BUSN Ch.3 BE005 Marketing and Business Integration and Strategic Manag

Tax avoidance

Holding onto cashing and shifting it among subsidiaries can lower a firm's overall tax bill.

Acquisitions

Buying the best firms and the best talent has become increasingly competitive. Rivals can be scared off if your firm seems to have limitless resources to spend.

Emergencies

In a highly risky economic environment, extra cash is always helpful.

Key benefits of international trade

Better access to factors of production, reduced risk, and an inflow of new ideas.

Access to factors of production

Capitalizing on resources (like skilled labor, oil, timber, or capital) not present locally in the right amounts or prices.

Reduced economic risk in global trade

Lowers dependence on a single economy, though integrated markets can transmit economic meltdowns globally.

Inflow of innovation

Provides companies with an invaluable source of new ideas and budding trends from foreign markets.

opportunity cost

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

absolute advantage

The benefit a country has in a given industry when it can produce more of a product 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 than other countries.

balance of trade

A basic measure of the difference in value between a nation's exports and imports, including both goods and services.

trade surplus

Overage that occurs when the total value of a nation's exports is higher than the total value of its imports.

trade deficit

Shortfall that occurs when the total value of a nation's imports is higher than the total value of its exports.

balance of payments

A measure of the total flow of money into or out of a country.

balance of payments surplus

Overage that occurs when more money flows into a nation than out of that nation.

balance of payments deficit

Shortfall that occurs when more money flows out of a nation than into that nation.

countertrade

International trade that involves the barter of products for products rather than for currency.

foreign outsourcing (also contract manufacturing)

Contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production.

importing

Buying products domestically that have been produced or grown in foreign nations.

exporting

Selling products in foreign nations that have been produced or grown domestically.

foreign licensing

Authority granted by a domestic firm to a foreign firm for the rights to produce and market its product or to use its trademark/patent rights in a defined geographical area.

foreign franchising

A specialized type of foreign licensing in which a firm expands by offering businesses in other countries the right to produce and market its products according to specific operating requirements.

direct investment (or foreign direct investment)

When firms either acquire foreign firms or develop new facilities from the ground up in foreign countries.

joint ventures

When two or more companies join forces— sharing resources, risks, and profits, but not actually merging companies—to pursue specific opportunities.

partnership

A voluntary agreement under which two or more people act as co-owners of a business for profit.

strategic alliance

An agreement between two or more firms to jointly pursue a specific opportunity without actually merging their businesses. Strategic alliances typically involve less formal, less encompassing agreements than partnerships.

Sociocultural differences

Differences among cultures in language, attitudes, and values.

infrastructure

A country's physical facilities that support economic activity.

protectionism

National policies designed to restrict international trade, usually with the goal of protecting domestic businesses.

tariffs

Taxes levied against imports.

quotas

Limitations on the amount of specific products that may be imported from certain countries during a given time period.

voluntary export restraints (VERs)

Limitations on the amount of specific products that one nation will export to another nation.

embargo

A complete ban on international trade of a certain item, or a total halt in trade with a particular nation.

Import licenses as nontariff barriers

Requiring red-tape-intensive import licenses for certain categories.

Nonstandard packaging requirements

Establishing nonstandard packaging requirements for certain products.

Exchange rates as nontariff barriers

Offering less-favorable exchange rates to certain importers.

Production and growth standards

Establishing standards on how certain products are produced or grown.

"Buy national" attitude

Promoting a "buy national" consumer attitude among local people.

Effectiveness of nontariff barriers

They tend to be fairly effective because complaints about them can be hard to prove and easy to counter.

free trade

The unrestricted movement of goods and services across international borders.

General Agreement on Tariffs and Trade (GATT)

An international trade treaty designed to encourage worldwide trade among its members.

World Trade Organization (WTO)

A permanent global institution to promote international trade and to settle international trade disputes.

World Bank

An international cooperative of 188 member countries, working together to reduce poverty in the developing world.

International Monetary Fund (IMF)

An international organization of 188 member nations that promotes international economic cooperation and stable growth.

International Monetary Fund (IMF)

Supports stable exchange rates

Facilitates a smooth system of international payments

Encourages member nations to adopt sound economic policies

Promotes international trade

Lends money to member nations to address economic problems

trading bloc

A group of countries that have reduced or even eliminated tariffs, allowing for the free flow of goods among the member nations.

common market

A group of countries that have eliminated tariffs and harmonized trading rules to facilitate the free flow of goods among the member nations.

North American Free Trade Agreement (NAFTA)

The treaty among the United States, Mexico, and Canada that eliminated trade barriers and investment restrictions over a 15-year period starting in 1994.

European Union (EU)

The world's largest common market, composed of 28 European nations.

Reasons to Create Trade Restrictions

Protect domestic industry (e.g., the U.S. steel industry)

Protect domestic jobs in key industries (but perhaps at the cost of domestic jobs in other industries)

Protect national security interests

Retaliate against countries who have engaged in unfair trade practices

Pressure other countries to change their policies and practices

Reasons to Eliminate Trade Restrictions

Reduce prices and increase choices for consumers by encouraging competition from around the world

Increase domestic jobs in industries with a comparative advantage versus other countries

Increase jobs—both at home and abroad—from foreign companies

Build exporting opportunities through better relationships with other countries

Use resources more efficiently on a worldwide basis