Chapt - 03 Doing Business in Global Markets
the U.S has how many billionaires?
565
Outsourcing
A decision by a corporation to turn over much of the responsibility for production to independent suppliers.
Licensing
A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty).
what is the key difference between a joint venture and a strategic alliance?
A joint venture is a partnership between two or more companies whereby they undertake a major project. Joint ventures generally involve: (a) sharing technology and risk; (b) sharing marketing and management expertise; (c) entry into markets where foreign companies are often not allowed unless goods are produced locally. In a strategic alliance partners do not share costs, risks, management, or even profits. The purpose is to gain advantages in building competitive market advantages.
strategic alliance
A long-term partnership between two or more companies established to help each company build competitive market advantages.
what makes a company a multinational corporation?
A multinational corporation manufactures and markets products in many different countries and has multinational stock ownership and management. Only firms that have manufacturing capacity or other physical presence in other countries can be called multinational.
Protective Tariff
A tax on imported goods that raises the price of imports so people will buy domestic goods
contract manufacturing can be used to
Allow a company to experiment in a new market without incurring heavy start up costs such as building a manufacturing plant. Temporarily meet an unexpected increase in orders.
trade deficit
An excess of imports over exports
multinational corporation
An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management
CAFTA
Central American Free Trade Agreement
examples of common market
EU, ASEAN, COMESA
How can licensing benefit a firm?
Gaining revenues it wouldn't have otherwise generated. Spending little or no money to produce or market their products.
GATT
General Agreement on Tariffs and Trade
Foreign Direct Investment
Investment made by a foreign company in the economy of another country.
NAFTA
North American Free Trade Agreement
Dumping
Selling goods in another country below market prices
Benefits of joint ventures
Shared technology and risk. Shared marketing and management expertise. Entry into markets where foreign companies are often not allowed unless goods are produced locally.
Tariffs
Taxes on imported goods
WTO
World Trade Organization
foreign subsidiary
a company owned in a foreign country by another company, called the parent company
frachising
a contractual agreement whereby someone with a good idea for a business sells other rights to use the name and sell a product or service in a given territory in a specified manner
aboslute advantage
a country has a monopoly on producing specific product or is able to produce it more efficiently than all other countries
Common Market
a group of countries that acts as a single market, without trade barriers between member countries
import quota
a limit on the number of products in certain categories that a nation can import
what are the advantages of using licensing as a method of entry in global markets? what are the disadvantages?
a) a firm can often gain revenues in a market it would not have generated in its home market; (b) licensees must purchase start-up supplies and consulting services from the licensing firm; and c) licensors spend little or no money to produce and market their products. Disadvantages to licensing include: (a) if a product is extremely successful in another market, the licensor does not receive the bulk of the revenues, and (b) if the foreign licensee learns the company's technology and product secrets, it may break the agreement and begin producing similar products on its own.
joint venture
an agreement between two or more companies to share a business project
Embargo
an official ban on trade or other commercial activity with a particular country.
importing
buying products from another country
what is comparative advantage, and what are some examples of this concept at work in the United States?
comparative advantage simply states that a county should sell to other countries those products it produces most effectively and efficiently, and buy from other countries those products it cannot produce as efficiently. Examples in the U.S are services such as software and engineering services.
physical and environmental forces affecting global markets
developing countries have transportation and storage systems that make international distribution difficult or impossible. Often, technological capabilities are far from those in the U.S which makes for a tough business environment.
what is meant by the term dumping in global trade?
dumping is the selling of products in foreign countries at lower prices than those charged in the producing country. this tactic is sometimes used to reduce surplus products in foreign markets or gain a foothold in a new market.
Benefits of Strategic Alliances
ease of market entry shared risk shared knowledge and expertise synergy and competitive advantage
what are the objectives of NAFTA
eliminate trade barriers and facilitate cross-border movement of goods and services. Promote conditions of fair competition. Increase investment opportunities. Provide effective protection and enforcement of intellectual property rights. Establish a framework for further regional trade cooperation. Improve working conditions in North America
economic and financial forces affecting global markets
exchange rate - the value of one nation's currency relative to the currencies of other countries. - high value of the dollar - dollar is trading for more foreign currency; foreign products become cheaper. - low value of the dollar - dollar is trading for less foreign currency; foreign goods become more expensive - floating exchange rates - currencies float in value depending on the supply and demand for them in the global market Devaluation - lowering the value of a nation's currency relative to other currencies Countertrading - a complex for of bartering in which several countries may be involved, each trading goods for goods or services for services.
what is the best country for living?
germany
Why trade with other nations?
global trade allows countries to produce what they make best and buy what they need from others
free trade
international trade free of government interference
sovereign wealth funds
investment funds controlled by governments holding large stakes in foreign companies
what is the term for a global strategy in which a firm allows a foreign company to produce its product in exchange for a fee?
licensing
what is the goal of the balance of payments?
more money flowing into a country that is flowing out - this is called a favorable balance
trade or surplus
occurs when the value of a country's exports exceeds that of its imports
contract manufacturing
private label manufacturing by a foreign company
what services are usually provided by an export-trading company ?
provide services such as assistance in associating and establishing the desired trading relationships, matching buyers and sellers from different countries, and help dealing with foreign customs offices, documentation, and weights and measures.
Exporting
selling products to another country
sociocultural forces affecting global markets
social structures, religion, manners and customs, values and attitudes, language, person communication
what are the forces that affect global markets?
sociocultural, economic and financial, legal and regulatory, physical and environmental
what is the best country for doing business?
sweden
what are examples of trade protectionism ?
tariffs - protective tariffs - revenue tariffs Import quota Embargo
revenue tariff
tax on imports used primarily to raise government revenue without restricting imports
comparitive advantage
the ability to produce a good at a lower opportunity cost than another producer
how are a nation's balance of trade and balance of payments determined?
the balance of trade is the difference in the total value of a nation's exports compared to its imports. The balance of payments is the difference between money coming into a country and money leaving the country plus money flows coming into or leaving a country from other factors such as tourism, foreign aid, military expenditures, and foreign investment
balance of trade
the difference between a country's total exports and total imports
balance of payments
the difference between the flow of money into and out of a country
what are two of the main arguments favoring the expansion of U.S businesses into global markets?
the sheer size of the global market is too large to ignore, plus it's difficult for an economy, even one as large as the u.s economy, to produce all the goods and services its citizens desire
trade protectionism
the use of government regulations to limit the import of goods and services
legal and regulatory forces affecting global markets
there's no global system of laws, laws may be inconsistent, U.S businesses must follow U.S laws while conducting global business.
what is an unfavorable balance?
when morem money is flowing out than in