MGMT 425 Exam 2

international trade

purchase, sale, or exchange of goods and services across national borders

mercantilism

trade theory that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports

trade surplus

condition that results when the value of a nation's exports is greater than the value of its imports

trade deficit

condition that results when the value of a country's imports is greater than the value of its exports

absolute average

ability of a nation to produce a good more efficiently than any other nation

comparative advantage

inability of a nation to produce a good more efficiently than other nations but an ability to produce that good more efficiently than it does any other good.

factor proportions theory

trade theory stating that countries produce and export goods that require resources (factors) that are abundant and import goods that require resources in short supply.

international produce life cycle theory

theory stating that a company will begin by exporting its product and later undertake foreign direct investment as the product moves through its life cycle.

new trade theory

trade theory stating that (1) there are gains to be made from specialization and increasing economies of scale, (2) the companies first to market can create barriers to entry, and (3) government may play a role in assisting its home companies.

first-mover advantage

economic and strategic advantage gained by being the first company to enter an industry

national competitive advantage theory

trade theory stating that a nations competitiveness in an industry depends on the capacity of the industry to innovate and upgrade.

economic system

structure and processes that a country uses to allocate its resources and conduct its commercial activities

centrally planned economy

Economic system in which a nation's, factories, and other economic resources are owned by the government, which plans nearly all economic activity.

mixed economy

economic system in which land, factories, and other economic resources are rather equally split between private and government ownership.

privatization

policy of selling government-owned economic resources to private operators

market economy

economic system in which the majority of a nation's land, factories, and other economic resources are privately owned, either by individuals or businesses.

supply

quantity of a good or service that producers are willing to provide at a specific selling price.

demand

quantity of a good or service that buyers are willing to purchase at a specific selling price.

economic development

measure for gauging the economic well-being of one nation's people as compared with that of another nation's people.

purchasing power

value of goods and services that can be purchased with one unit of a country's currency

purchasing power parity (PPP)

relative ability to two countries' currencies to buy the same "basket" of goods in those two countries.

human development index (HDI)

measure of the extent to which a government equitably provides its people with a long and healthy life, an education, and a decent standard of living.

developed country

country that is highly industrialized and highly efficient, and whose people enjoy a high quality of life.

newly industrialized country (NIC)

country that has recently increased the portion of its national production and exports derived from industrial operations.

emerging markets

newly industrialized countries plus those with the potential to become new industrialized..

developing country

nation that has a poor infrastructure and extremely low personal incomes. Also called less-developed countries

technological dualism

use of the latest technologies in some sectors of the economy coupled with the use of outdated technologies in other sectors.

economic transition

process by which a nation changes its fundamental economic organization and creates new free-market institutions.

entry mode

institutional arrangement by which a firm gets its products, technologies, human skills, or other resources into a market

direct exporting

practice by which a company sells its products directly to buyers in a target market.

indirect exporting

practice by which a company sells its products to intermediaries who when resell to buyers in a target market.

agents

individuals or organizations that represent one or more indirect exporters in a target market

export management company (EMC)

company that exports products on behalf of indirect exporters

export trading company (ETC)

company that provides services to indirect exporters in addition to activities related directly to clients' exporting activities

freight forwarder

specialist in export-related activities such as customers clearing, tariff schedules, and shipping and insurance fees.

countertrade

practice of selling goods or services that are paid for, in whole or in part, with other goods or services.

barter

exchange of goods or services directly for other goods or services without the use of money

counterpurchase

sale of goods or services to a country by a company that promises to make a future purchase of a specific product from the country.

offset

agreement that a company will offset a hard-currency sale to a nation by making a hard-currency purchase of an unspecified product from that nation in the future.

switch trading

practice in which one company sells to another its obligation to make a purchase in a given country

buyback

export of industrial equipment in return for products produced by that equipment.

advance payment

export/import financing in which an importer pays an exporter for merchandise before it is shipped.

documentary collection

export/import financing in which a bank acts as an intermediary without accepting financial risk.

draft (bill of exchange)

document ordering an importer to pay an exporter a specified sum of money at a specified time.

bill of lading

contract between an exporter and a shipper that specifies merchandise destination and shipping costs.

letter of credit

export/import financing in which the importer's bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document

open account

export/import financing in which an exporter ships merchandise and later bills the importer for its value.

licensing

practice by which one company owning intangible property (the licensor) grants another firm (the licensee) the right to use that property for a specified period of time.

cross licensing

practice by which companies use licensing agreements to exchange intangible property with one another

franchising

practice by which one company (the franchiser) supplies another (the franchisee) with intangible property and other assistance over an extended period.

management contract

practice by which on company supplies another with managerial expertise for a specific period of time.

turnkey (build-operate-transfer) project

practice by which one company designs, constructs, and tests a production facility for a client firm.

