Doing Business in Global Markets

Flashcards to review key concepts from the 'Doing Business in Global Markets' lecture notes.

How large is the global market in terms of potential customers?

Over 8 billion people.

What is importing?

Buying products from another country.

What is exporting?

Selling products to another country.

Why do nations engage in global trade regarding resources and products?

It allows nations to produce what they make best and buy what they need from others.

What is free trade?

The movement of goods and services among nations without political or economic barriers.

How does free trade impact productivity?

Productivity grows when countries produce goods and services in which they have a comparative advantage.

What is comparative advantage?

A country should sell products that it produces efficiently and buy products that it cannot produce as effectively or efficiently.

What is absolute advantage?

A country has a monopoly on producing a specific product or can produce it more efficiently than all other countries.

What is the balance of trade?

The total value of a nation’s exports compared to its imports over a particular period.

What is a trade surplus?

When the value of a country’s exports exceeds that of its imports.

What is a trade deficit?

When the value of a country’s imports exceeds that of its exports.

What is the 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.

What is dumping in global trade?

Selling products in a foreign country at lower prices than those charged in the producing country.

Licensing.

strategy for reaching global markets involves the least amount of commitment, control, risk, and profit potential

What are two benefits of licensing for a firm?

Gaining revenues it wouldn’t have otherwise generated and spending little or no money to produce or market its products.

What is franchising as a global market strategy?

A contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product or service in a given territory in a specified manner.

What is contract manufacturing?

A foreign company’s production of goods to which a domestic company then attaches its own brand name or trademark; part of the broad category of outsourcing.

What is an international joint venture?

A partnership in which two or more companies (often from different countries) join to undertake a major project.

What is a strategic alliance in global markets?

A long-term partnership between two or more companies established to help each company build competitive market advantages.

What is Foreign Direct Investment (FDI)?

The buying of permanent property and businesses in foreign nations.

What is a foreign subsidiary?

A company owned in a foreign country by another company, called the parent company.

What is ethnocentricity in a business context?

An attitude that your own culture is superior to other cultures.

What is an exchange rate?

The value of one nation’s currency relative to the currencies of other countries.

What is the effect of a high value of the dollar on foreign products?

Foreign products become cheaper.

What is devaluation?

Lowering the value of a nation’s currency relative to other currencies.

What is countertrading?

A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.

What is trade protectionism?

The use of government regulations to limit the import of goods and services.

What is a tariff?

A tax imposed on imports.

What is an import quota?

A limit on the number of products in certain categories that a nation can import.

What is an embargo?

A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.

What is the primary purpose of the World Trade Organization (WTO)?

To oversee cross-border trade issues and global business practices.

What is a common market (or trading bloc)?

A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange.

What agreement did the United States–Mexico–Canada Agreement (USMCA) replace?

The North American Free Trade Agreement (NAFTA).

Name one goal of the USMCA.

To create a level playing field for U.S. workers with improved rules, modernize and strengthen food and agriculture trade in North America, support the modern economy, or introduce new rules on digital trade, anticorruption, and good regulatory practices.

What is China's current role in global trade and its economy?

It is the world’s largest exporter and has the second-largest economy.

In which sectors has India seen significant growth in global markets?

Information technology, pharmaceuticals, and biotechnology.

What is offshore outsourcing?

The process whereby one firm contracts with other companies abroad to do some or all of its functions.

What is reshoring?

The process of bringing outsourced jobs or production back to the home country.

What is a potential disadvantage of offshore outsourcing regarding product quality or reputation?

It may reduce product quality and can therefore cause permanent damage to a company's reputation.

How can one prepare for globalization in their future career?

Study foreign languages, learn about foreign cultures, and take global business courses to develop a global perspective.

What are the major threats to doing business in global markets?

Major threats include political instability, economic fluctuations, cultural differences, and regulatory challenges.

What key challenges must China face before becoming the major global economic leader?

China must address issues such as environmental sustainability, overcapacity in certain industries, income inequality, and an aging population.

What are the two primary concerns associated with offshore outsourcing?

The two primary concerns are job displacement in the home country and quality control of the outsourced work.