Business in a Global Environment Chapter 3

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Importing
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Buying products from another country
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Exporting
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Selling products to another country
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Free Trade
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The movement of goods and services among nations without political or economic barriers
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Comparative Advantage Theory
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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
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Absolute Advantage
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Advantage that exists when a country has a monopoly on a producing a specific product or is able to produce it more efficiently than all other countries
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Balance of Trade
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The total value of a nation’s exports compared to its imports measured over a particular period
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Trade Surplus
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A favorable balance of trade occurs when the value of a country’s exports exceeds that of its imports
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Trade Deficit
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An unfavorable balance of trade occurs when the value of country’s imports exceeds that of its exports
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Balance of Payments
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The difference between money coming into a country ad money leaving the country plus money flows from other factors such as tourism, foreign aid, millitary expenditures, and foreign investment
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Dumping
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Selling products in a foreign country at lower prices than those charged in the producing prices
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Licensing
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A global strategy in which a firm allows a foreign company to produce its product in exchange for a fee
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Contract Manufacturing
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A foreign country’s production of private label goods to which a domestic company then attaches its brand name of trademark part of the broad category of outsourcing
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Franchising
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Contractual agreement where 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
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Joint Venture
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A partnership in which two or more companies join to undertake a major project
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Strategic Alliance
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A long term partnership between two or more companies established to help each company build competitive market advantages
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Foreign Direct investment
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The buying of permanent property and businesses in foreign nations
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Foreign Subsidiary
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A company owned in a foreign country by another company called the parent company
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Multinational Corporation
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An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management
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Sovereign Wealth Funds
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Investment funds controlled by government holding large stakes in foreign companies
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Ethnocentricity
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Attitude that your own culture is superior to other cultures
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Exchange Rate
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The value of ones nation’s currency relative to the currencies of other countries
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Devaluation
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Lowering the value of a nations currency relative to other currencies
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Countertrading
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A complex form of bartering in which several countries may be involved each trading goods for goods or services for services
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Trade protectionism
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The use of government regulations to limit the import of goods and services
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Tariff
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A tax imposed on imports
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Import Quota
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A limit on the number of products in certain categories that a nation can import
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Embargo
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A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country
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General Agreement on Tariffs and Trade
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A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions
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World Trade Organization
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The international organization that replaced the General Agreement, on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations
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Common Market
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A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange
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North American Free Trade Agreement
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Agreement created a free trade among the US, Canada and Mexico

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