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GEB 1011 CH: 4

Absolute advantage
is the ability to produce more of a good or a service than any other country
Comparative advantage
means that the country can produce a good or service relatively more efficiently compared to other countries.
is a belief that one’s own culture is superior to all other cultures
Foreign direct investment
is the purchasing of property and businesses in a foreign nation
Free trade agreements
compacts abolishing trade barriers among member countries.
the movement toward a more interconected and interdependent world economy, maybe one of the most profound factors affecting people in the united states and around the globe.
Trade deficit
when the value of the country’s import exceeds the value of it’s export.
Trade surplus
occurs when the value of a country’s exports exceeds the value of its imports
Out sourcing
is the assignment of certain tasks, such as production or accounting, in an outside company or organization.
Strategic alliance
are cooperative arrangements between actual or potential competitors.
Transnational strategy
offers a customized product while simultaneously selling it at the lowest possible price
Currency depreciation
is a decrease in the exchange rate value of a nation’s currency
Local content requirement
are a requirement that some portion of a good be produced domestically
Global strategy
sells a standardized (or homogeneous) product across the globe
are a limitation on the amount of an import allowed to enter a country
Ethical challenge
bribery is an example of this type of challenge facing businesses
Multinational enterprises
Are businesses that manufacture and market products in two or more countries
Offshore outsourcing
is when businesses relocate their production facilities overseas or subcontract at least some of the components of their products to foreign companies around the world to achieve lower manufacturing costs
Globalization of market
refers to the movement away from thinking of the market as being the local market or the national market to thinking of the market as being the entire world
is an agreement in which the licensor’s intangible property, patents, trademarks, service marks, copyrights, trade secrets, or other intellectual property, may be sold or made available to a licensee in exchange for a royalty fee
Turnkey project
occur when firms export their technological know-how in exchange for a fee
What are the implications of globalization of markets and the globalization of production?
* The globalization of markets refers to the movement away from thinking of the market as being the local market or the national market to the market being the entire world. Businesses need to “think globally but act locally”, which means that companies must market their products so that they appeal to their local customers.
* The globalization of production refers to the trend of individual firms to disperse parts of their productive process to different locations around the world to take advantage of lower costs or enhance quality. the globalization of production often involves outsourcing , which is contracting with another firm to produce part of a product that formerly was produced in-house. Offshore outsourcing has become a significant concern for U.S workers.
Why has globalization accelerate so rapidly?
*The decline in trade and investment barriers, which are government barriers that inhibit the free flow of goods, services, and financial capital across national boundaries, is one factor that has led to increased globalization. This declined has encouraged developing nation to become involved in inter nation trade and allows companies to base production facilities at the lowest cost location.
* Technological changes that have also contributed to the rise in globalization in clyde the following
– teleconferencing , which allow businesspeople to conduct meetings with contacts around the world.
– IT, such as the internet and cable and satellite television systems, which allow companies to advertise and sell products on global scale.
What are the costs and benefits of international trade?
* The theory of comparative advantage states that specialization and trade between con tries benefits all who are involved. This is true because countries that participate in international trade experience higher standards of living due to the greater quality and variety of higher-quality products at lower prices.
* The costs of international trade are borne by those businesses and their workers whose livelihoods are threatened by foreign competition. Businesses may lose their market shares to foreign campaniles, which in turn force businesses to lay off workers.
What are the different types of trade barriers?
The different types of trade barriers are tariffs, subsidies, quotas, and administrative trade barriers.
– tariffs are taxes imposed on a foreign good or service.
– Subsidies are government payments to domestic producers in the form of a direct cash grant or payment in kind.
– Quotas are quantity limitations on the amount of an export allowed to enter a country.
– Administrative trade barriers are government bureaucratic rules designed to limit imports. One example is a local content requirement, which is a requirement that some portion of a good be produced domestically.
What are the three basic strategies of international business?
The tree basic strategies of international business are,
– global strategy
– multi multidomestic strategy
– transnational strategy.
How can international firms successfully enter foreign markets?
There are eight common ways for a company to enter foreign markets, as follows
– Exporting, the sale of domestically produced goods in a foreign market
– Turnkey projects, firms export their technological know-how to exchange for a fee
– Franchising, selling a well-known brand name or business method in exchange for a fee and percentage of the profits
– licensing, an agreement in which in licensor’s intangible property may be sold or made available to a license for a fee
– Joint ventures, the shared ownership in a subsidiary firm
– Strategic alliances, cooperative agreements between competitors
– Contract manufacturing, a firm subcontracts part or all of its good to an outside firms
– Wholly owned subsidiary, establishing a foreign facility that is owned entirely by the investing firm.
What are exchange rates, and how do they affect international business?
– An exchange rate is the rate at which one currency is converted into another.
– Currency appreciation, the increase in the ex-change rate value of a nation’s currency, causes the price of imports to fall and the cost of exports to rise.
– Currency depreciation, the decrease in the exchange rate value of the nation’s currency, creates the opposite effect.
What economic factors and challenges play a role in conducting business on a global scale?
-Economic growth and development present a challenge because some countries lack in the infrastructure necessary to transport goods effectively.
What are the sociocultural, political, legal, and ethical challenges to conducting business in a global marketplace?
-Ethnocentrism, the belief that one’s own culture is superior to all others, can lead to conflict when conducting business globally. Other sociocultural challenges include differences in aesthetics, religion, and attitudes toward time and work.
-International businesses prefer stable governments with a strong infrastructure. however, many countries do not offer this kind of political and economical environment. Government decisions about taxation, infrastructure investments, and antitrust law enforcement can all affect global business.
– From a legal standpoint, the differences in laws and regulations around the word provide challenges for conducting business. There are no universal laws or policies for governing contracts, product safety and liability standards, or property rights.
– Bribery is an ethical challenge facing international business. Decisions about whether to conform to a home environmental, workplace, and product safety standards which operating in a foreign country are other ethical dilemmas.

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