International Business Overview

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Questions and Answers

What best defines international business?

Transactions that cross the borders of two or more nations. (correct)
Commercial activities that do not involve the movement of goods.
Business transactions that occur solely within one country.
The exchange of goods and services among local businesses.

Which of the following best describes a Multinational Corporation (MNC)?

A type of business that focuses only on exporting goods.
A corporation that focuses only on local markets.
A business that has direct investments in multiple countries. (correct)
A small business run by a single entrepreneur.

What does globalization primarily refer to?

The trend of increasing interdependence among nations. (correct)
The development of local markets without external influence.
The decrease in the movement of goods across borders.
Isolation of national economies.

Which of the following is a benefit of globalization of markets?

Enhanced ability of firms to standardize marketing activities. (C) Signup and view all the answers

What characterizes a 'born global firm'?

A business that engages in international activities from its inception. (B) Signup and view all the answers

How does international business differ from domestic business?

International business requires navigating different legal and cultural environments. (B) Signup and view all the answers

Which of the following is NOT a characteristic of globalization?

Decreased cultural interdependence among nations. (C) Signup and view all the answers

What is a potential new market opportunity for a global product?

Accessing international consumers in emerging markets. (A) Signup and view all the answers

What benefit does a company achieve by supplementing domestic sales with international sales?

Steady cash flow. (A) Signup and view all the answers

What is a key factor managers should consider when entering global markets?

Local buyers’ needs. (A) Signup and view all the answers

What does global sustainability aim to achieve?

Meeting present needs without harming future generations. (C) Signup and view all the answers

What is one of the primary purposes of the International Monetary Fund (IMF)?

To regulate the international monetary system (B) Signup and view all the answers

What does globalization of production enable companies to access?

Low-cost labor. (C) Signup and view all the answers

Which of the following statements is true about NAFTA?

It increased trade and economic output among member nations (B) Signup and view all the answers

What is the purpose of the General Agreement on Tariffs and Trade (GATT)?

To promote free trade by reducing trade barriers. (D) Signup and view all the answers

What role does the World Trade Organization (WTO) play in international trade?

Enforcing international trade rules. (A) Signup and view all the answers

What was replaced by the U.S.–Mexico–Canada Agreement (USMCA)?

North American Free Trade Agreement (NAFTA) (B) Signup and view all the answers

Which organization focuses on financing for national economic development in developing countries?

World Bank. (B) Signup and view all the answers

Which of the following is a goal of the European Union (EU)?

To foster peace, values, and well-being of its citizens (B) Signup and view all the answers

Which of the following is NOT a benefit of accessing global production?

Access to a single market. (B) Signup and view all the answers

What is the total market value of all final goods and services produced in a country during a particular year known as?

Gross Domestic Product (GDP) (A) Signup and view all the answers

Which regional trade agreement includes countries like Brunei and Vietnam?

Association of Southeast Asian Nations (ASEAN) (C) Signup and view all the answers

Which of the following is NOT a purpose of the International Monetary Fund (IMF)?

Facilitate regional trade agreements (C) Signup and view all the answers

Which of the following correctly defines Gross Domestic Product (GDP)?

The value of all goods and services produced by a domestic economy over one year (D) Signup and view all the answers

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Study Notes

What is International Business?

Commercial transactions that occur across national borders
Involves movement of goods/services, capital, personnel, technology, and intellectual property rights

Key players in International Business

Multinational Corporations (MNCs)
- Direct investments in multiple countries
- Significant contributions to jobs, investments, and tax revenue
Entrepreneurs and Small Businesses
- Born global firm: Focuses on global perspective from its inception
- Innovative cultures and knowledge-based organization capabilities

What is Globalization?

Increasing interdependence among national institutions and economies
Spreads financial products, goods, technology, information, and jobs across borders
Denationalization: National boundaries become less relevant

Globalization of Markets

Convergence of buyer preferences in markets worldwide
Example: Nike, Apple
Benefits
- Reduced marketing costs
- New market opportunities
- Leveled income streams (seasonal products)
- Meeting local buyer needs
- Global sustainability

Globalization of Production

Dispersing production activities to optimize costs and quality
Benefits
- Access to lower-cost workers
- Access to technical expertise
- Access to production inputs

Forces Driving Globalization

Falling Trade and Investment Barriers
- General Agreement on Tariffs and Trade (GATT): Reduced tariffs and non-tariff barriers to international trade
- World Trade Organization (WTO): Enforces international trade rules, promotes free trade, opens markets, and resolves trade disputes
- Other International Organizations:
  - World Bank: Finances economic development projects
  - International Monetary Fund (IMF): Regulates exchange rates and international monetary system
- Regional Trade Agreements: (NAFTA, EU, APEC) Integrate economies through trade and investment
- Trade and National Output: Openness to trade increases national output

Regional Examples

North American Free Trade Agreement (NAFTA):
- Free-trade zone in North America
- Increased trade, output, investment, and consumer prices
- Replaced by USMCA (U.S.– Mexico – Canada Agreement) in 2020
European Union (EU):
- Promotes peace, values, well-being of its citizens
- Offers freedom, security, and justice without internal borders
- Includes Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.
Association of Southeast Asian Nations (ASEAN):
- Focuses on economic growth, social progress, cultural development
- Promotes regional peace and stability
- Includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, and East Timor.

National Output

Gross Domestic Product (GDP): Total market value of goods and services produced within a country in a year
Gross National Product (GNP): Total market value of goods and services produced by a nation's residents regardless of location.