Chapter 19

Joint ownership

A cooperative venture in which a company creates a local business with investors in a foreign market who share ownership and control. Merges strengths. Probably disagreement between firms.

Global firm

A firm that, by operating in more than one country, gains R&D, production, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors.

Adapted global marketing

A global marketing approach that adjusts the marketing strategy and mix elements to each international target market, which creates more costs but hopefully produces a larger market share and return.

Standardized global marketing

A global marketing strategy that basically uses the same marketing strategy and mix in all of the company's international markets.

Economic community

A group of nations organized to work toward common goals in the regulation of international trade.

Exchange controls

Limit the amount of foreign exchange and the exchange rate against other currencies.

Quotas

Limits on the amount of foreign imports that they will accept in certain product categories.

Industrial Economies

Major importers and exporters of manufactured goods and services. Their varied manufacturing activities and large middle classes make them rich markets for all sorts of goods. The United States, Japan, and the Western European countries are examples.

Union of South American Nations (UNASUR)

Modeled after the EU. Makes up the largest trading bloc after NAFTA and the EU.

Subsistence Economies

Most people engage in simple agriculture, consume most of their output, and barter the rest for simple goods and services. These economies offer few market opportunities.

Tariff

Taxes on certain imported products designed to raise revenue or protect domestic firms. Often used to force favorable trade behaviors from other nations.

Contract manufacturing

A joint venture in which a company contracts with manufacturers in a foreign market to produce its product or provide its service. Decreased control over the manufacturing process and loss of potential profits on manufacturing. Chance to start faster with less risk and the later opportunity either to form a partnership with or buy out the local manufacturer.

Management contracting

A joint venture in which the domestic firm supplies the management know-how to a foreign company that supplies the capital; the domestic firm exports management services rather than products. Low risk, high initial income.

Countertrade

The practice of using barter rather than money for making global sales

Transatlantic Trade and Investment Partnership (TTIP)

Between the United States and the European Union. Still under negotiation.

Non-tariff trade barriers

Biases against bids, restrictive product standards, or excessive host-country regulations or enforcement.

Direct Exporting

Companies handle their own exports. The investment and risk are somewhat greater in this strategy, but so is the potential return.

Emerging economies

Countries experiencing rapid economic growth and industrialization. Examples include the BRICS countries—Brazil, Russia, India, China, and South Africa. Other hot emerging markets include Colombia, Indonesia, Vietnam, Egypt, and Turkey (CIVITS).

Direct investment

Entering a foreign market by developing foreign-based assembly or manufacturing facilities. May have lower costs in the form of cheaper labor or raw materials, foreign government investment incentives, and freight savings. High risk.

Joint venturing

Entering foreign markets by joining with foreign companies to produce or market a product or service (licensing, contract manufacturing, management contracting, and joint ownership).

Licensing

Entering foreign markets through developing an agreement with a licensee in the foreign market. Low risk but less control and lower profits.

Central American Free Trade Agreement (CAFTA)

Established a free trade zone between the United States and Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.

North American Free Trade Agreement (NAFTA)

Established free trade zone between Canada, United States and Mexico.

Trans-Pacific Partnership (TPP)

Promises to lower trade barrier and increase economic cooperation among twelve Pacific Rim countries: the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

World Trade Organization

Promotes world trade by reducing tariffs and other international trade barriers. Imposes international trade sanctions and mediates global trade disputes.

Industrial Structure

Shapes a country's product and service needs, income levels, and employment levels.

Balance of Trade

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

Exporting

The simplest way to enter a foreign market. Entering foreign markets by selling goods produced in the company's home country, often with little modification.

Income Distribution

The way the national income is divided into "shares" ranging from the poor to the rich.

Indirect Exporting

Working through independent international marketing intermediaries. Indirect exporting involves less investment because the firm does not require an overseas marketing organization or network. Less risk.