Business Vocab #3

Foreign Subsidiary

A company owned in a foreign country by another company called the parent company. The most common form of FDI. Primary Advantage: Parent company maintains complete control over its technology or expertise. Primary Disadvantage: Must commit funds and technology within foreign boundaries.

Multinational Corporation (MNC)

A company that manufactures and markets products in many different countries and has multinational stock ownership and management.

Embargo

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

Franchising

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

Absolute Advantage

A country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.

Comparative Advantage

A country should sell the products it produces most efficiently and buy from other countries the products it cannot produce as efficiently.

Contract Manufacturing

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

General Agreement on Tariffs and Trade (GATT)

A global forum for reducing trade restrictions on goods, services, ideas and cultural problems.

Strategic Alliance

A long-term legal partnership between two or more companies established to help each company build competitive market advantages.

Joint Venture

A partnership in which two or more companies join and form a separate 3rd company to undertake a major project or market expansion.

Common Market

A regional group of countries with a common external tariff, no internal tariffs and coordinated laws to facilitate exchange among members.

BRIC Countries

Brazil, Russia, India, China

Malaysia McDonald's

Bubur Ayam McD - Chicken strips in porridge with onions, ginger, and shallots.

Importing

Buying products from another country.

Countertrading

Complex form of bartering in which several countries each trade goods or services for other goods or services.

Low value of the dollar

Dollar is trading for less foreign currency; foreign goods are more expensive.

High value of the dollar

Dollar is trading for more foreign currency; foreign goods are less expensive.

World Trade Organization (WTO)

Headquartered in Geneva, Switzerland, the WTO is an independent entity of the 153 member nations whose purpose is to oversee cross-border trade issues and global business practices.

Sovereign Wealth Funds (SWFs)

Investment funds controlled by governments holding large stakes in foreign companies.

Import Quota

Limits the number of products in certain categories a nation can import.

Devaluation

Lowers the value of a nation's currency relative to others.

Egypt McDonald's

Mcarabia - Grilled chicken with tehina sauces, lettuce, tomato and onion on Arabic bread.

Israel McDonald's

Operates using Kosher kitchens.

Outsourcing

Process by which a firm contracts with other companies to do some or all of its functions.

North American Free Trade Agreement (NAFTA)

Ratified in 1994, created a free-trade area among the United States, Canada and Mexico.

Dumping

Selling products in a foreign country at lower prices than those charged in the producing country or below cost.

Exporting

Selling products to another country.

Tariffs

Taxes on imports, making imported goods more expensive.

Japan McDonald's

Teritama - Teriyaki burger topped with an egg.

Foreign Direct Investment (FDI)

The buying of permanent property and businesses in foreign nations.

Balance of Payments

The difference between money coming into a country (from exports) and money leaving the country (from imports) plus other money flows.

Medical Tourism Association (MTA)

The first membership-based international non-profit trade association for the medical tourism and global healthcare industry.

Free Trade

The movement of goods and services among nations without political or economic barriers.

Balance of Trade

The total value of a nation's exports compared to its imports measured over a particular period.

Trade 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 the currencies of other countries.

Germany McDonald's

Want a beer with your burger? You can order one in the German stores.

Licensing

When a firm (licensor) provides the right to manufacture its product or use its trademark to a foreign company (licensee) for a fee (royalty).

Trade Deficit (Unfavorable)

When the value of a country's exports is less than that of its imports.

Trade Surplus (Favorable)

When the value of a country's exports is more than that of its imports.

Organization for Economic Cooperation and Development (OECD) and Transparency International

fight to end corruption and bribery in foreign markets and have had limited success.