Chapter 3: Business in the Global Economy (flash cards)

Globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale; integration of world economies.

International Trade

The exchange of goods, services, and capital across national borders.

Exports

Goods or services produced in one country and sold to buyers in another country.

Imports

Goods or services brought into a country from abroad for sale.

Balance of Trade

The difference in value between a country’s exports and imports (exports minus imports).

Trade Surplus

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

Trade Deficit

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

Balance of Payments

A record of all financial transactions made between one country and all other countries during a specific time period; includes trade, investment, and financial transfers.

Exchange Rate

The value of one country’s currency expressed in terms of another country’s currency.

Currency Functions

International currency serves three main functions: a) Store of value for future buying, b) Medium of exchange for conducting business transactions, c) Unit of measure to value goods and services between countries.

Tariffs

Taxes imposed by a government on imported goods, typically to protect domestic industries or to generate revenue.

Quotas

Limits set by a government on the quantity of a good that can be imported over a specified period.

Trade Barrier

Any government policy or regulation (tariffs, quotas, embargoes, etc.) that restricts international trade.

Free Trade Agreement

A pact between two or more nations to reduce or eliminate trade barriers to encourage trade.

World Trade Organization (WTO)

An international organization that deals with global trade rules. Four key purposes: a) Lower tariffs that discourage free trade, b) Eliminate import quotas, c) Reduce barriers for banks, insurance companies, and other financial services, d) Assist poor countries with economic growth.

Foreign Direct Investment (FDI)

Investment made by a firm or individual in one country into business interests located in another country.

Multinational Corporation (MNC)

A company that has operations (production, marketing, etc.) in more than one country.

Outsourcing

Having another entity (often in another country) perform part of a firm’s operations or services to reduce costs or improve efficiency.

Offshoring

Relocating business processes or production to another country while retaining control of operations.

Licensing

A business arrangement in which a company allows another party in another country to use its intellectual property for a fee or royalty.

Franchising

A method of expanding a business where a firm grants a foreign franchisee the rights to operate using its name, branding, and business model.

Joint Venture

A business enterprise in which two or more parties (often from different countries) agree to share ownership, control, profits, and risks.

Trade Bloc / Economic Union

A group of nations that form an agreement to reduce trade barriers among member nations (e.g., EU, NAFTA / USMCA).

Comparative Advantage

The ability of a country to produce a good or service at a lower opportunity cost than its trading partners.

Culture

The shared beliefs, values, customs, behaviors, and social norms of a group of people that influence how they interact and do business.

Main Cultural & Social Factors

Language, religion, values, customs, and social relationships; factors that can affect international business operations.

World Bank

An international bank formally called the International Bank for Reconstruction and Development, created in 1944 to help countries rebuild after World War II and provide loans for development projects.