CH 1-2 Quiz
The capability of one nation to produce more of a good with the same amount of input than another country is a/an
absolute advantage
environment
all the forces (internal and external) influencing the life and development of the firm.
United Kingdom
9,447 (GDP Purchasing Power Parity)
More than one-half of the exports from developing countries go to __________ countries, and this proportion has been _____________.
developed; decreasing
international company
A company with operations in multiple nations
perfect competition
A market situation in which there is a sufficiently large number of well-informed buyers and sellers of a homogeneous product, such that no individual participant has enough power to determine the price of the product, resulting in a marketplace that is efficient in production and allocation of products
The domestic environment is composed of all the uncontrollable forces originating in the __________ that surround and influence the life and development of the firm.
home country
Examples of the kinds of external forces listed in the text are each of the following except
human resources
cost drivers
Improved economies of scale, shared costs of research and development, investment incentives and so forth.
A market situation in which there is a sufficiently large number of well-informed buyers and sellers of a homogeneous product such that no individual participant has enough power to determine the price of the product, resulting in a marketplace that is efficient in production and allocation of products is known as
perfect competition
When considering where to export, advantages to managers of focusing on a nation that is already a sizable purchaser of goods coming from the home country include the fact that
satisfactory transportation facilities have already been established
Unconscious reference to one's own cultural values when judging behavioral actions of others in a new and different environment is called
self-reference criterion
controllable forces
Internal forces that management administers to adapt to changes in the uncontrollable forces.
Competitive Drivers
New competitors from developing nations, entry of foreign firms into a company's home market, access to supplies, and entry into downstream activities to preserve markets for products
The theory of resource endowment
states that a nation will trade goods that can be produced with the production factor that is most abundant
Supporters of mercantilism
viewed accumulation of precious metals as an activity essential to a nation's welfare
trade surplus
The amount by which the value of a nation's exports exceeds the value of its imports
trade deficit
The amount by which the value of imports into a nation exceeds the value of its exports
Greenfield Investment
The establishment of new facilities from the ground up
overlapping demand
The existence of similar preferences and demand for products and services among nations with similar levels of per capita income
uncontrollable forces
The external forces that management has no direct control over
International Environment
The interaction between domestic and foreign environmental forces, as well as interactions between the foreign environmental forces of two countries
resource endowment
The land, labor, capital, and related production factors a nation possesses
foreign business
The operations of a company outside its home or domestic market
cross-border acquisition
The purchase of an existing business in another nation
product differentiation
Unique differences producers build into their products with the intent of positively influencing demand
comparative advantage
When one nation is less efficient than another nation in the production of each of two goods, the less efficient nation has a comparative advantage in the production of that good for which its absolute disadvantage is less
Porter's diamond model of national advantage:
claims that the ability of local firms in a country to use the country's resources to gain a competitive advantage is based on demand conditions, factor conditions, related and supporting industries, and firm strategy, structure, and rivalry
A nation having absolute disadvantages in the production of two goods with respect to another nation has a/an ___________ in the production of the good in which its absolute disadvantage is less.
comparative advantage
International business differs from domestic business in that a firm operating across borders must deal with which of the following additional environmental forces?
foreign
According to the international product life cycle
foreign-produced products compete in export markets in the third stage
The proportion of world trade in services accounted for by the European Union has evidenced ____ since 1980.
an overall decline
World
127,000 (GDP Purchasing Power Parity)
China (gpd ppp per capita)
16,624 GDP Per capita
Average
17,300 GDP Per capita
European Union
19,360 (GDP Purchasing Power Parity)
India
2,888 (GDP Purchasing Power Parity)
United States
20,850 (GDP Purchasing Power Parity)
China
23,120 (GDP Purchasing Power Parity)
U.K. (gpd ppp per capita)
43,620 GDP Per capita
U.S. (gpd ppp per capita)
59,495 GDP Per capita
India (gpd ppp per capita)
7,174 GDP Per capita
absolute advantage
A nation's ability to produce more of a good or service than another country for the same or lower cost of inputs
national competitiveness
A nation's relative ability to design, produce, distribute, or service products within an international trading context while earning increasing returns on its resources
International Product Life Cycle (IPLC)
A theory explaining why a product that begins as a nation's export eventually becomes its import
economies of scale
A theory explaining why a product that begins as a nation's export eventually becomes its import
domestic environment
All the uncontrollable forces originating in the home country that surround and influence the life and development of the firm
foreign environment
All the uncontrollable forces originating outside the home country that surround and influence the firm
Mercantilism
An economic philosophy based on the belief that (1) a nation's wealth depends on an accumulated treasure, usually precious metals such as gold and silver; and (2) to increase wealth, government policies should promote exports and discourage imports
Transnational corporation
An enterprise made up of entities in more than one nation, operating under a decision-making system that allows a common strategy and coherent policies
International Business
Business that is carried out across national borders
The three largest markets for American exports of goods in 2013 were
Canada, Mexico, & China.
Foreign Direct Investment (FDI)
Direct investments in equipment, structures, and organizations in a foreign country at a level sufficient to obtain significant management control
experience scale
The rising scale on which efficiency improves as a result of cumulative experience and learning
Economic Globalization
The tendency toward an international integration and interdependence of goods, technology, information, labor, and capital, or the process of making this integration happen
exporting
The transportation of any domestic good or service to a destination outside a country or region
importing
The transportation of any good or service into a country or region, from a foreign origination point
Eclectic Theory of International Production (OLI Model)
Theory proposing that for a firm to invest in facilities overseas, it must have three kinds of advantages: ownership specific, location specific, and internalization
oligopolistic advantage theory
Theory suggesting that strategic rivalry between firms in an oligopolistic industry will result in firms closely following and imitating each other's international investments in order to keep a competitor from gaining an advantage
monopolistic advantage theory
Theory that foreign direct investment is made by firms in industries with relatively few competitors, due to their possession of technical and other advantages over indigenous firms
internalization theory
Theory that to obtain a higher return on its investment, a firm will transfer its superior knowledge to a foreign subsidiary that it controls, rather than sell it in the open market
Economies of scale
are the predictable decline in the average cost of producing each unit of output as a production facility gets larger and output increases
The increased internationalization of business requires __________ to have a basic knowledge of international business.
all managers
The proportion of world trade accounted for by North America has evidenced ____ since 1980.
an overall decline
Environment as used in the textbook is the forces surrounding and influencing the life and development of the firm and is classified as
controllable and uncontrollable as well as internal and external
The theory of overlapping demand suggests that
international trade in manufactured goods will be more common between countries with similar levels of income