Business Test Chapter 3

How many members are in the World trade organization and what do they do?

160 member countries Settles trade disputes and enforce free-trade agreements

How many members are in the International Monetary Fund and what do they do?

180 member nations Helps promote economic cooperation and maintain an orderly system of world trade and exchange rates

How many members are in the World Bank and what do they do?

190 member countries Give economic aid to developing countries and build communication systems, transportation networks, and energy plants

What actions could be taken to encourage international trade?

Actions that could be taken to encourage international trade include free-trade zones, free-trade agreements, and common markets

International business

All business activities that involve exchanges across national boundaries

Drawbacks of multinational companies

An MNC can become an economic power Worker dependence on MNC for jobs Consumer dependence for goods and services Influence or control of political power

What are the factors affecting Currency Values and how?

Balance of payments, economic conditions, and political stability

Licensing

The right to use a company name or process in a specific way

Reasons for quotas

To keep supply low and prices at a certain level, to express displeasure at the policies of the importing country, and to protect one of a country's industries from too much competition

Reasons for embargoes

To offer more protection from international competition than the quota or tariff will provide, and to prevent sensitive products from falling into the hands of unfriendly groups or nations

How does balance of trade differ from balance of payments?

Trade is not the only thing influencing the balance of payments

Multinational company

Treats each market company differently. Adapts to customs, tastes, and buying habits

How does balance of payments affect currency value?

When a country has a favorable balance of payments, the value of its currency is usually constant or rising

How do economic conditions affect currency values?

When prices increase and the buying power of the country's money declines, its currency is not as appealing. Inflation reduces the buying power of a currency

How does political values affect currency values?

When prices increase and the buying power of the country's money declines, its currency is not as appealing. Inflation reduces the buying power of a currency

What are the international trade organizations?

Word Trade Organization, International Monetary Fund, and World Bank

How can U.S. business-people handle situations in foreign countries where officials expect bribes to be paid as a condition for doing business there?

You could report them to authorities or simply just avoid the bribery given

Suppose you work for a manufacturing company. A plastics supplier who is trying to get more business sends you a case of golf balls made with one of its high-tech composite materials. What would you do?

You could send back the golf balls and determine what to do with the bribe on how ethically sound the business is.

Comparative advantage

a situation in which a country specializes in the production of a good or service at which it is relatively more efficient

Where are free-trade zones located?

around a seaport or airport

what do common markets allow?

companies to invest freely in each member country., and allow workers to move freely across borders

In franchising what do organizations do?

enter into contracts with people in other countries to set up a business that looks and runs like the parent company

What does global market entry mode allow?

foreign companies to use procedure

Import

goods and services bought from other countries

Export

goods and services sold to other countries

Free-trade agreements increase what?

in increased trade between members

What do free-trade zones promote?

international business in a selected area where products can be imported duty free and the stored, assembled, and/or used in manufacturing

In joint venture what is shared?

raw materials, Shipping facilities, management activities, or production facilities

In free-trade agreement member countries agree to do what?

remove duties and trade barriers on products traded among them.

What does franchising involve?

selling a product or service

A tariff tends to lower what?

the demand for the product and reduce the quantity of that import

Balance of trade

the difference between a country's total exports and total imports

Balance of payments

the difference between the amount of money that comes into a country and the amount that goes out of a country

What does a tariff increase

the price of an imported product

What are the concerns for joint venture?

the sharing of profits and not as much control because several companies are involved

Exchange rate

the value of one currency for the purpose of conversion to another

Absolute advantage

when a country can produce a good or service at a lower cost than other countries

Unfavorable balance of trade

when you are importing more goods to other countries than they are exporting

What is a favorable balance of trade?

when you are receiving more exported goods than importing goods

International development association

which makes loans to help developing countries

International finance cooperation

which provides technical capital and technical help to private businesses in nations with limited resources

What is the global market entry mode?

Licensing, Joint Venture, and Franchising

Quotas

Limit on quantities for imports and exports

What encourages international trade?

Free-trade zones, free-trade agreement, and common markets

Elements of International Business Environment

Geographic factors, cultural factors, economic factors, and political/legal factors

Political and legal factors

Government system, Political stability, Trade barriers, and Business regulations

World Bank's two main divisions?

International finance cooperation and International development association

Cultural factors

Language, Family, Religion, Customs, Traditions, and Food

Geographic factors

Location, Climate, Terrain, Waterways, and Natural Resources

How is the financial investment for licensing?

Low

How is the risk for Financial investment?

Low

Multinational company benefits

Many goods available Lower prices Career opportunities Foster understanding, communication, and respect Friendly international relations

Infustructure

Nation's transportation, communication and utility

How does the International Monetary Fund assist countries?

Promote economic cooperation and maintaining an orderly system of world trade and exchange rates

Trade barriers

Restrictions to free trade

Franchising

Selling the right to use some intangible property for a fee or royalty

Embargoes

Stop Export or import completely

Tariff

Tax that government places on imported products

Economic factors

Technology, Education, Inflation, Exchange rate, and Infrastructure

How does licensing differ from a franchise?

Licensing doesn't require as much financial investment or risk as franchising Both licensing and franchise involve royalty payments Licensing usually involves the manufacturing process, while franchising involves selling a product or service.