CH 3- THE DYNAMIC GLOBAL MARKET

Vocabulary flashcards covering the key terms and concepts from Chapter 3: The Dynamic Global Market, including trade theories, entry strategies, and regulatory forces.

Licensing

A global strategy in which a firm (licensor) allows a foreign company (licensee) to manufacture its products or use its trademarks for a fee or a royalty; agreements often last for an extended period, such as $20$ years or longer.

Dumping

An unfair trade practice defined as selling products in a foreign country at lower prices than those charged in the producing country; US laws require products be priced to include $10\%$ overhead costs plus a $8\%$ profit margin.

Importing

The process of buying products from another country.

Exporting

The process of selling products to another country; exports represent $11\%$ of US GDP and account for $9\,\text{mil}$ jobs.

Free Trade

The movement of goods and services among nations without political or economic barriers, providing access to a market of over $8\,\text{bil}$ potential customers.

Comparative Advantage

A theory suggesting 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

When a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries; the transcript notes this advantage does not last forever.

Balance of Trade

The total value of a nation’s exports compared to its imports measured over a particular period.

Trade Surplus

A favorable balance of trade that occurs when the value of a country's exports exceeds that of its imports.

Trade Deficit

An unfavorable balance of trade that occurs when the value of a country’s exports is less than that of its imports.

Balance of Payments

The difference between money coming into a country from exports and money leaving the country for imports, plus money flows from factors like tourism, foreign aid, military expenditures, and foreign investment.

Export Assistance Centers (EACs)

Entities created by the US Department of Commerce to provide hands-on exporting assistance and trade finance support for small and medium-sized businesses.

Export-trading companies

Also known as export-management companies, they help companies with indirect exporting by negotiating relationships, matching buyers and sellers, and dealing with foreign customs and documentation.

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; it is considered 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; benefits include shared technology, risk, marketing, and management expertise.

Strategic Alliance

A long-term partnership between two or more companies established to help each company build competitive market advantages, distinct from joint ventures as they do not share costs, risks, management, or profits.

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 (parent company) which operates like a domestic firm but must observe legal requirements of both the home and host countries.

Sovereign Wealth Funds (SWFs)

Investment funds controlled by governments holding investment stakes in foreign companies, real estate, and other investments.

Ethnocentricity

The attitude that one's own culture is superior to other cultures.

Exchange Rate

The value of one nation’s currency relative to the currencies of other countries.

Devaluation

The act of lowering the value of a nation’s currency relative to other currencies, which can be done by a government to increase the export potential of its products.

Floating Exchange Rates

A system where currencies vary in value according to the supply and demand for them in the global market, as determined by global currency traders.

Foreign Corrupt Practices Act of 1978

A US law that prohibits questionable or dubious payments to foreign officials to secure business contracts.

Trade Protectionism

The use of government regulations, such as tariffs and quotas, to limit the import of goods and services.

Mercantilism

An economic policy dominant in the 17th and 18th centuries where nation leaders believed a country should sell more goods to other nations than it bought from them.

Protective Tariffs

Import taxes designed to raise the retail price of imported products so that domestic goods are more competitively priced, helping to save domestic jobs and infant industries.

Revenue Tariffs

Tariffs specifically designed to raise money for the government.

Import Quota

A limit on the number of products in certain categories that a nation can import to protect domestic companies and preserve jobs.

Embargo

A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.

General Agreement on Tariffs & Trade (GATT)

A global forum of $23$ nations created for reducing trade restrictions on goods, services, ideas, and cultural programs.

World Trade Organization (WTO)

An organization headquartered in Geneva used to mediate trade disputes among nations.

Common Market

Also known as a trading bloc, this is a regional group of countries with a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members; example: European Union (EU).

United States – Mexico – Canada Agreement (USMCA)

The revised trade agreement that replaced NAFTA with objectives to create a level playing field for workers, support agribusiness, and include rules for digital trade and anticorruption.

8 bil

How many popential customers does the US have in global market?

1. domestic workers lose jobs

2. workers may be forced to accept pay cuts

3. domestic companies can lose their comparative advantage when competitors build advanced production operation in low wage countries

Disadvantages of Global trade

goods & services

What is the US comparative advantage?

1. sociocultural forces

2. economic & financial forces

3. legal & regulatory forces

4. physical & environmental forces

Forces affecting trading in global market…