Business in the Global Marketplace Chapter 3

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is a currency called when its exchange rate is higher than what is considered normal?

Weak currency

Strong currency (correct)

Stable currency

Inflated currency

Free trade is characterized by restrictive measures imposed on international trade.

False

What effect can exchange rates have on a company's financial results?

They can raise or lower the cost of supplies it imports and the price of goods it exports.

A ______ is a total ban on trade with a particular nation or product.

embargo Signup and view all the answers

Match the following trade concepts with their definitions:

Tariffs = Taxes levied on imports Import quotas = Limits on the quantity of certain imports Protectionism = Policies to shield domestic industries from foreign competition Free trade = International trade without restrictions Signup and view all the answers

Which of the following is a characteristic of protectionism?

Imposing tariffs Signup and view all the answers

Explain the main argument of supporters of free trade.

Supporters argue that free trade produces winners and losers, but the gains for winners outweigh the losses for losers. Signup and view all the answers

What is a tax haven?

A country that offers favorable banking laws and low tax rates Signup and view all the answers

Licensing involves the purchase of goods from another country.

False Signup and view all the answers

Define foreign direct investment (FDI).

Investment of money by foreign companies in domestic business enterprises. Signup and view all the answers

_________ refers to companies with operations in more than one country.

Multinational corporations (MNCs) Signup and view all the answers

Match the following forms of international business activity with their descriptions:

Importing = Purchasing goods from another country Exporting = Selling and shipping goods to another country Licensing = Agreement to produce another company's product Foreign Direct Investment = Investment by foreign companies in domestic enterprises Signup and view all the answers

Which strategy refers to creating highly independent operating units in each new country?

Multidomestic strategy Signup and view all the answers

Respecting cultural customs is important for effective communication in international business.

True Signup and view all the answers

What is the primary purpose of exporting?

To sell and ship goods or services to another country. Signup and view all the answers

A decentralized approach to international expansion is known as a __________ strategy.

Multidomestic Signup and view all the answers

What is the primary reason nations engage in international trade?

To leverage comparative cost advantage Signup and view all the answers

A trade deficit occurs when a country exports more than it imports.

False Signup and view all the answers

Name one major form of international business activity.

Exporting Signup and view all the answers

Economic globalization refers to the increasing integration and ______ of national economies around the world.

interdependence Signup and view all the answers

Match the following terms with their definitions:

Comparative Cost Advantage = The ability to produce goods at a lower opportunity cost Trade Deficit = When a country's imports exceed its exports Balance of Payments = The sum of all payments received and made by a country Economic Globalization = The integration of economies globally Signup and view all the answers

Which of the following is NOT a reason why nations trade?

Reducing foreign competition Signup and view all the answers

Understanding cultural and legal differences is important in the global business environment.

True Signup and view all the answers

What is one major organization that facilitates international trade?

World Trade Organization (WTO) Signup and view all the answers

Free trade is characterized by minimal government ______ on imports and exports.

intervention Signup and view all the answers

In the context of international trade, what is the purpose of foreign exchange rates?

To determine the value of one currency in terms of another Signup and view all the answers

Study Notes

Chapter 3: Business in the Global Marketplace

This chapter covers business in the global marketplace, including topics like why nations trade, measuring international trade, conflicts in global business, organizations facilitating trade, major trading blocs, cultural and legal differences in the global business environment, forms of international business activity, strategic choices for entering international markets and more.

Learning Objectives

Objective 1: Explain why nations trade and how international trade is measured.
Objective 2: Discuss conflicts in global business, including free trade and government interventions.
Objective 3: Identify organizations facilitating international trade and major trading blocs.
Objective 4: Explain the importance of understanding cultural and legal differences in the global business environment.
Objective 5: Define major forms of international business activity.
Objective 6: Discuss strategic choices for entering international markets.

Why Nations Trade

Economic Globalization: Increasing integration and interdependence of national economies globally.
Comparative Cost Advantage: Focusing on relative strengths/specializations.
Expanding Markets: Growing potential customer bases.
Economies of Scale: Achieving greater efficiencies through larger production volumes.
Acquiring Resources: Access to materials, goods, and services.
Meeting Customer Needs: Maintaining a competitive edge.
Competing with Competitors: Maintaining a foothold in the global marketplace.

