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Unformatted text preview: CHAPTER 3: COMPETING IN GLOBAL MARKETS THE DYNAMIC GLOBAL MARKET Importing- buying products from another country Exporting- selling products to another country WHY TRADE WITH OTHER NATIONS? Free trade- the movement of goods and services among nations without political or economic barriers THE THEORIES OF COMPARATIVE AND ABSOLUTE ADVANTAGE Comparative advantage theory- theory that states that a country should sell to other countries those products that it produces most effectively , and buy from other countries those products that it cant produce as effectively or efficiently Absolute advantage- the advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries GETTING INVOLVED IN GLOBAL TRADE IMPORTING GOODS AND SERVICES Howard Shultz- bought the original Starbucks coffee shop in Seattle in 1987 EXPORTING GOODS AND SERVICES- C. Fred Bergsten – director of the institute for International Economics – estimates that every $1 billion in US exports generates 25,000 jobs at home MEASURING GLOBAL TRADE Balance of trade- the total value of a nation’s exports compared to its imports measured over a particular period Trade deficit- an unfavorable balance of trade; occurs when the value of a country’s imports exceeds that of its exports Balance of payments- the difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment- Favorable balance of payments – when there is more money flowing into the country then out of the country Dumping- selling products in a foreign country at lower prices than those charged in the producing country STRATEGIES FOR REACHING GLOBAL MARKETS LICENSING Licensing- 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) A licensing agreement can be beneficial:- Through licensing, an organization can gain additional revenues it normally would not have generated in its home market- Foreign licensees often must purchase start-up supplies, component materials, and consulting...
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- Fall '07
- International Trade, American Free Trade, Free Trade Agreement