12 14 13 Chapter 3 Notes Doing Business in Global Markets Importing buying products from another country The Dynamic Global Market Exporting selling products to another couldn t Free trade the movement of goods and services among nations without political or economic barriers Comparative advantage theory that states that a country should sell to other countries those products that it produces most effectively and efficiently and buy from other countries those products that it cannot produce as effectively or efficiently Absolute advantage the advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries Getting Involved in Global Trade Importing Exporting Balance of trade the total value of a nations exports compared to its imports Trade surplus favorable balance of trade occurs when the value of a country s Trade deficit unfavorable balance of trade occurs when the value of a country s measured over a particular period exports exceeds that of its imports imports exceeds that of its exports Balance of payments the difference between money coming into a country from exports and money leaving the country from imports plus money flows from other factors such as tourism foreign aid military expenditures and foreign investment Dumping selling products in a foreign country at lower prices than those charged in the producing country Strategies for Reaching Global Markets Licensing global strategy in which a firm allows a foreign company to produce its product in exchange for a fee Licensing exporting franchising contract manufacturing international joint ventures and strategic alliances foreign direct investment US is hesitant to engage in indirect exporting through specialists called export trading companies that assist in negotiating and establishing trading relationships Franchising is a contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name and sell a product or service in a given territory in a specified manner Contract manufacturing a foreign country s production of private label goods to which a domestic company then attaches its brand name or trademark part of the broad category of outsourcing Joint venture a partnership in which two or more companies often from different countries join to undertake a major project Strategic alliance long term partnership between two or more companies established to help each company build competitive market advantages Foreign direct investment the buying of permanent property and business in Foreign subsidiary a company owned in a foreign country by another company foreign nations called the parent company Multinational corporation an organization that manufactures and markets products in many countries and has multinational stock ownership and multinational management Sovereign wealth funds investment funds controlled by governments holding large stakes in foreign companies Forces Affecting Trading in Global Markets Sociocultural forces o US business people are accused of ethnocentricity an attitude that your own culture is superior to other cultures o Never assumer that what works in one country works in another Exchange rate the value of one nations currency relative to the currencies of other Devaluation lowering the value of a nation s currency relative to other currencies Countertrading complex form of bartering in which several countries may be involves each trading goods for goods or service for services Legal and regulatory forces no central system of law exists Physical and environmental forces affects a companies ability to conduct global Trade Protectionism Trade protectionism the use of government regulation to limit the import of goods Tariff tax imposed on imports Import quota a limit on the number of products in certain categories that a nation can import Embargo a complete ban on the import or export of a certain product or the stopping of all trade with a particular country General Agreement on Tariffs and Trade GATT 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions World Trade Organization WOT international organization that replaced the GATT and was assigned the duty to mediate trade disputes among nations Common markets regional group of countries that have a common external tariff no internal tariffs and coordination of laws to facilitate exchange also called trading bloc An example is the European Union North American Free Trade Agreement NAFTA agreement that created a free trade area among the US Canada and Mexico The Future of Global Trade countries business and services Outsourcing firm contracts with other companies often in other countries to do some or all of its functions Offshore outsourcing is a major issue shift to primary low wage global markets
View Full Document
Unlocking...