understanding business chapter 3
the Foreign Corrupt Practices Act of 1978 prohibits ___________ payments to foreign officials to secure business contracts
"questionable" or "dubious"
The benefits of creating a joint venture when doing business internationally include:
1. Shared technology and risk 2. Share marketing and management expertise 3 Entries into markets where foreign countries are often not allowed unless goods are produced locally
Which of the following are important reasons to do business globally?
1. US consumers buy billions of dollars worth of goods from other countries 2. There are many potential customers in other customers
an embargo
1. bans all trades with a particular country 2. bans all trades of a certain product
Which of the following are disadvantages of international joint ventures?
1. the joint venture may become too large and flexible 2. Shared technology may become obsolete
contract manufacturing
A foreign country's production of private-label goods to which a domestic company then attaches its brand name or trade mark
The ____ Economic community was established in 1967 in Thailand to create economic cooperation among its five original members (Indonesia, Malaysia, Philippines, Singapore and Thailand)
ASEAN
when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries it is said to have an ________________ advantage
Absolute advantage
___________ advantage is a monopoly that exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item while ________ advantage is the basis of most international trade, when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items
Absolute advantage comparative advantage
Why are small and medium-sized firms often better prepared to lead into global markets?
Because they can react quickly to opportunities
Which of the following are benefits associated with offshore outsourcing
Companies can create efficiencies; companies can focus on business areas where they can expand and grow
The development of a common market changes the way good and services are traded within that market. Which of the following are examples of such changes
Coordinated laws that facilitate exchange among members No internal tariffs Common external tariff
Exchange rates and labor costs both affect trading in global markets. What category of forces affecting global trade do they fall under?
Economic and financial forces
True or False: Devaluation is a complex form of bartering in which several countries trade goods or services for goods or services
False; countertrading
True or False: Licensing is a contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name to sell a product or service in a given territory in a specified manner
False; franchising
__________ trade is the movement of goods and services among nations without political or economic barriers
Free trade
Which of the following are considered licensor benefits to licensing
Licensors spend little or no money to produce products Gaining new revenues The foreign licensee purchases items (start-up and supply) from the licensor
A widely debated issue of the early 1990s was the ratification of the __________ ___________ ____________ _____________ Agreement that created a free-trade area among the United States, Mexico and Canada
North American Free Trade Agreement (NAFTA)
_________ tariffs are designed to raise money for the government
Revenue tariffs
Exporting
Selling goods to another country
________ forces include religion, manners and customs, values and attitudes, language, and personal communication
Sociocultural forces
A(n) _________________ _______________ is a long term partnership between two or more companies established to help each company build competitive market advantages, although they do not share costs, profits or management
Strategic alliance
What is the definition of trade protectionism
The use of government regulations to limit the import of goods and services
protectionism
The use of government regulations to limit the import of goods and services
Exchange rate
The value of one nation's currency relative to currencies to other countries
Which of the following are reasons why some governments establish trade protectionism?
To allow domestic producers to survive and grow To protect against dumping To avoid foreign competition To save local jobs
trade surplus
When the value of a country's exports exceeds that of its imports
The ____________ ____________ ____________ is the organization that replaced the General Agreement on Tariffs and Trades (GATT) and was assigned the duty to mediate trade disputes among nations
World Trade Organization (WTO)
The organization established in 1986 by the Uruguay Round of GATT, whose purpose it to mediate trade disputes among nations is called
World Trade Organization (WTO)
Among the benefits of exporting are:
a boost to the US economy
parent company
a foreign subsidiary is a company owned in a foreign country by another country
licensing
a global strategy in which a firm allows a foreign company to produce its product in exchange for a fee
joint venture
a partnership in which two or more companies, often from different countries, join to undertake a major project
Tariff
a tax imposed on imports
common markets
also referred to as "trading blocs"
US business people are often accused of ethnocentricity which is the belief that
an attitude that your own culture is superior to other countries
Revenue tariffs
are designed to raise money for the government
Balance of ________ is the difference between the flow of money into and out of a country
balance of payments
Balance of ____________ is the total value of a nation's exports compared to its imports measured over a particular period
balance of trade
Global trade is measured using two key indicators known as
balance of trade balance of payments
A regional group of countries with a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members is the definition of:
common market also known as a trading bloc
No internal tariffs are benefits enjoyed by member of __________ markets or trading blocs
common markets
A foreign country's production of private-label goods to which a domestic company then attaches its brand name or trade mark is called
contract manufacturing
Sometimes, due to a nation's unreliable currency, the only way to trade is ____________, which is defined as the exchange of merchandise or service for service with no money traded
countertrading
A Hong Kong Kentucky Fried Chicken franchise owner was disappointed by low sales. The local consultant told her that locals found eating greasy chickens with their hands was too messy. This is an example on how different __________ can affect global business
cultural forces
The definition of ________ states; lowering the value of the nation's currency relative to other currency
devaluation
Exporting assistance centers work with small and medium sized business who are hesitant to do:
direct exporting
A(n) ____________ is a complete ban on the import or export on a certain product, or the stopping of all trade with a particular country
embargo
in addition to goods and services, countries also ____ art, cultural events, medical advances, space exploration and labor
exchange
The value of one nation's currency relative to currencies to other countries is the
exchange rate
Unlike joint ventures, strategic alliances share
expertise and markets
A major benefit of _____________ is that selling goods and services to other countries results in an economic boost in the United States
exporting
A trade deficit occurs when a country's
exports are less than imports
The definition of __________ ___________ __________states: the buying of permanent properties or businesses in foreign nations
foreign direct investment
The possibility of having all foreign assets expropriated is the major shortcoming of what strategy?
