Intro to Business Chapter 4

Balance of payment

the record of all economic transactions between the residents of the country and the rest of the world in a particular period (over a quarter of a year or more commonly over a year)

Free trade

the unencumbered flow of goods and services across national borders. It's free from government intervention or other impediments that can block the flow of goods across borders

Embargo

total restriction on an import (or an export). Most heavy-handed government trade barrier/quota

Currency appreciation

an increase of value of a country's currency

comparative advantage

When a country produces the goods and services it can produce relatively more efficiently compared to other countries

global strategy

When companies sell a standardized product across the globe, they are pursuing this.

Wholly-owned subsidiary

a company that is completely owned by another company called the parent company or holding company. The parent company will hold all of the subsidiary's common stock

strategic alliance

a cooperative arrangement between actual or potential competitors. Typically, they are agreements for a specific period of time or the duration of a particular project.

Currency depreciation

a decrease in the exchange rate of a nation's currency. It has the opposite effect on the relative prices of exports and imports: exports become cheaper and imports become more expensive.

tariff

a tax imposed on an imported good or service. Governments prefer to impose tariffs because they raise tax revenues

Turnkey project

a type of project that is constructed so that it could be sold to any buyer as a completed product

Competitive advantage

an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices.

Multinational enterprises

businesses that manufacture and market products in two or more countries

trade deficit

exists when the value of a country's imports exceeds the value of its exports.

Joint venture

formed when 2 firms team up to better take advantage of a business opportunity

subsidiary

formed when an investing firm purchases a foreign or domestic facility

Licensing

is an agreement in which a firm's intangible property may be sold or made available to another firm for a fee.

Political instability

likely to have an adverse effect on international trade. Companies do not want to invest in countries that are politically unstable.

Quota

limitation on the amount of an import allowed to enter a country.

Contract manufacturing

occurs when a firm subcontracts part or all of its goods to an outside firm as an alternative to owning and operating its own production facility.

trade surplus

occurs when the value of a country's exports exceeds the value of its imports.

transnational strategy

offer a standardized product globally to many countries, working simultaneously to sell it at the lowest possible price

offshoring

refers to moving production from a domestic site to a foreign location.

The globalization of production

refers to the trend of moving a firm's production to different locations around the globe to take advantage of lower costs or enhance the quality of products. Outsourcing is often part of the globalization of production.

Dumping

selling a product at a price below its cost in a foreign market. Can be difficult to prove and even harder to stop.

Absolute advantage

the ability of a party (an individual, or firm, or country) to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.

Outsourcing

the assignment of certain tasks, such as production or accounting, to an outside company or organization.

Balance of trade

the difference in value between a country's imports and exports

Globalization

the movement toward a more interconnected and interdependent world economy.