unit 1 (ch. 1-6)

The trade agreement in place between the United States, Canada, and Mexico is called

- NAFTA

Which BRIC country has not lived up to expectations due to a slowing economy, political and social problems, and being labeled as the world's most corrupt major economy?

- Russia

The difference between money coming into a country from exports and money leaving a country due to imports, plus money flows from other factors, is known as the

- balance of payments

What two tasks are important to complete when writing a business plan?

- calculate how much money you need to start - analyze the competition

______________ is the world's largest exporter.

- china

_______________ is a cost-effective way that many companies outsource the production of goods, such as clothing, shoes, and cell phones. The domestic firm contracts with a foreign company to produce and private-label the goods, because the price is much cheaper than the domestic firm could produce in its home market.

- contract manufacturing

When the value of exports from a country exceeds the value of imports into that country, there is a(n)

- favorable balance of trade

The law that specifically prohibits "questionable" or "dubious" payments to foreign officials to secure business contracts is called the

- foreign Corrupt Practice act

Even though the nation faces political instability, the island of Frollik with its wide, expansive beaches is a destination hub for cruise lines. Recently, a large theme park company showed strong interest in buying land in Frollik with the intent of building a park targeted toward families. The company wants to make a commitment to Frollik, including the hiring of several hundred local employees. It is using a global marketing strategy called

- foreign direct investment

During the past five years, the nation of Andolvia began a massive undertaking: teaching farmers how to successfully grow and harvest peanuts. The government subsidized the building of peanut processing plants, where private businesses are now producing peanut butter and other products of nutritional value. Although the Andolvia government has not completely banned the importation of peanuts, it has placed ________________ on the number of peanut products that the nation can import each year, in order to protect Andolvia's young peanut industry.

- import quotas

Buying products produced in another country is known as

- importing

All of the following are reasons for countries to participate in foreign trade EXCEPT

- it is just as easy to start a business overseas as it is in the United States. (actual reasons: no nation can produce all of the products its people want and need, even if a country was self-sufficient, other nations would seek to trade with that country in order to meet the needs of its own people, some nations have resources, but not technological know-how; while others have know-how, but lack resources.)

The placement of Starbucks cafés within Barnes & Noble bookstores has proven to be a successful strategic alliance because both companies benefit from this arrangement. As a global marketing strategy, an important characteristic of a strategic alliance is

- participant companies do not share costs or profits

The makers of Samsung washers and other electrical appliance manufacturers need to be concerned about the kind and availability of electricity in the global marketplace. If there were a compatibility problem, it would be the result of a(n) _____________ difference.

- technological

As a strategy for reaching global markets, licensing provides the licensor with several advantages. One advantage is

- the cost of producing and marketing the product in a foreign market is significantly reduced.

The value of one nation's currency relative to the currencies of other countries is referred to as

- the exchange rate

Sovereign wealth funds (SWFs) are a growing form of foreign direct investment. The size of these funds and the fact that they are investments from government coffers of other nations might be a cause for concern. More specifically, some fear

- the governments who offer these funds may obtain sensitive technologies or gain control of strategic resources.

In global trade, the term dumping refers to

- the practice of selling products in a foreign country at lower prices than those charged in the producing country.

Learning from others is a useful way to avoid pitfalls when starting a small business. Some things you may be told would include:

- to hire a good lawyer and accountant - that finding and retaining good workers is hard - starting with enough money

Using government regulations to limit the import of goods and services is called

- trade protectionism

The nation of Kandabar exports $75 million worth of products and services and imports $52 million worth of products and services. Kandabar has a(n)

- trade surplus

Not good. The high value of the dollar relative to the Chinese yuan would make Carl's products more expensive in Beijing and Shanghai.

Because of the high volume of bicycles as a common form of transportation in Beijing and Shanghai, Carl wants to sell his bicycle horns in these foreign markets. Currently, the U.S. dollar is trading at a higher rate than the Chinese yuan. Economically speaking, how are Carl's prospects?

It is extremely important to develop a(n) ___________ ____________ before going to a bank for a loan, because it shows that you are aware of who the target market is, who the competition is, how much money you need, and exactly how you intend to turn a profit.

business plan

Mark recently started a small consulting firm. He is drafting a detailed written statement that describes the nature of the business, the target market, the advantages the business will have over competition, and the resources and qualifications of the owner(s). Mark is writing a(n) Blank______.

business plan

When your profitable franchise fails simply because other similar franchisees have failed, this is known as the

coattail effect

Partnerships refer to more than one owner. A limited partnership

consists of general partners and limited partners, at least one of each.