How International Trade is Measured

Trade Deficit: Country imports more than it exports, creating an unfavorable trade balance.
Balance of Payments: Sum of all payments a country receives from other countries minus all payments it makes to other countries over a period.

U.S. Exports and Imports

Data visuals (Exhibit 3.2) show U.S. exports, imports, and trade balances (deficits/surpluses) from 1990 to 2014, both for goods and services sectors. Data suggests fluctuating trends.

Foreign Exchange Rates and Currency Valuations

Exchange Rate: Rate at which one country's currency is exchanged for another.

Strong and Weak Currencies

Strong Currency: Higher exchange rate than usual; makes imports cheaper and exports more expensive.
Weak Currency: Lower exchange rate than usual; makes imports more expensive and exports more affordable.

Free Trade

Unencumbered (unimpeded) international trade without restrictions.
Winners and losers exist but overall benefits outweigh losses.

Government Intervention in International Trade

Protectionism: Policies shielding domestic industries from foreign competition.
Tariffs: Taxes levied on imports.
Import Quotas: Limits on the quantity of specific imports.
Embargo: Complete ban on trade with a country or product.
Export Subsidies: Government financial assistance to producers, enabling lower prices for competitiveness
Dumping: Pricing goods/products below cost in targeted markets.
Sanctions: Politically motivated embargoes.

International Trade Organizations

World Trade Organization (WTO): Permanent forum for negotiating, implementing, monitoring international trade procedures, and mediating trade disputes among member countries.
International Monetary Fund (IMF): Monitors global finances, offering technical advice and short-term loans to countries facing financial difficulties and alleviating poverty in developing economies.
World Bank: Financed post-World War II reconstruction and provides funding projects to address developing countries' poverty, health, education, and other concerns.

Trading Blocs

Organizations of nations removing trade barriers among members but establishing uniform barriers to trade with non-members.
NAFTA: Agreement between the U.S., Canada, and Mexico. Gradual elimination of tariffs, services, and capital flow within the bloc.
EU: Significant economy with over two dozen member countries comprising half a billion people; eliminating protectionist trade barriers.
APEC: An organization of twenty-one countries around the Pacific Rim that promotes liberalization in trade and investment.

Global Business Environment

Culture: Shared symbols, beliefs, attitudes, values, and norms for behavior.
Stereotyping: Using overly broad generalizations about groups.
Ethnocentrism: Judging other groups/cultures based on one's own group's standards.
Successful global leaders: Recognize, respect, and accommodate language, social values, status, decision-making, time, space, body language, manners, religion, and ethical standards.

Improving Communication with Persons from a Different Culture

Be observant of others' customs.
Deal with individuals personally.
Clarify intent and meaning.
Adapt communication style.
Show respect.

Legal Differences in Global Business

Tax Havens: Countries providing favorable banking laws and low tax rates to attract companies, potentially circumventing higher taxes in their home or other countries.

Forms of International Business Activity

Importing/Exporting: Buying and selling goods/services across national borders.
International Licensing: Granting rights to use intellectual property (design patents, etc.).
International Franchising: Allowing use of a business system/product.
International Strategic Alliances/Joint Ventures: Long-term business partnerships, creating new companies, or working with existing local partners.
Foreign Direct Investment (FDI): Investment in, or establishment of, businesses in other countries.
Multinational Corporations (MNCs): Companies operating in multiple countries.

Strategic Approaches to International Markets

Multidomestic Strategy: Decentralized approach with independent operating units in each new country.
Global Strategy: Highly centralized approach, with decisions made by headquarters in the home country.
Transnational Strategy: Hybrid approach combining benefits from international scale while adapting to local market dynamics.

Product Strategies for International Strategies

Products
Customer support
Promotion
Pricing
Staffing

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

Explore the complexities of business in the global marketplace with this quiz focused on Chapter 3. Learn about why nations engage in trade, the measurement of international trade, conflicts, major trading blocs, cultural and legal dimensions, and strategic choices for entering international markets. Test your understanding of these critical concepts in global business.