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Chapter Three
Competing in the Global Marketplace
| Question | Answer |
|---|---|
| What is a global vision? | Recognizing and responding to international business opportunities, understanding foreign competition, and using global distribution networks effectively |
| Why is global business important to the U.S.? | It creates jobs, increases economic growth, improves living standards, and expands markets for goods and services |
| What are exports? | Goods and services produced in one country and sold to another country |
| What are imports? | Goods and services purchased from other countries |
| What is the balance of trade? | The difference between a country's exports and imports during a specific period |
| What is a trade surplus? | A favorable balance of trade that occurs when exports exceed imports |
| What is a trade deficit? | An unfavorable balance of trade that occurs when imports exceed exports |
| What is the balance of payments? | A summary of a country's international financial transactions |
| What is the exchange rate? | The value of one country's currency compared to another country's currency |
| What happens when a currency appreciates? | Less of that currency is needed to buy another currency |
| What happens when a currency depreciates? | More of that currency is needed to buy another currency |
| What is a floating exchange rate? | A currency value that rises and falls based on supple and demand |
| What is devaluation? | A government action that lowers the value of its currency relative to others |
| What is absolute advantage? | The ability to produce a product at a lower cost or more efficiently than another country |
| What is comparative advantage? | The ability to produce a good or service more efficiently than competitors, leading to lower costs and greater specialization |
| What is free trade? | The policy of allowing people and businesses to buy and sell without government restrictions |
| What is protectionism? | Government actions that protect domestic industries from foreign competition |
| What are some negatives of global trade? | Job losses due to outsourcing, Wage reductions, Fear of unemployment, and Increased foreign competition |
| What are some positives of global trade? | Lower prices, Greater product availability, Increased innovation, Economic growth. and Higher living standards |
| What is outsourcing? | Moving business operations or jobs to another country to reduce costs |
| What are the three major barriers to international trade? | Natural barriers, Tariff barriers, and Non-tariff barriers |
| What are natural barriers? | Physical or cultural obstacles such as distance, language, or customs |
| What is tariff? | A tax placed on imported goods |
| What is a protective tariff? | A tariff designed to make imported products less attractive than domestic products |
| What are arguments for tariff? | Protect new industries, Protect jobs, and Support military preparedness |
| What are arguments against tariffs? | Raise prices, Reduce consumer purchasing power, and Discourage free trade |
| What is an important quota? | A limit on the quantity of a good that can be imported |
| What is an embargo? | A complete ban on imports or exports of a product |
| What are buy-national regulations? | Rules that give preference to domestic manufactures and retailers |
| What are exchange controls? | Government restrictions on the amount of foreign currency available for trade |
| What is dumping? | Selling products in foreign markets at lower prices than in the home market |
| What is predatory dumping? | Selling products at extremely low prices to eliminate competitors and dominate a market |
| What was the Uruguay Round? | Trade negotiations that significantly reduced global trade barriers |
| What is the World Trade Organization (WTO)? | The General Agreement on Tariffs and Trade (GATT) |
| What is the World Bank? | An organization that provides low-interest loans to developing countries |
| What is the International Monetary Fund (IMF)? | An organization that provides short-term loans and promotes international financial cooperation |
| What is a preferential tariff? | A tariff arrangement that gives one nation advantages over others |
| What is a free-trade zone? | An area where member countries trade with few restrictions |
| What countries are members of NAFTA? | United States, Canada, and Mexico |
| What was NAFTA'S primary goal? | To eliminate trade barriers and increase trade among member countries |
| What countries are members of Mercosur? | Brazil, Argentina, Paraguay, Uruguay, and Peru |
| What countries are members of CAFTA? | United States, Costa Rica, Dominican Republic, El Salvador. Guatemala, Honduras, and Nicaragua |
| What is European integration? | The pooling of sovereignty among European Union Nations to make joint decisions |
| What is Brexit? | The United Kingdom's decision to leave the European Union |
| Why do companies enter global markets? | Increase profits, Reach new customers, Gain resources, and Reduce costs |
| What is exporting? | Selling goods directly to buyers in foreign countries |
| Why is exporting considered the least risky entry strategy? | It requires less investment and commitment than other international strategies |
| What is licensing? | Allowing another company to use a firm's patents, trademarks, or technology |
| What is franchising? | A form of licensing in which businesses sell the right to operate under their brand name |
| What is contract manufacturing? | A form of licensing in which businesses sell the right to operate under their brand name |
| What is a joint venture? | A partnership between domestic and foreign companies to create a new business entity |
| What is direct foreign investment? | Investing directly in facilities or operations in another country |
| What is countrade? | Trading goods or services instead of using cash as payment |
| What is nationalism? | Strong loyalty to one's country that may discourage foreign investment |
| Why are cultural differences important in global business? | They can affect communication, negotiations, advertising. and business relationships |
| What is infrastructure? | The basic institutions and public facilities needed for economic development |
| What is a multinational corporation (MNC)? | A company that operates and moves resources across national borders |
| What advantages do multinational corporations have? | Avoid some regulations, Overcome trade barriers, and Shift production as markets change |
| What are the three major trends driving global trade? | Market expansion, Resource acquisition, Growth of China and India |
| What is market expansion? | Seeking larger customer bases beyond domestic market |
| Why do firms seek resources globally? | To obtain cheaper labor, raw materials, technology, and capital |
| Why has China's economy grown rapidly? | Foreign investment and low labor costs have fueled export growth |
| What is expected of India in the Global Economy? | India is projected to become one of the world's largest economies and a major technology leader |
| Define Balance of Trade | Exports minus imports |
| Define Free Trade | Trade without government restrictions |
| Define Tariff | A tax on imported goods |
| Define Trade Deficit | Imports exceed exports |
| Define Trade Surplus | Export exceed imports |
| Define WTO | The organization that promotes international trade and reduces trade barriers |
| Define Embargo | A complete ban on imports or exports |
| Define NAFTA | A free-trade agreement between the United States, Canada, and Mexico |
| Define Export | A product sold to another country |
| Define Import | A product purchased from another country |
| What are the five major methods of entering global markets? | Exporting, Licensing, Contract Manufacturing, Joint Ventures, and Direct Foreign Investment |
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