Business in Action Chapter 3

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Economic Globalization

The increasing integration and interdependence of national economics around the world

Economies of Scale

Savings from buying parts and materials, manufacturing, or marketing in large quantities.

Balance of Trade

Total value of the products a nation exports minus the total value of the products it imports, over some period of time

Trade Surplus

Favorable trade balance created when a country exports more than it imports

Trade Deficit

Unfavorable trade balance created when a country imports more than it exports

Balance of Payments

Sum of all payments one nation receives from other nations minus the sum of all payments it makes to other nations, over some specified period of time.

Exchange Rate

Rate at which the money of one country is traded for the money of another.

Free Trade

International trade unencumbered by restrictive measures

Fair Trade

A voluntary approach to trading with artisans and farmers in developing countries, guaranteeing them above-market prices ad a way to protect them from exploitation by larger, more powerful trading partners

Protectionism

Government policies aimed at shielding a country's industries from foreign competition

Import Quotas

Limits placed on the quantity of imports a nation will allow for a specific product.

Embargo

Total ban on trade with a particular nation (a sanction) or of a particular product

Dumping

Charging less than the actual cost or less than the home-country price for goods sold in other countries

Export Subsidies

A form of financial assistance in which producers receive enough money from the government to allow them to lower their prices in order to complete more effectively in the world market.

Trading Blocs

Organizations of nations that remove barriers to trade among their members and that establish uniform barriers to trade with nonmember nations

Stereotyping

Assigning a wide range of generalized attributes, which are often superficial to or even false, to an individual based on his or her membership in a particular culture or social group.

Ethnocentrism

Judging all other groups according to the standards, behaviors, and customs of one's own group

Importing

Purchasing goods or services from another country and bringing them into one's own country

Exporting

Selling and shipping goods or services to another country

Foreign Direct Investment (FDI)

Investment of money by foreign companies in domestic business enterprises

Multinational Corporations (MNC's)

Companies with operations in more than one country

Multidomestic Strategy

Decentralized approach to international expansion in which a company creates highly independent operating units in each new country

Global Strategy

Highly centralized approach to international expansion, with headquarters in the home country making all major decisions

Transnational Strategy

Hybrid approach that attempts to reap the benefits of international scale while being responsive to local market dynamics

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