Business Chapter 3 Global Markets Vocab

Importing

Buying products from another country.

Exporting

Selling products to another country.

Free trade

The movement of goods and services among

nations without political or economic barriers.

Comparative advantage

A country should sell to other

countries those products that it produces most efficiently, and

buy from other countries those products that it cannot produce

as effectively or efficiently.

Absolute advantage

A country has a monopoly on producing

a specific product or is able to produce it more efficiently than all

other countries.

Balance of trade

The total value of a nation’s exports

compared to its imports over a particular period.

Trade surplus (favorable)

Occurs when the value of a

country’s exports exceeds that of its imports.

Trade deficit (unfavorable)

Occurs when the value of a

country’s 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.

Favorable balance of trade

The goal is to have more money flowing into a country than out.

Unfavorable balance of trade

Occurs when more money flows out of a country than into a country.

Dumping

Selling products in a foreign country at lower prices

than those charged in the producing country.

Licensing

A global strategy in which a firm (the licensor)

allows a foreign company (the licensee) to produce its product in

exchange for a fee (a royalty).

ETCs (Export Trading Companies)

Help companies engage in indirect exporting by matching buyers and sellers. They deal with foreign customs offices, documentation, and conversions.

Franchising

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.

Contract manufacturing

A foreign company’s production of

private-label goods to which a domestic company then attaches

its own 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

A long-term partnership between two or

more companies established to help each company build

competitive market advantages.

Foreign direct investment (FDI)

The buying of permanent

property and businesses in foreign nations.

Foreign subsidiary

A company owned in a foreign country by

another company, called the parent company.

Multinational corporation

An organization that manufactures

and markets products in many different countries and has

multinational stock ownership and multinational management.

Sovereign wealth funds (SWFs)

Investment funds controlled

by governments holding large stakes in foreign companies.