International Trade Midterm Review - Questions Answers

International trade midterm review questions

Lecture 1 :

-Define International business :

• International business consists of all commercial transactions across two or more countries. From the perspective of a business.

-Why Study International business:

• An understanding of International business helps you decide what governmental policies to support.
• An understanding of International business helps you make better career decisions.

-Why do companies engage in International business?

• Expanding sales (growth into new markets)
• Acquiring resources and expertise
• Reducing risk

Lecture 2:

-Define Globalization:

• Globalization refers to the widening set of interdependent relationships among people from different parts of the world that happens to be divided into nations.

-What are 3 characteristics of a country that could impact the extent to which it is globalized?

• Size of countries
• Income of the countries’ populations
• Variance among globalization aspects

-How does the size of a country impact the extent to which it is globalized?

• Smaller countries tend to be more globalized than larger ones, mainly because their smaller land masses and populations permit a lower variety of production.

-How does the income of a country’s population impact the extent to which it is globalized?

• Countries with higher income populations tend to be more globalized than those with lower income populations because their citizens can better afford foreign products, travel, and communications with people they have met abroad.

List 4 general environmental factors that increase globalization:

• Increase in and application of technology
• Increase in global competition
• Growth of consumer pressures
• Liberalization of cross border trade and resource movements

-Why does the increase in, and application of technology promote globalization?

• Much new technical innovation takes so many financial and intellectual resources that companies must cooperate to take on portions of development.

-Why does the liberalization of cross border trade and resource movement promote globalization?

Over time, most governments have reduced such restrictions, primarily for 3 reasons:

• Their citizens want a greater variety of goods and services at lower prices
• Competition spurs domestic producers to become more efficient
• They hope to induce other countries to lower their barriers in turn

-How does growth in consumer pressure promote globalization?

• More consumers know more today about products and services available in other countries, can afford to buy them, and want the greater variety in quality, price, and characteristics that access to these products offers.

-How does an increase in global competition promote globalization?

• The present and potential pressures of increased foreign competition can persuade companies to buy or sell abroad. A firm might introduce products into markets where competitors are already gaining sales or seek supplies where competitors are getting cheaper or more attractive products.

-List 4 costs or drawbacks of globalization:

• Countries’ sovereignty is diminished
• The resultant growth hurts the environment
• Some people lose both relatively and absolutely
• Greater insecurity increases personal stress

-Describe how globalization can affect the sovereignty of a country?

• Overdependence (Small economies depend so much on larger ones for supplies and sales that they are vulnerable to foreign mandates, including everything from defending certain positions at the United Nations to supporting a large economy’s foreign military or economic actions.
• Cultural threat (Globalization homogenizes products, companies’ work methods, social structures, and even language)

-What is an argument that supports the idea that globalization increases pollution?

• More consumption leads to more pollution.

-What is an argument that supports the idea that globalization decreases pollution?

• The collaboration between countries leads to more efficient production and an ability to collectively reduce negative impacts on the environment.

-Explain why individuals living in countries that are becoming more globalized face more stress:

• Because of the increased insecurity about their job and social status but also with costly social unrest.

-List 3 forms of international trade:

• Merchandise Import and export
• Service Import and Export (Tourism and transportation, service performance, asset use)
• Investments (Direct and portfolio investment)

-What is the difference between a turnkey project and a management contract?

• Turnkey projects are completed entirely and then transferred to the owner when they are operational.
• Management contracts involve an agreement where one company provides personnel to perform management functions for another.

-What is a licensing agreement used for?

• A licensing agreement is used to let a company allow another company to use its assets (commonly intangible assets like trademarks, patents, copyrights or expertise under a contract.

-Describe franchising:

• Franchising is a form of licensing involving one company (the franchisor) allowing the use of an entire business model and all associated intangible assets to another (the franchisee) in exchange for royalties. The franchisor normally offers setup and operational support.

-What is the key difference between foreign direct investment and portfolio investment?

• Foreign direct investment is the ownership of a controlling share (interest) in a foreign company.
• Portfolio investment is a non-controlling financial ownership (or interest) in an entity. These take the form of bonds (debt) or stock (equity).

-What are 3 words and acronyms that are used to describe a company that has investments in many different countries?