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