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Introduction to Business - Chapter 3
Terms in this set (44)
When a country can produce a good or service at a lower cost than other countries
(Examples: South America - coffee, Saudi Arabia - oil production)
A situation in which a country specializes in the production of a good or service at which it is relatively more efficient.
(If a country can maximize in more than 1 area then they must choose).
Items bought from other countries
(Half of fish and crude oil are from other countries. 20-50% account for carpets, sugar, leather gloves, dishes, sewing machines. Without foreign trade, products may be unavailable or provided at a high price).
Goods and services sold to other countries. (Agricultural products, chemicals, fertilizers, medicines, and plastics are exported).
Measuring Trade Relations:
Balance of trade
Balance of payments
1st sell labor wages
Amount a country owes to other countries
Balance of Trade
The difference between a country's total exports and total imports
Sells more than buys
(Favorable Balance of Trade)
Buys more than sells
(Unfavorable Balance of Trade)
Balance of Payments
Difference between the amount of money that comes into a country and the amount that goes out of it.
(Other forms take place in addition to goods and services - money, investments, tourism, deposits into banks).
Factors affecting currency values
Balance of payments, economic conditions - interest rates, political disability.
4 main elements of the International Business environment
Geography, cultural influences, economic development, political and legal concerns.
Economic factors of the international business environment
(Everybody Thinks Edward is Entertainingly Interesting)
Geographic Factors of the international business environment
(George Likes Cats That Wear Necklaces)
Cultural factors of the international business environment
(Computers Like Fingers Rapidly Clicking The Functions)
Political and Legal factors of the international business environment
(People Genuinely Please Their Brothers)
A nation's transportstion, communication, and utility's systems
International Trade Barriers
Restrictions to free trade
3 common barriers
To set a limit on quantity (amount) of a product
Reasons for quotas
To keep supply low and prices the same.
(To express displeasure at the policies of the importing country.
To protect themselves.)
A tax on certain goods
Reasons for tariffs
To set the value of a good.
(To set amount per pound, gallon, or other unit.)
Stop the export or import of a product
Reasons for embargoes
To protect a country's industries from international competition more than the quota or tariff will achieve.
(To prevent sensitive products from falling into the hands of unfriendly groups or nations).
Free - Trade Zones
A selected area where products can be imported daily - free and then stored, assembled, and used in manufacturing.
(Located around a seaport or airport.
Importer pays only when product leaves the zone).
Free - Trade Agreements
Under the NAFTA agreement, countries agree to remove duties (import taxes) and trade barriers.
Common Markets - (Economic Community)
Members do away with duties and trade barriers, invest freely, workers move freely.
(Ex. Europe, Latin America)
Multinational Companies (MNC)
Organizations that do business in several countries
Where a parent country is placed
A country in which the MNC places business activities
Uses the same product and marketing strategy worldwide.
(The same product is sold in essentially the same matter throughout the world.
Treats each country market differently.
(Firms develop products and marketing strategies that adapt to the customs, tastes, and buying habits of a distinct national market.
Ex. Some restaurant chains employ a multinational strategy when they modify their menus to local tastes).
Large amount of good available.
Foster understanding, communication, and respect.
Friendly international relations.
Worker dependence on the MNC.
Global market entry modes
Selling the right to use some tangible property for a fee or royalty.
(Production process, trademark, or brand name.
Low risk and low financial investment.
Ex. Nike, this is made by Nike but not an actual thing you can touch.)
The right to use a company name or business process in a specific way.
(Enter into contracts to set up that business in other countries.
Same marketing elements are used.
Ex. Fast food companies, found all across the world.)
An agreement between two or more companies to share a business project
(Benefit - sharing of raw materials, shipping facilities.
Concerns - sharing profit, not as much control.
International Trade Organizations
World Trade Organization - WTO.
International Monetary Fraud - IMF.
World Trade Organization
Settles trade disputes
Enforces free - trade agreements
150 member countries
Lowering tariffs that discourage free trade.
Eliminating import quotas.
Reducing barriers for banks, insurance companies, and other financial services.
Assisting the poor countries with economic growth.)
International Monetary Fund
Helps to promote economic cooperation.
Maintains an orderly system of world trade and exchange rates.
Includes more than 150 member nations.
Created in 1944 to provide loans for rebuilding after World War II.
(Today has more than 180 member countries and 2 main divisions:
International Development Association which makes loans to help developing countries.
International Finance Corporation which provides technical capital and technical help to private businesses in nations with limited resources).
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