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Introduction to Business 3, Cheat Sheet of Economics

An introduction to international trade, including the concepts of import and export, theories of comparative and absolute advantage, measuring international trade, strategies for reaching global markets, and forces that affect trade in global markets. It also covers trade protection and common markets. the advantages of joint ventures and strategic alliances, as well as foreign direct investment. The document concludes with a discussion of future trading opportunities in Brazil, Russia, India, and China.

Typology: Cheat Sheet

2017/2018

Available from 09/21/2022

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INTRODUCTION TO BUSINESS
CHAPTER 3
Import Buying products from other countries
Export Selling products to other countries
Best countries for business : Ireland, New Zealand, Hong Kong
Free trade is ..
The movement of goods and services between countries without political
or economic boundaries
Reasons for doing international trade:
1. Complementing each other's differences in resources,
2. Each country has different expertise (production can be more effective
and efficient)
Theory of Comparative Advantage
The state sells products that can be produced efficiently and effectively,
buys those that cannot be produced efficiently and effectively
Absolute Advantage Theory
A country can produce a product more efficiently than another country
Measuring international trade:
1. Trade balance
Total value of exports and imports in one period
Trade surplus : export >import
Trade Deficit : import>export
2. Balance of payments
The difference between money coming in and out of a country (from
the service sector, investment, and grants)
Dumping Selling in another country at a lower price than the country
of origin (already prohibited)
Strategy to reach global market:
1. Licensing : Production permit in exchange for royalty
2. Export
3. Franchising: Permission to use a name and sell in an area
4. Contract manufacturing: Like outsourcing well-known brands
5. International Joint Venture & Strategic Alliance
Joint venture is two or more companies join for a project.
Advantages of joint ventures :
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INTRODUCTION TO BUSINESS

CHAPTER 3

Import Buying products from other countries Export Selling products to other countries Best countries for business : Ireland, New Zealand, Hong Kong Free trade is .. The movement of goods and services between countries without political or economic boundaries Reasons for doing international trade:

  1. Complementing each other's differences in resources,
  2. Each country has different expertise (production can be more effective and efficient)  Theory of Comparative Advantage The state sells products that can be produced efficiently and effectively, buys those that cannot be produced efficiently and effectively  Absolute Advantage Theory A country can produce a product more efficiently than another country Measuring international trade:
    1. Trade balance Total value of exports and imports in one period Trade surplus : export >import Trade Deficit : import>export
    2. Balance of payments The difference between money coming in and out of a country (from the service sector, investment, and grants) Dumping Selling in another country at a lower price than the country of origin (already prohibited) Strategy to reach global market:
  3. Licensing : Production permit in exchange for royalty
  4. Export
  5. Franchising: Permission to use a name and sell in an area
  6. Contract manufacturing: Like outsourcing well-known brands
  7. International Joint Venture & Strategic Alliance Joint venture is two or more companies join for a project. Advantages of joint ventures :

 Sharing technology and risks  Share marketing and managerial skills  Ease of product entry in cooperating countries Strategic Alliance is long-term cooperation to build a competitive market

  1. Foreign direct investment General form: foreign subsidiary (there are parent and overseas branches) Multinational Cooperation : Owners of shares in various countries Forces that affect trade in global markets:
    1. Socio-cultural There is ethnocentric (consider the culture number 1)
    2. Economics and finance Value of money (inflation and deflation), exchange rates, floating exchange rates (determined by market mechanisms), changes in exchange rates by the government (deflation), countertrading (barter)
    3. Laws and regulations There is no central law.
    4. Environment  Developing countries have poor road access and storage systems  The technology of each country is different Trade Protection Done by the government to limit the import of goods and services
  2. Tariff Goods are taxed so that the price of imported goods is more expensive  Protective tariffs: To protect domestic producers  Profit rate: To increase foreign exchange
  3. Import quota: Limiting the number of incoming goods
  4. Embargo: Total ban
  5. Non-tariff barriers: Making import permits is complicated, there are regulations, bureaucracy, etc. Common market is Group of regional countries that have agreements to hold free trade (eg: NAFTA) Future trading:
  • Brazil (2030, its economy will grow rapidly)
  • Russia (oil)
  • India (IT, pharmacy, biotechnology)
  • China (investment center)