Exam 1 Chapter 3-4 Test Prep Questions

What are four major hurdles to successful global trade?

1) Dealing with differences in sociocultural forces. 2) Economic and financial forces. 3) Legal and regulatory forces. 4) Physical and environmental forces.

What are two of the main arguments favoring the expansion of U.S. businesses into global markets?

1) Providing goods and services to satisfy peoples needs and wants won't be possible by a single nation. 2) Prices will be kept down by global competition and less-costly imports.

What are the major threats to doing business in global markets?

1) Terrorism 2) Nuclear Proliferation 3) Rogue States 4) Income Inequality

How would a low value of the dollar affect the U.S. exports?

A low value of the dollar may affect the U.S. exports by spending more money to make the products which would lead to making no profit.

What are the advantages and disadvantages of trade protectionism and of tariffs?

Advantages: -Used to regulate the imports and exports of goods. Disadvantages: -Goods sometimes cost more to purchase due to the cost of tariffs.

What are the advantages of using licensing as a method of entry in global markets? What are the disadvantages?

Advantages: -Gain revenues it would not otherwise have generated in its home market. -Licensors spend little or no money to produce and market their products Disadvantages: -A firm must grant licensing rights to its product for an extended period, 20 years or longer. -If a product experiences remarkable growth in the foreign market, the bulk of the revenues belong to the licensee. -If legal remedies are not available, the licensing firm may lose its trade secrets and promised royalties.

How are a nation's balance of trade and balance of payments determined?

Balance of trade and balance of payments are determined by the total value of a nation's exports compared to its imports over a particular period and the difference between money coming into a country from exports and money leaving the country for imports.

What is the key objective of a common market like the European Union?

Being able to trade regionally without having an internal tariff.

What is the comparative advantage, and what are some examples of this concept at work in the United States?

Comparative advantage is where a country should sell to other countries those products that it produces most efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently. Some examples of this concept at work in the U.S. would be software development and engineering services.

What is meant by the term "dumping" in global trade?

Dumping products being sold in a foreign country at lower prices than available in the country that they're being created in.

What does ethnocentricity mean, and how can it affect global success?

Ethnocentricity is an attitude that your own culture is superior to other cultures. This can affect global success because if you say or do anything offensive you'll basically be shut off and won't be successful.

What services are usually provided by an export-trading company?

Export-trading companies match buyers and sellers from different countries and deal with foreign custom offices, documentation, and even weights and measures conversions to ease the process of entering global markets.

What key challenges must China face before becoming a major global economic leader?

Key Challenges: -China's one-party political system -Human rights abuses -Currency issues -Increasing urban population growth

What three nations comprise NAFTA?

Mexico, Canada, and United States

What makes a company a multinational corporation?

Only firms with manufacturing capacity or some other physical presence in different nations can be called multinational corporation.

What does the Foreign Corrupt Practices Act prohibit?

Prohibits "questionable" or "dubious" payments to foreign officials to secure business contracts.

What is the primary purpose of the WTO?

To oversee cross-border trade issues and global business practices.

What are the two primary concerns associated with offshore outsourcing?

Two Primary Concerns: 1) Jobs may be lost permanently and wages fall due to low-cost competition. 2) May reduce product quality which will cause permanent damage to a company's reputation.

What is the key difference between a joint venture and a strategic alliance?

Unlike joint ventures, strategic alliances don't share costs, risks, management, or even profits.