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Intro to Bus. Ch. 3
Chapter 3 Vocab
| Term | Definition |
|---|---|
| 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 Theory | Theory that states that a country should sell to other countries those products that it produces most effectively and efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently. |
| Absolute Advantage | The advantage that exists when 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 measured over a particular period. |
| Trade Surplus or Favorable Balance of Trade | Occurs when the value of a country's exports exceeds that of its imports. |
| Trade Deficit or Unfavorable Balance of Trade | 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(for imports) plus money flows from other factors such as tourism, foreign aid and investment, and military expenditures. |
| 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). |
| Franchising | Franchising is a contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name and sell a product or service in a given territory in a specified manner. |
| Contract Manufacturing | A foreign country's production of private-label goods to which a domestic company then attaches its 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. |
| Exchange Rate | The value of one nation's currency relative to the currencies of other countries. |
| Devaluation | Lowering the value of a nation's currency relative to other currencies. |
| Countertrading | A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services. |
| Floating Exchange Rates | That currencies "float" in value according to the supply and demand for them in the global market for currency. |
| Trade Protectionism | The use of government regulations to limit the import of goods and services. |
| Tariff | A tax imposed on imports. |
| Protective Tariffs(Import Taxes) | Raise the retail price of imported products so that domestic goods are more competitively priced. |
| Revenue Tariffs | Designed to raise money for the government. |
| Import Quota | A limit on the number of products in certain categories that a nation can import. |
| 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 and Trade(GATT) | A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions. |
| World Trade Organization(WTO) | The international organization that replaced the General Agreement on Tariffs and Trade and was assigned the duty to mediate trade disputes among nations. |
| Common Market or Trading Bloc | A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange. Ex. European Union |
| North American Free Trade Agreement(NAFTA) | Agreement that created a free-trade area among the United States, Canada, and Mexico. |
| Outsourcing | The process whereby one firm contracts with other companies, often in other countries, to do some or all of its functions. |
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