wholly owned subsidiary (wos)

facility entirely owned and controlled by a single parent company.

joint venture (jv)

separate company that is created and jointly owned by two or more independent entities to achieve a common business objective. Example: Roommate, UL Monroe & UL Lafayette

strategic alliance

relationship whereby two or more entities cooperate (but do not form a separate company) to achieve the strategic goals of each.

culture

set of values, beliefs, rules, and institutions held by a specific group of people

ethnocentricity

belief that one's own ethnic group or culture is superior to that of others.

cultural literacy

detailed knowledge about a culture that enables a person to function effectively within it.

subculture

a group of people who share a unique way of life within a larger, dominant culture

aesthetics

what a culture considers "good taste" in the arts, the imagery evoked by certain expressions, and the symbolism of certain colors.

values

ideas, beliefs, and customs to which people are emotionally attached.

attitudes

positive or negative evaluations, feelings, and tendencies that individuals harbor toward objects or concepts

cultural trait

anything that represents a culture's way of life, including gestures, material objects, traditions, and concepts

cultural diffusion

process whereby cultural traits spread from one culture to another

cultural imperialism

replacement of one culture's traditions, folk heros, and artifacts with substitutes from another.

manners

appropriate ways of behaving, speaking, and dressing in a culture.

customs

habits or ways of behaving in specific circumstances that are passed down through generations in a culture

folk custom

behavior, often dating back several generations, that is practiced by a homogeneous group of people

popular custom

behavior shared by a heterogeneous group or by several groups

social culture

a culture's fundamental organization, including its groups and institutions, its system of social positions and their relationships, and the process by which its resources are distributed

social group

collection of two or more people who identify and interact with each other.

social stratification

process of ranking people into social layers or classes

social mobility

ease with which individuals can move up or down a culture's "social ladder."

caste system

system of social stratification in which people are born into a social ranking, or caste, with no opportunity for social mobility

class system

system of social stratification in which personal ability and actions determine social status and mobility

communication

system of conveying thoughts, feelings, knowledge, and information through speech, writing, and actions

lingua franca

third or "link" language understood by two parties who speak different native languages

body language

language communicated through unspoken cues, including hand gestures, facial expressions, physical greetings, eye contact, and the manipulation of personal space.

brain drain

departure of highly educated people from one profession, geographic region, or nation to another

topography

all the physical features that characterize the surface of a geographic region

material culture

all the technology used in a culture to manufacture goods and provide services.

Klockhohn-Strodtbeck framework

framework for studying cultural differences along six dimensions, such as focus on past or future events and belief in individual or group responsibility for personal well-being.

Hofstede framework

framework for studying cultural differences along five dimensions, such as individualism versus collectivism and equality versus inequality

What are two methods of exporting to foreign markets?

Indirect Exporting
Direct Exporting

What are the methods of indirect exporting to foreign markets?

Agents
Export Management Company (EMC)

What are the methods of direct exporting to foreign markets?

Sales Representative
Distributors

What are the methods of entry and operations in FM's (production &/or marketing)?

WOS (wholly owned subsidiaries)
JV (joint venture)
Licensing & Franchising
Manufacturing Contract or Contract Manufacturing (not in book)
Management Contract or Contract Management
Turn-key Products

What is the method of involvement of strategic alliance (enter & establish)?

Cooperative engagement between you and I, limited purpose & duration.

What does free trade promote?

free international trade promotes economic prosperity by engaging in economies of skill.

Free Trade vs. Protectionsim:
What is the Free Trade thesis example?

Free trade is in the best economic interest of every country in the world.

Under certain conditions at certain time and for a limited time period, some protectionism is justifiable.
1.) National security or sovereignty
2.) Infant/ Mature Industry Protection
3.) Protection of Domestic jobs
4.)Anti-dumping
5.)Retaliation against unfair trading companies

Free Trade vs. Protectionsim:
What is the Protectionism thesis example?

Free trade promotes economic prosperity through increased specialization and efficiency.
a.) free trade will increase standard of living.
b.) free trade fosters competition
c.) free trade forces the economy to become more efficient (E=output/input)

Free Trade vs. Protectionsim:
What does the Free Trade promote?

Protectionism is both unjust and wasteful (of scarce economic resources)

Free Trade vs. Protectionsim:
What does Free Trade discredit?

The risk of non-shipment

What is importer risk?

Not receiving payment

What is exporter risk?

1.) Invoice/Packing List
2.) Draft (dc) (ex: checkbook); 2 kinds
3.) Letter of Credit (LC); 3 kinds
4.) Bill of Lading; 3 types

What are the different types of shipping documents?

sight draft & time draft

What are the different kinds of drafts?

Revocable, Irrevocable, Confirmed

What are the different kinds of letter of credit

Airway, Ocean, Land

What are the different kinds of bills of lading

Culture

Very important and is everything?