Chapter 3: The World Marketplace

Flashcards on international business concepts.

Unprecedented Opportunity in International Trade

The economic boundaries between nations have begun to blur due to technology, telecommunications, and falling trade barriers.

Key Reasons for International Trade

Access to factors of production, reduced risk, and inflow of innovation.

Key Reasons against International Trade

Loss of jobs, loss of industries, and increase in foreign ownership.

Opportunity cost

The opportunity of giving up the second-best choice when making a decision.

Absolute advantage

When a country can produce more of a good than other nations using the same amount of resources.

Comparative advantage

The benefit a country has in a given industry if it can make products at a lower opportunity cost.

Absolute Advantage Theory

Exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.

Comparative Advantage Theory

A country should sell to other countries those products that it produces most effectively and efficiently, and buy from other countries those products it cannot produce as effectively or efficiently.

Global Trade Measures

Balance of trade, balance of payments, exchange rates, and countertrade.

Benefit of a Strong Dollar for Canadian travelers to Europe

Their dollars can buy more European goods and services.

Benefit of a Strong Dollar for Canadian firms with European operations

Operating costs from buying products to paying workers are lower.

Benefit of a Strong Dollar for European exporters

Their products are less expensive in Canada, so Europe exports more and we import more.

Benefit of a Weak Dollar for European travelers to Canada

Their dollars buy more Canadian goods and services.

Benefit of a Weak Dollar for European firms with Canadian operations

Operating costs from buying products to paying workers are lower.

Benefit of a Weak Dollar for Canadian exporters

Their products are less expensive in Europe, so we export more and Europe imports more.

Strategies for Reaching Global Markets (Part 1)

Foreign outsourcing and importing.

Strategies for Reaching Global Markets (Part 2)

Exporting, licensing, franchising, and direct investment.

Barriers to International Trade

Socio-cultural differences, economic differences, and political and legal differences.

Examples of Social/Cultural Differences

Nonverbal communication, forms of address, attitudes toward punctuality, religious celebrations, and business practice/gifts.

Economic Differences to Consider

Population, per capita income, economic growth rate, currency exchange rates, stage of economic development, and infrastructure.

Political and Legal Differences to Consider

Political regimes, laws and regulations, political climate, and international trade restrictions.

Trade Restrictions

Tariffs, quotas, voluntary export restraints (VER), and embargos.

Free Trade

The unrestricted movement of goods and services across borders.

General Agreement on Tariffs and Trade (GATT)

Now encompasses 125 nations and has slashed tariffs by about 30%.

World Trade Organization (WTO)

Promotes international trade and settles trade disputes.

World Bank

Made up of 188 member countries; provides financial assistance and low-interest loans.

International Monetary Fund (IMF)

Supports stable exchange rates and facilitates international payments.

Trading Blocs/Common Markets

Groups of countries promoting the free flow of goods and services.

Examples of Trading Blocs/Common Markets

The USMCA (United States-Mexico-Canada Agreement), CETA (Comprehensive Economic and Trade Agreement), European Union (EU), CKFTA (Canada Korea Free Trade agreement), TPP (Trans-Pacific Partnership)