Comprehending economic stability requires distinguishing between two stages: economic expansion and economic contraction. Additionally, it is important to differentiate between a recession and a recovery. Economic expansion denotes an escalation in business production caused by an upsurge in consumer spending on commodities and services; conversely, economic contraction pertains to a decline in business production due to decreasing consumer spending.
If consumer spending decreases, leading to limited purchases of essential items, severe economic contraction occurs. This results in businesses reducing their production and workforce. A country may enter into recession due to severe economic contraction if its domestic product declines for two consecutive quarters.
When a recession comes to an end, the country starts to recover. This is because companies increase their production and hire more workers. The higher employment rates then lead to greater spending, which causes the economy to expand. Conversely, in times of economic contraction
...during a recession, both spending and production decrease. Economic expansion happens when businesses produce more goods and services while also generating jobs that result in increased spending, ultimately driving the recovery process.
In summary, there are five common forms of international business and their respective characteristics:
- Importing and Exporting: Buying goods or services from another country to sell within your own country is importing while selling outside your home country is exporting. Importing carries higher risks than exporting.
- Licensing: This involves granting permission for the use of intellectual property such as patents or trademarks in exchange for a fee.
- Franchising: More involvement than licensing, franchising includes ongoing support like training and marketing from the franchisor in addition to their intellectual property.
- Strategic Alliance: Two separate entities work together on specific projects by combining
resources and knowledge for mutual benefit under a strategic alliance agreement.
By agreeing to a license agreement, you are granted permission to utilize either a portion or the entirety of another company's resources.
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