Chapter 3 - Business in the Global Economy
Economic community
A group of nations organized to work toward common goals in the regulation of international trade.
quota
A limit on the quantity of a product that may be imported and exported within a given period.
infrastructure
A nation's transportation, communication, and utility systems.
free-trade zone
A selected area where products can be imported duty-free and then stored, assembled, and/or used in manufacturing.
tariff
A tax that a government places on certain imported products.
joint venture
An agreement between two or more companies from different countries to share a business project.
multinational company (MNC)
An organization that conducts business in several countries.
World Trade Organization (WTO)
Created in 1995 to promote trade around the world. With over 150 member countries, this organization settles disputes and enforces free-trade agreements between its members.
multinational strategy
Customizing products, promotion, and distribution according to cultural technological, regional, and national differences
imports
Goods and services bought from another country.
exports
Goods and services sold to another country.
International Monetary Fund (IMF)
Helps promote economic cooperation among its 150 nations and maintains an orderly system of world trade and exchange rates. It was established in 1946 when the economic interdependence among nations was growing at a greater pace than ever before in history.
International Development Association (IDA)
Makes loans to help developing countries.
free-trade agreement
Member countries agree to remove duties and trade barriers on products traded among them. This results in increased trade between the members.
unfavorable balance of trade
More imports than exports
formal trade barriers
Political actions such as quotas, tariffs and embargoes
foreign debt
Refers to external debt, meaning the total amount of debt (private and public) incurred by borrowing from foreign creditors. The global problem of debt involves large volumes of public debt.
informal trade barriers
Restrictions to trade based on culture, traditions, and religion
franchise
Right to use a company name of business process in a specific way.
licensing
Selling the right to use some intangible property (production process, trademark, or brand name) for a fee or royalty. Example: The Gerber Company started selling its baby food products in Japan by this means.
global strategy
Selling the same standardized product and using the same basic marketing approach in each national market
embargo
Stopping the importing or exporting of a certain product or service.
foreign exchange market
a market in which currencies of different countries are bought and sold
favorable balance of trade
an economic situation in which a country sells more goods abroad than it buys from abroad
international business
refers to business activities needed for creating, shipping, and selling goods and services across national borders
Absolute advantage
Exists when a country can produce a good or service at a lower cost than other countries. This may exist as a result from an abundance of natural resources or raw materials in a country. Example: South American countries have an absolute advantage in coffee production, and Saudi Arabia has an absolute advantage in oil production.
Comparative advantage
Exists when a country specializes in the production of a good or service at which it is relatively more efficient.
World Bank
The International Bank for Reconstruction and Development and is commonly called ____ _____. It was created in 1944 to provide loans for rebuilding after World War II. Today, its key function is to give economic aid to less developed countries.
interest rates
The cost of borrowing money
balance of trade
The difference between a country's total exports and total imports of goods.
balance of payments
The difference between a country's total payments to other countries and its total receipts from other countries.
foreign exchange rate
The value of money of one country expressed in terms of the money of another country.
Domestic business
the making, buying, and selling of goods and services within a country.
trade surplus
when a country exports more than it imports
trade deficit
when a nation imports more than it exports
