chapter 3 business

Absolute Advantage

1. if a nation is the only source of a particular product 2. it can make more of a product using the same amount of or fewer resources than other countries, because of climate and soil conditions.

2. Explain the following forms of global business: Licensing

A_________ agreement allows a foreign company to sell a company's products or use its intellectual property in exchange for royalty fees.

North America Free Trade Agreement

An agreement among the governments of the United States, Canada, and Mexico to open their borders to unrestricted trade. ----The effect of this agreement is that three very different economies are combined into one economic zone with almost no trade barriers.

subsidiary

An independent company owned by a foreign firm//a company controlled by a holding company

Comparative Advantage

How we can predict, for any given country, which products will be made and sold at home, which will be imported, and which will be exported. This exists when a country can produce a product at a lower opportunity cost compared to another nation

trade surplus

If a country sells more products than it buys, it has a favorable balance called what?

Foreign Corrupt Practices Act

Prohibits the distribution of bribes and other favors in the conduct of business. Unfortunately, though they're illegal in this country, such tactics as kickbacks and bribes are business-as-usual in many nations. According to some experts, American businesspeople are at a competitive disadvantage if they're prohibited from giving bribes or undercover payments to foreign officials or businesspeople who expect them; it's like asking for good service in a restaurant when the waiter knows you won't be giving a tip.

Strategy "Think Globally, Act Locally?"

They often adjust their operations, products, marketing, and distribution to mesh with the environments of the countries in which they operate. Because they understand that a "one-size-fits-all" mentality doesn't make good business sense when they're trying to sell products in different markets, they're willing to accommodate cultural and economic differences.

3. Explain the following forms of global business: Franchising

Under a ________ agreement, a company grants a foreign company the right to use its brand name and sell its products. ____________is a natural form of global expansion for companies that operate domestically, including restaurant chains, such as McDonald's

country's infrastructure- Provide one specific example.

_____ is the basic physical systems of a business or nation; transportation, communication, sewage, water and electric systems are all examples of infrastructure. These systems tend to be high-cost investments; however, they are vital to a country's economic development and prosperity.

4. Explain the following forms of global business: Outsourcing

a company has its products manufactured or services provided in other countries

European Union

a group of twenty-seven countries that have eliminated trade barriers among themselves.

forms of global business

exporting, franchising, licensing, outsourcing

Absolute Quota

fixes an upper limit on the amount of a goods that can be imported during the given period.

quotas

imposes limits on the quantity of a good that can be imported over a period of time. are used to protect specific industries, usually new industries or those facing strong competitive pressure from foreign firms.

Is the United States primarily a high-context or low-context culture? Explain.

low context -you don't necessarily need to know much about the personal context of a person's life to deal with him or her in the business arena.

offshoring

occurs when the facilities set up in the foreign country replace U.S. manufacturing facilities and are used to produce goods that will be sent back to the United States for sale. Shifting production to low-wage countries is often criticized as it results in the loss of jobs for U.S. workers.

Tariff-Rate Quota

permits the import of a specified quantity and then adds a high import tax once the limit is reached

foreign direct investment

refers to the formal establishment of business operations on foreign soil—the building of factories, sales offices, and distribution networks to serve local markets in a nation other than the company's home country

1. Explain the following forms of global business: Exporting

selling domestic products to foreign customers

tariffs

taxes on imports, also used to raise revenue for a government

balance of payments

the difference, over a period of time, between the total flow of money coming into a country and the total flow of money going out.

opportunity cost

the products that a country must decline to make in order to produce something else. When a country decides to specialize in a particular product, it must sacrifice the production of another product