ADM 1300 Chapter 5: The global context of business

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globalization

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process by which the world economy is becoming a single interdependent system

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Imports

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goods produced abroad and sold domestically

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38 Terms

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globalization

process by which the world economy is becoming a single interdependent system

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Imports

goods produced abroad and sold domestically

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Exports

goods produced domestically and sold abroad

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high-income countries

annual per capita income greater than $12,536

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Upper-Middle-Income Countries

annual per capita income of $12,536 or less but more than $4,046

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low-middle income countries

annual per capita income of $4,046 or less but more than $1,036

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low-income countries

annual per capita income less than $1,036

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three major marketplaces

North America, Europe, Pacific Asia

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BRICS

Brazil, Russia, India, China, South Africa

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absolute advantage

the ability to produce a good using fewer inputs than another producer

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comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

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National Competitive Advantage

international competitive advantage stemming from a combination of factor conditions, demand conditions, related and supporting industries, and firm strategies, structures, and rivalries

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balance of trade

difference in value between its total exports and its total imports

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surplus

a country exports more than it imports creating a favourable balance of trade

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deficit

a country's imports exceed its exports creating a negative balance of trade

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balance of payments

the difference between the flow of money into and out of a country

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exchange rate

the rate at which one currency is converted into another

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Adapting to Customer Needs

a firm must decide whether and how to adapt its products to meet the special demands of foreign customers

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Exporters

businesses who sell goods to a country that was made in a different country

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Importers

businesses who bring goods in from another country

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international firm

firm that conducts a significant portion of its business in foreign countries

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Multinational Firm

firm that designs, produces, and markets products in many nations

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independent agents

Salespeople who sell a manufacturer's products on an extended contract basis but are not employees of the manufacturer; also known as manufacturer's representatives or reps.

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Licensing Arrangement

arrangement in which firms choose foreign individuals or organizations to manufacture or market their products in another country

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branch office

foreign office set up by an international or multinational firm

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strategic alliance

company finds a partner in a foreign country where it would like to conduct business

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Foreign Direct Investment

Investment made by a foreign company in the economy of another country.

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Quota

A limit placed on the quantities of a product that can be imported

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Embargo

an official ban on trade or other commercial activity with a particular country.

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Tariff

A tax on imported goods

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subsidy

A government payment that supports a business to help it compete with foreign firms

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Protectionism

practice of protecting domestic business at the expense of free-market competition

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local content laws

laws requiring that products sold in a particular country be at least partly made in that country

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business practice laws

law or regulation governing business practices in given countries

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Cartel

a formal organization of producers that agree to coordinate prices and production

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Dumping

Selling goods in another country below market prices

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General Agreement on Tariffs and Trade (GATT)

a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions

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World Trade Organization (WTO)

a permanent global institution to promote international trade and to settle international trade disputes