In a ________, members democratically control the business by electing a board of directors that hires professional management to run the business.

cooperative

Joel and Mike would like to start a new business selling a product new to the U.S., the Peraves Monotracer. Joel and Mike have done a considerable amount of research on this product, and think it would be successful in the U.S. However, they are still concerned about the risk of a new venture and both would like to avoid losing any personal assets. They should organize their firm as a

corporation

You inherited 500 shares of IBM stock from your Great Aunt Mabel. As you contemplate selling the shares, your accountant informs you that the company pays a generous dividend, and advises you to start watching the firm's profits. When you are awarded the first dividend, you learn that it is considered a source of income and you will be taxed on that amount. You find this bothersome because the firm paid the dividend from after-tax profits (these dollars were already taxed). This phenomenon is called

double taxation

A few years ago, in order to gain market share, Blackboard™, a well-known management system software company used by many colleges and universities, joined forces with WEB CT™, another management system software company. Both companies were in the same industry and originally competed against one another. In business, we would call the joining of these two firms a(n)

horizontal merger

If the employees of San Simeon Company successfully borrowed a large sum of money and purchased the firm from its current owners, we would call this event a

leveraged buyout

When Luke, Larry, and Lance lost their jobs during the recent recession, they pooled their resources, borrowed a little more, and bought a couple of houses to renovate. All three were concerned about the risk involved in owning their own business, particularly the risk of losing personal assets. As their advisor, which of the following forms of business ownership would you recommend?

limited liability company

At Sound Off!, a store that buys and sells used CDs, there is only one general partner, Sonia. She spends all her time running the business, and makes all the decisions. Sonia's mother and brother put up money for her to buy the store, but they work full time at other jobs and have no management say in the running of Sound Off!, but share in some of the profits. This is an example of a

limited partnership

When Beck joined his uncle's oil exploration company in east Texas, he was given several hundred shares of stock in the firm, and was officially made a partner. The firm's accountant explained that the company paid taxes the same way as regular partnerships, by passing the profits through to each partner. Beck could purchase more shares of the company on a public stock exchange, as long as someone was willing to sell his/her shares. This firm was likely a special form of ownership called a

master limited partnership

Advantages of ________ include reduced start-up fees and no territory restrictions.

online franchising

Chris spent his own money on marketing research, and consulted his sister Kara, who is an accountant. They spent the next few months writing a business plan. Which of the following are some business functions Chris would have addressed?

planning, financing, marketing

When going into a partnership, you should always

put all term of the partnership into writing in a partnership agreement

One of the key advantages of a franchise is

receiving management and marketing expertise from the franchisor.

In his search for a franchised business that would satisfy his passion for the outdoors and earn him a decent living, Andrew noted that the shared profit criterion required of franchisors had significant variance. Some required franchisees to pay 7% of their monthly revenues to the franchisor. Others required 4% of the profits. In business we refer to this obligation as a

royalty

A business that is independently owned and operated, is not dominant in its field of operation, and meets certain standards of size in terms of employees or annual receipts is a(n):

small business

When Gene started his window-washing business, he wanted to keep things simple. He liked the idea of being his own boss and the possibility of leaving the business one day to his son. He chose the type of business that was easy to start, allowed him to keep company profits, and not have any special taxes. Gene's financial resources were limited, but so were his concerns; after all, "he was the business." Gene's business is most likely a(n)

sole proprietorship

Which form of business ownership is the most common in the United States?

sole proprietorship

The owners of a corporation are called

stockholders

A firm's management purchases all the issued and outstanding stock of the firm and takes the company off the stock market. The management of this company has engaged in

taking the firm private

Flexible Fittings was a small manufacturing company that made shut-off valves for gas pipe used in home and building construction. Flexible purchased the General Gas Pipeline Company, which was Flexible Fittings' largest customer. This strategic decision bringing the two companies together is called a

vertical merger

Twenty years ago, your parents invested in Apple. As the years have gone by, the investment has grown. However, if Apple should go out of business and declare bankruptcy, what would happen to your parent's investment?

your parents will only lose the value of their shares. (they will not be responsible for some of the debt of Apple, have to go to court to show they have no involvement in the firm, or borrow money to pay for the value of their shares.)