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Questions and Answers
MNEs only interact with importers in international business.
MNEs only interact with importers in international business.
False
Cross-border activities of firms include trade, finance, investment, and technology transfer.
Cross-border activities of firms include trade, finance, investment, and technology transfer.
True
The international environment does not influence the processes of firms.
The international environment does not influence the processes of firms.
False
International trade refers to the action of conducting business only domestically.
International trade refers to the action of conducting business only domestically.
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Global business refers to transactions between parties within a single country.
Global business refers to transactions between parties within a single country.
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International business encompasses only two or more countries.
International business encompasses only two or more countries.
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Franchising is a method that involves only the franchisee in international business.
Franchising is a method that involves only the franchisee in international business.
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Exploitation is one of the disadvantages of international business.
Exploitation is one of the disadvantages of international business.
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The scope of international business is broader than that of global business.
The scope of international business is broader than that of global business.
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Competition with developed countries is a disadvantage of engaging in international business.
Competition with developed countries is a disadvantage of engaging in international business.
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Licensing in international business allows one company to manufacture another's product for a specific payment.
Licensing in international business allows one company to manufacture another's product for a specific payment.
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A joint venture is defined as a business arrangement where one company operates independently in a foreign country.
A joint venture is defined as a business arrangement where one company operates independently in a foreign country.
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Wholly owned subsidiaries are entities that are partially owned by a parent company.
Wholly owned subsidiaries are entities that are partially owned by a parent company.
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The Incense Route is considered one of the earliest known trade routes.
The Incense Route is considered one of the earliest known trade routes.
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The main goal of mercantilism was to maximize imports and minimize exports.
The main goal of mercantilism was to maximize imports and minimize exports.
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Economists believe that specialization in trade focuses on producing goods inefficiently.
Economists believe that specialization in trade focuses on producing goods inefficiently.
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GDP stands for Gross Domestic Product and measures the total amount of goods and services produced in a country.
GDP stands for Gross Domestic Product and measures the total amount of goods and services produced in a country.
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The World Trade Organization (WTO) governs only the trade of goods.
The World Trade Organization (WTO) governs only the trade of goods.
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NAFTA was established to facilitate trade between the U.S., Canada, and Brazil.
NAFTA was established to facilitate trade between the U.S., Canada, and Brazil.
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International trade can create potential downsides for local firms that are unable to compete globally.
International trade can create potential downsides for local firms that are unable to compete globally.
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Study Notes
International Business and Trade
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International Business Definition: A business involved in international economic activities. It differs from international trade, which focuses on the exchange of goods and services, and from global business which operates globally with facilities throughout the world.
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International Business Interactions: Firms interact with importers, exporters, organizations, and institutions internationally.
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Cross-Border Activities: Common cross-border activities include trade, finance, investment, and technology transfer. The international environment impacts firm operations and processes. Organizational forms adapt to operate internationally.
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Comparative Business Studies: Examine businesses in different countries and contexts.
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International Trade Definition: Involves conducting business in foreign countries, more broadly defined. Global business involves transactions between parties from different countries.
Globalization
- Globalization Definition: The increasing integration of countries and people across the world.
Modes of Entry into International Markets
- Franchising: A business arrangement involving a franchisor and franchisee.
- Licensing: Transferring manufacturing rights to a foreign entity for payment.
- Exporting: Selling products from the home country to foreign markets.
- Joint Ventures: Two or more parties pooling resources for a specific purpose.
- Merger and Acquisition: Combination of two entities (merger) or one entity taking over another (acquisition).
- Wholly Owned Subsidiaries: Companies fully controlled and managed by a parent company.
- Turnkey Projects: Projects where the supplier delivers a completed project to the customer.
History of Trade
- Ancient Trade: Trade has existed for thousands of years, beginning with local exchanges. The Incense Route was an early trade route. The Silk Road facilitated silk trade with the West.
- Transportation Methods: Ships, trucks, and planes facilitate global trade. Countries export and import goods and services.
- Trade Categories: Two main categories are manufactured goods and agricultural commodities. Services include intangible goods like advertising and telecommunications. Trade necessitates a vast network including complex supply chains.
Economic Systems and Theories
- Mercantilism: An economic system prioritizing self-sufficiency, aiming for maximum exports and minimum imports, and using tariffs on imports. Classical economists advocated comparative advantage in trade (specialization), focusing on productivity instead of gold reserves. GDP, measuring the total value of final goods and services produced in a country, became relevant to trade during this time.
International Trade Modernization
- Advances in Trade: Technological advancements like container ships and communication systems boosted international trade.
- GATT and WTO: The General Agreement on Tariffs and Trade (GATT) aimed to reduce trade barriers and established international trade rules. It became the World Trade Organization (WTO) in 1995, governing goods, services, and intellectual property. The WTO system can, however, be challenging for some countries who face difficulties adjusting to support their economic situations.
Benefits and Challenges of International Trade
- Advantages: Access to better and cheaper goods, job creation, and strengthened international connections.
- Disadvantages: Competition for local firms, potential job losses in particular sectors, and the need for support and training for affected individuals.
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Description
Explore the key concepts of international business, including its definition, interactions, and cross-border activities. Understand how firms adapt to global environments and examine comparative business studies across various countries. This quiz offers a comprehensive look at the complexities of conducting business internationally.
