Business Chapter 3 Doing Business in Global Markets

Important reasons to do business globally

There are over 7.1 Billion potential customers in the 194 countries that make up the global market. U.S Consumers seek the best value whether in the U.S. or other countries

Which of the following are functions of the world trade organization?

To mediate trade disputes among nations To oversee cross-border trade issues

The benefits of creating a joint venture when doing business internationally include

access to restricted local markets shared marketing expertise shared technology

a common Market

also known as trading bloc is a regional group of countries with a common external tariff, no internal trariffs, and coordinated laws to facilitate exchange amoung members

Revenue Tariffs

are designed to raise money for the government

Foreign direct investment (FDI)

buying of permanent property and business in foreign nations

Importing

buying products from another country

Small and medium-sized firms are often better prepared to leap into global markets because they

can react quickly to opportunities

The Foreign Corrupt Practices Act of 1978 prohibits ------- payments to foreign officals to secure business catracts.

dubious questionable

walmart has retail stores in China, and staples has retail stores in Australia. these are examples of U.S companies

engaged in the global market

One drawback of an interantional ___________ ____________is that one partner can learn the other's technology and business practices and then use what it has learned to its own advantage.

joint venture

Legal & regulatory forces can create problems in the global market because

laws and regulations vary greatly between countries

Absolute advantage

the advantage that exists when a country has a monopoly on producing a specific product

Balance of payments

the difference between money coming into a country and money leaving the country plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment

Outsourcing

the process whereby one firm contracts with other companies often in different countries,to do some or all of its functions

Dumping

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

Balance of Trade

the total value of a nations exports compared to its imports measured over a particular period

Exchange Rate

the value of one nation's currency relative to the currencies of other countries

Franchising

A contractual agreement whereby someone with a good idea for a business sells others the rights to use a business name and sell a product or service in a given territory in a specified manner.

Contract Manufacturing

A foreign company produces private-label goods to which a domestic company then attaches its own brand name or trademark.

Import Quota

A limit on the number of products in certain categories that a nation can import

Tariff

A tax imposed on imports

Which of the following is an advantage of offshore outsourcing?

Companies can create efficiencies by paying low wages to employees.

Culture

refers to the set of values, beliefs, rules, lanuage, and institutions held by a specific group of people.

Embargo

A complete ban on the import/export of a certain product or the stopping of all trade with a particular country

Benefits of exporting

Increased sales and revenues Increased number of potential customers

Which of the following statements regarding offshore outsourcing is TRUE?

It allows companies to focus on areas in which they can grow

Strategies For Reaching Global Markets risk and commitment

Least Licensing Exporting Franchising Most Contract manufacturing Invernational joint ventures and strategic alliances Foreign direct investment

Which of the following are considered major hurdles to successful global trade?

Legal and regulatory forces and economic and financial forces

________ is the process in which one company contracts with companies in other countries (primarily low-wage global markets) to do some or all of its functions

Offshore outsourcing

Exporting

Selling of products to another country

Free trade

When goods and services can be traded freely across borders without political and/or economic barriers

. Which of the following statements is a good prediction of future occurrences in global markets?

With the strong growth in technical talent globally, offshore outsourcing will likely continue to increase

Foreign Subsidiary

a company owned in a foreign country by another company called the parent company

Licensing

a global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty)

Strategic Alliance

a long term partnership betweeen two or more compaines established to help each company build competitive market advantages

Joint Venture

a partnership in which two or more companies, often from different countries, join to undertake a major project.

devaluation

lowering the value of a nation's currency relative to other currencies

For a Firm to be considered a multinational corporation it must have

manufactures and markets products in many different countries and has multinational stock

Disadvantages of international joint ventures

may become too large and inflexible shared technology may become obsolete

A weak transportation infrastructure results in a __________ barrier to global business

physical

Trade_________ is the use of government regulations to limit the import of goods and services such as import tariffs and quotas

protectionism

Primary Function of protective tariffs

to raise the price of imported products so that domestic goods are more competitively priced

Since 1975 the united states has bought more goods from other nations thatn it has sold resulting in a

trade deficit

Trade Surplus (favorable balance of trade)

when the value of a country's exports exceeds that of its imports