Chapter 3 Notes Business Essentials

quota

"To regulate international trade, govern- ments set a limit on the quantity of a product that may be imported or exported within a given period."

tariff

"is a tax that a government places on certain imported products."

Multinational Company

"is an organization that does business in several countries."

Joint Venture

"s an agreement between two or more companies to share a business project." -allows two or more companies to share raw materials, shipping facilities, management activities, or production activities

Trading Among Nations

-absolute advantage -comparative advantage -importing -exporting

What actions could be taken to encourage international trade?

-actions that could be taken to encourage international trade include free- trade zones free trade agreements and common markets.

Common Markets

-allow companies to invest freely in each members country -allow workers to move freely across borders -examples: European Union (EU) Latin American Integration Association (LAIA)

Licensing

-allows companies to product items in other countries without being actively involved -has a low financial investment, so the potentials financial return for the company is often low -the risk for the company is low

Franchising

-allows organizations to enter into contracts with people in other countries to set up a business that looks and runs like the parent company. -marketing elements, such as food products, packaging, and advertising, must meet both cultural sensitivities and legal requirments

What factors affect the value of a country's currency?

-balance of payments -economic conditions -political stability

How does balance of trade differ from balance of payments?

-balance of trade is the difference between a country's total exports and total imports -balance of payments is the difference between the amount of money that comes into a country and the amount that goes out of it.

Concerns about Joint Venture

-concerns include the sharing of profits and not as much control because serveral companies are involved -very popular for manufacturing, such as Japanese and U.S automobile manufactors

Drawbacks of Multinational companies

-economic power -worker dependence on the MNC -consumer dependence -political power

How does importing differ from exporting

-exporting is selling goods and services to other countries -importing is bringing items from other countries into a country

International Currency

-foreign exchange rates -factors affecting currency values -Three main factors affect currency -balance of payments -economic conditions -political stability

International Business Enviroment

-geography -cultural influences -economic development -literacy level -technololgy -agricultural dependency -political and legal concerns

The 4 main elements of the international business environment?

-geography -cultural influences -economic development -political and legal concerns

MNC Benefits

-large amounts of goods available -lower prices -career opportunities -foster understanding, communication, and respect -friendly international relations

How does licensing differ from a fanchise?

-licensing does not require as much financial investment of a risk as franiching

Free Trade Agreements

-member countries agree to remove duties and trade barriers on products traded among them -results in increased trade between members

What are three formal trade barriers?

-quotas -tariffs -ambargoes

Reasons for quatos

-to keep supply low and prices the same -to express displeasure at the policies of the importing country -to protect on of a country's industries from too much competition from abroad

Reasons for emabargoes

-to protect a country's industries from international competition more than the quota or tariff will achieve. -to prevent sensitive product from falling into the hands of unfriendly groups or nations

Reasons for tariffs

-to set amount per pound, gallon, or other unit -to set the value of a good

Free- Trade Zones

-used to promote international business in a selected area where products can be imported duty-free and then stored assembled, and or used in manufacturing -usually located around a seaport or air port

World trade orginzation

150 member countries promote trade settles trade disputes enforces free trade agreements] GOALS lowering tariffs that discourage free trade eliminating import quotas reducing barriers for banks, insurance companies, and other financial services

exports

Goods and services sold to other countries are called

balance of payments

is the difference between the amount of money that comes into a country and the amount that goes out of it.

exchange rate

is the value of a currency in one country compared with the value in another.

infrastructure

Another factor that supports international trade in industrialized countries is

balance of trade

The difference between a country's total exports and total imports is called the

imports

are items bought from other countries

How does the international monetary fund assist countries?

the international monetary fund assists countries by promoting economic cooperation and maintaining an orderly system of world trade and exchange rates.

trade barriers

which are restrictions to free trade.