Chapter 3: Competing in Global Markets

Name the 4 reasons nations trade?

To get what they need

To expand their market

To search for growth opportunities

Access to factors of production

How does globalization help keep prices down

by increasing competition

Benefits of Globalization

more competition

foreign investments

innovation

Why is foreign investment good?

it keeps interest rates low

Drawbacks of Globalization

Lose jobs (service jobs)

Wages decrease

Loss of advantage for domestic companies

This type of advantage occurs when a country

monopolizes the production of a product

can make it more efficiently

Absolute advantage

This type of advantage occurs when a company

sells what it makes efficiently and buys what it cannot make efficiently

Comparative advantage

The strategies to reach global markets depend on these factors:

Commitment

Control

Risk

Profit Potential

Which strategy to reach global markets has the least amount of commitment, control, risk, profit potential

Licensing

Which strategy to reach global markets is the most risky

Multinational Corporation

_____________ is when you allow a foreign company to make your product for a fee

Licensing

___________ occurs when you sell products and/or services to another country

exporting

___________ occurs when you buy products and/or services from another country

Importing

____________ occurs when a company sells rights to use their business name & sell their products/services

Franchising

_____________ occurs when goods are manufactured in a foreign country

Contract manufacturing

___________ occurs when companies join to undertake a major new project.

Joint venture

__________ is a long-term partnership with the goal to help each other get a competative advantage

Strategic alliances

In which of the two is it easier to separate functions

Strategic alliance

_________________ occurs when permanent property/businesses are bought in a foreign nation

Foreign direct investment

_______________ is the term used when a company owns another company in a foreign country

Foreign subsidiary

What is the most common type of Foreign Direct investment?

Foreign subsidiaries

_____________ is what we call investment funds controlled by the government

Sovereign wealth funds

_______________________________ is limited to large companies where they:

   Make/market goods in many countries

   Have multinational stock ownership and management

Multinational corporation

Indicators used to measure trade

Balance of trade and balance of payments

__________ is calculated by finding the difference between exports and imports

Balance of trade

__________ is calculated by finding the difference between money entering the country and money leaving the country

Balance of payments

A trade surplus occurs when:

There are more exports than imports

A trade deficit occurs when:

There are more imports than exports

This force that affects trade includes differences in:

   language, religion, values, attitudes, aesthetics, materialism

Socio-cultural Environment

Risk and uncertainty tolerance is used to describe:

a person’s openness to change

_____________ is the term used to describe society’s acceptance/rejection of unequal power

Power distance

_____________ prefers structure, order and predictability

High uncertainty avoidance culture

____________ has a willingness to run risks

Low uncertainty avoidance culture

_____________ is the degree to which society emphasizes short-term/long-term goals

Time orientation

____________ does one thing at a time

monochronic culture

____________ does many things at once

Polychronic culture

________ is the term used to describe how interpersonal space is used to communicate

Space/Proxemics

Protectionism occurs when:

government regulations limit imports

These tariffs raise retail prices on imports

Protective tariffs

These tariffs raise money for the government

Revenue tariffs

An import quota is when:

the government sets limits to the number of imports from a country

An embargo is:

a complete ban on a product