CHAPTER 3: Doing Business in Global Markets
Importing Buying products from another country.
Exporting: Selling products to another country.
Free Trade The movement of goods and services among nations without political or economic barriers.
Comparative Advantage Theory : Theory that states that a country should sell to other countries those products that it produces most efficiently and effectively, and buy from other countries those products that it cannot produce as effectively or efficiently.
Absolute Advantage: The advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.
Strategic Alliance: A long-term partnership between two or more companies established to help each company build competitive market advantages.
Foreign Direct Investment (FDI): The buying of permanent property and business in foreign nations.
Foreign Subsidiary: A company owned in a foreign country by another company, called the parent company.
Multinational Corporation: An organization that manufactures and market products in many different countries and has multinational stock ownership and multinational management.
Sovereign Wealth Funds (SWFs): Investment funds controlled by governments holding large stakes in foreign companies.
Exchange Rate: The value of one nation's currency relative to the currencies of other countries.
Devaluation: Lowering the value of a nation's currency relative to other currencies.
Countertrading: A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.
Trade Protectionism: The use of government regulations to limit the import of goods and services.
Tariff: A tax imposed on imports.
Import Quota: A limit on the number of products in certain categories that a nation can import.
Embargo: A complete ban on the import or export of a certain product, or stopping of all trade within a particular country.
GATT (General Agreement on Tariffs and Trade): A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions.
WTO (World Trade Organization): The international organization that replaced the General Agreement on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations.
Common Market: A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc. An example is the European Union.
NAFTA (North American Free Trade Agreement): Agreement that created a free-trade area among the United States, Canada and Mexico.
1. A company owned in a foreign country by another company, called the parent company.
ANSWER: Foreign Subsidiary
2. An unfavorable balance of trade; occurs when the value of a country's imports exceeds that of its exports.
ANSWER: Trade Deficit
3. Not as specific. Can detail exactly how a product must be sold in a country. For example, butter in Denmark must be sold in cubes not tubs
ANSWER: Non-Tariff Barriers
4. 17th and 18th century idea for a nation to sell more goods to other nations than it bought for them ie. to have a favorable balance of trade. An early form of economic theory.
5. Foreign Direct Investment → a company owned in a foreign country by another company, called the parent...