Summary: Business In Global Market

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• 1 Business in Global Market

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• What's the difference between importing and exporting?

  Importing is buying products from another country and exporting is selling products to another country.

• Why trade with different nations?

  1. No country can produce all the goods needed
  2. If so, other countries would want to trade to satisfy their own people's needs.
  3. Countries with abundant natural sources need technological resources from other countries. 

• What's the difference between comparative and absolute advantage?

  Comparative advantage states that a country should sell the products it produces most efficiently and buy the products it can't produce as efficiently. absolute advantage means that a country as a monopoly on producing a specific product or is able to produce it more efficiently than others.  

• What are the 2 key indicators to measure the effectiveness of the world trade?

  1. Balance of trade; balance between export and import.
  2. Balance of payments; the difference between money that enters the country (exports) and the money that leaves the country (imports) + the money that enters/leaves the country via other ways (tourism)

• What are the advantages/disadvantages of a foreign subsidiary?

  A company owned in a foreign country by another company called the parent company.
  - Advantage; parent company maintains complete control over its technology or expertise.
  - Disadvantage; must commit funds and technology within foreign boundaries.

• What are the advantages of licensing?

  - Gaining revenues it wouldn't have otherwise
  - Spending little money to produce or market their products
  - Ensures long-term relationship
  - Licensees must purchase start-up supplies and consulting services from the licensing firm.

• What are the disadvantages of licensing?

  - Licensing rights for a long period
  - if a product is extremely successful in another market, the licensor does not receive the bulk of the revenues. 
  - the licensee can sell its knowledge in the market
  - The licensee can break the agreement and produce a similar product
  - The licensor has little control over the project

• What do EACs and ETCs do?

  EACs provide hands-on exporting assistance and trade-finance support for small/medium businesses who directly wants to export.
  ETCs help companies engage in indirect exporting by; matching buyers/sellers and dealing with foreign customs offices, documentation and conversions.

• What can contract manufacturing can be used to?

  - Allow a company to experiment in a new market without incurring heavy start-up costs such as building a manufacturing plant.
  - Temporarily meet an unexpected increase in orders

• What's a joint venture?

  A partnership in which two or more companies join to undertake a major project.