foreign direct investment. subsidiary
Economic competition is intensifying due to
globalization
Which of the following are functions of export assistance centers (EACs)?
hands on exporting assistance and trade finance support for small and medium-sized businesses that wish to directly export goods and services
A(n) ________________ __________________ is the limit of the number of products in certain categories that a nation can import and is considered a form of trade protectionism
import quota
The United States is the largest
importer in the world
Buying products from another country is the definition of
importing
___________ is buying products from another country, while ____________ is selling products to another country
importing; exporting
Which of the following are likely benefits of exporting?
increased number of potential customers, increased sales and revenue, less intense competition
Which of the following are likely benefits of exporting
increased number of potential customers, less intense competition, increased sales and revenue
Dumping
involves selling products in a foreign country at lower prices than those charged in the producing country
Franchising
is a contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name to sell a product or service in a given territory in a specified manner
Absolute advantage
is a monopoly that exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item
multinational corporation
is an organization that manufactures and markets products in many different countries and has managers and stockholders from many countries
Comparative advantage
is the basis of most international trade, when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items
balance of payments
is the difference between the flow of money into and out of a country
Free trade
is the movement of goods and services among nations without political or economic barriers
Outsourcing
is the process whereby a firm contracts with other companies, often in other countries, to do some or all of its functions
balance of trade
is the total value of a nation's exports compared to its imports measured over a particular period
Which of the following are considered benefits of contract manufacturing?
it enables the producer or business to experiment in a new market without incurring heavy start up costs; it can be used to temporarily meet an unexpected increase in orders; labor costs in foreign markets may be lower than in the firm's host country
Which of the following statements about offshore outsourcing is true
it has become a major issue
The definition of _______ ________ states; a partnership in which two or more companies, often from different countries, join to undertake a major project
joint venture
Shared technology and risk, shared marketing and management and entry into markets where foreign countries are often not allowed are all benefits of
joint ventures
Problems arising from differences in antitrust rules, labor relations, patents, copyrights, taxes and other issues are all combined examples of _______________ and regulatory forces within a global market
laws
strategies for reaching global markets
least to most licensing, exporting, franchising, contract manufacturing, International joint ventures and strategic alliances, foreign direct investment
The definition of ______________ states; a global strategy in which a firm allows a foreign company to produce its product in exchange for a fee
licensing
Which strategy for reaching global markets has the lowest risk?
licensing
a business can legally compete in a global markets by using which of the following strategies
licensing, franchising, exporting
Strategic alliance
long term partnership between two or more companies established to help each company build competitive market advantages, although they do not share costs, profits or management, they provide access to markets, capital and technical expertise
In what way will globalization impact US businesses?
loss of jobs in manufacturing; increased competition
Dumping involves selling products in a foreign country at _________prices than those charged in the producing country
lower
Devaluation
lowering the value of the nation's currency relative to other currency
Free trade allows labor to be outsourced to other markets where it may be less expensive. This negative consequence of free trade most commonly created a loss of domestic
manufacturing jobs
A(n) ______________ corporation is an organization that manufactures and markets products in many different countries and has managers and stockholders from many countries
multinational corporation
Protective tariffs
on imports is to raise the retail price of imported products so that domestic goods are more competitively priced
_____________ is the process whereby a firm contracts with other companies, often in other countries, to do some or all of its functions
outsourcing
The definition of contract marketing A foreign country's production of private-label goods to which a domestic company then attaches its brand name or trade mark; contract marketing is in the broad category of
outsourcing, because business functions are transferred to a third-party
a foreign subsidiary is a company owned in a foreign country by another country, called the
parent company
A weak transportation infrastructure results in a __________ barrier to global business
physical
Some developing countries have primitive transportation and storage systems, in addition to unclean water and poor sewer systems. That is why it is important to analyze _____ and ____ forces before entering the market
physical and environmental
the function of protective _____________ on imports is to raise the retail price of imported products so that domestic goods are more competitively priced
protective tariffs
______________ tariffs are designed to raise money for the government
revenue
__________ and __________ sized business are often better prepared for the global market because they are able to react more quickly to opportunities
small and medium sized
Culture includes
social structures, religion, manners and customs, values and attitudes, language, and communication
Which of the following are considered major hurdles to successful global trade?
sociocultural forces, economic and financial forces, legal and regulatory forces, and physical and environmental forces
Kelly wants to expand her small business. She analyzed the amount of risk, commitment, control, and potential profit for each. She decided that franchising was the right _____ for her company
strategy
The definition of a(n) __________ states: a tax imposed on imports
tariff
trade deficit
the United States has bought more goods from other nations than it has sold since 1975
foreign direct investment
the buying of permanent properties or businesses in foreign nations
countertrading
the complex form of bartering in which several countries each trade goods or services for other goods or services, parties involved benefit and avoid some of the financial problems and currency constraints in global markets
Import quota
the limit of the number of products in certain categories that a nation can import and is considered a form of trade protectionism
Which of the following is a function of the WTO World Trade Organization?
to oversee cross-border trade issues to mediate trade disputes amongst nations
By buying more than it has sold, making the value of its exports less than its imports the United States faces a trade
trade deficit
Since 1975, the United States has bought more goods from other nations than it has sold resulting in
trade deficit
When the value of a country's exports exceeds that of its imports, the country exhibits a(n)
trade surplus
Why is it important to analyze the local technological and physical forces in the business environment before doing global business in a given market
transportation systems may be affected by weather; communication systems may be primitive
Culture can include which of the following
values and attributes, language, religion
Absolute advantage
when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries