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Chapter 3
Global Business, export => licensing => joint venture=>…
Chapter 3
Global Business
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Absolute advantage – the ability to produce a specific product more efficiently than any other nation
Comparative Advantage - the ability to produce a specific product more efficiently than any other product
EXPORTING AND IMPORTING
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• Example: The Boeing Company exports its airplanes to a number of countries for use by their airlines.
Importing – purchasing raw materials or products in other nations and bringing them into one’s own country
• Example: Buyers for Macy’s department stores purchase rugs in India and have them shipped back to the United States for resale.
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BALANCE OF PAYMENTS- the total flow of money into a country minus the total flow of money out of that country over some period of time
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LICENSING
– a contractual agreement in which one firm permits another to produce and market its product and use its brand name in return for a royalty or other compensation
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• If the licensee does not maintain the licensor’s product standards, the
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• A licensing arrangement may not provide the original producer with any foreign marketing experience.
EXPORTING - A firm may manufacture its products in its home country and export them for sale in foreign markets.
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JOINT VENTURES
Joint venture – a partnership formed to achieve a specific goal or to operate for a specific period of time
A joint venture may be used to produce and market an existing product in a foreign nation or to develop an entirely new product.
Advantage- a JV with an established firm in a foreign country provides immediate market knowledge and access, reduced risk, and control over product attributes
Disadvantage
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• Joint-venture agreements generally require a very high level of commitment from all the parties involved.
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Multinational enterprise – a firm that operates on a worldwide scale without ties to any specific nation or region
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World Trade Organization (WTO) – powerful successor to GATT that incorporates trade in goods, services, and ideas
General Agreement on Tariffs and Trade (GATT) – an international organization of nations dedicated to reducing or eliminating tariffs and other barriers to world trade
Export-Import Bank of the United States – an independent agency of the U.S. government whose function is to assist in financing the exports of American firms
Multilateral development bank (MDB) – an internationally supported bank that provides loans to developing countries to help them grow
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International Monetary Fund (IMF) – an international bank that makes short-term loans to developing countries experiencing balance-of-payment deficits
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