifies its rules, guidelines, policies, and procedures to adapt to differences in foreign customers, governments, and regulatory agencies

Question 25

cooperative contract

Answer 25

an agreement in which a foreign business owner pays a company a fee for the right to conduct that business in his or her country

Question 26

franchise

Answer 26

a collection of networked firms in which the manufacturer or marketer of a product or service, the franchisor, licenses the entire business to another person or organization, the franchisee

Question 27

licensing

Answer 27

an agreement in which a domestic company, the licensor, receives royalty payments for allowing another company, the licensee, to produce the licensor's product, sell its service, or use its brand name in a specified foreign market

Question 28

wholly owned affiliates

Answer 28

foreign offices, facilities, and manufacturing plants that are 100 percent owned by the parent company

Question 29

joint venture

Answer 29

a strategic alliance in which two existing companies collaborate to form a third, independent company

Question 30

strategic alliance

Answer 30

an agreement in which companies combine key resources, costs, risk, technology, and people

Question 31

global new ventures

Answer 31

new companies that are founded with an active global strategy and have sales, employees, and financing in different countries

Question 32

purchasing power

Answer 32

a comparison of the relative cost of a standard set of goods and services in different countries

Question 33

national culture

Answer 33

the shared values and beliefs that affect the perceptions, decisions, and behaviour of the people of a particular country.

Question 34

policy uncertainty

Answer 34

the risk associated with changes in laws and government policies that directly affect the way foreign companies conduct business the risk of major changes in political regimes that can result from war, revolution, the death of a political leader, social unrest, or other influential events

Question 35

expatriate

Answer 35

someone who lives and works outside his or her native country