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Importing — Buying products from another country.
Exporting — Selling products to another country. |
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| The movement of goods and services among nations without political or economic barriers. |
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| — A country should sell to other countries those products that it produces most efficiently and buy from other countries those products that it cannot produce as effectively or efficiently. |
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| A country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries. |
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The total value of a nation’s exports compared to its imports over a particular period. |
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Trade Surplus
Trade Deficit |
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Trade Surplus (favorable) — Occurs when the value of a country’s exports exceeds that of its imports.
Trade Deficit (unfavorable) — Occurs when the value of a country’s imports exceeds that of its exports. |
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The difference between money coming into a country (from exports) and money leaving the country (from imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment. |
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Selling your products in a foreign country at lower prices than those charged in your own producing country. |
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A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty). |
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A contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product or service in a given territory in a specified manner. |
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A foreign company’s production of private-label goods to which a domestic company then attaches its own brand name or trademark; part of the broad category of outsourcing.
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A partnership in which two or more companies (often from different countries) join to undertake a major project.
The benefits of joint ventures:
Shared technology and risk
Shared marketing and management expertise
Entry into markets where foreign companies are often not allowed unless goods are produced locally
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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 FDI |
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| The buying of permanent property and businesses in foreign nations. |
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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.
NOTE: many extremely large multinational firms are larger is sales than the GDP of the entire country in which they operate…this gives them tremendous power. |
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The value of one nation’s currency relative to the currencies of other countries.
•High value of the dollar — Dollar is trading for more foreign currency; foreign products become cheaper.
•Low value of the dollar — Dollar is trading for less foreign currency; foreign goods become more expensive.
•Floating exchange rates — Currencies float in value depending on the supply and demand for them in the global market. |
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The use of government regulations to limit the import of goods and services. |
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A tax imposed on imports coming into the USA on certain specified goods and from certain countries as well. |
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| A limit on the number of products in certain categories that a nation can import. |
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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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World Trade Organization (WTO) An independent entity of 164 member nations whose purpose is to oversee cross-border trade issues and global business practices; headquartered in Geneva. |
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General Agreement on Tariffs and Trade (GATT) — A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions. |
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Common Market — A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc.
•Some common markets are:
•European Union (EU)
•Mercosur
•ASEAN |
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Free Trade Agreements
•(USMCA) — Agreement that created a free-trade area among the United States, Mexico and Canada ratified in 2020.
•Central American Free Trade Agreement (CAFTA) — Agreement that created a free-trade zone with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua; signed into law in 2005. |
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Process whereby one firm contracts with other companies to do some or all of its functions. |
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