Chapter 03 – Doing Business in Global Markets
1. Today, over 90% of the companies doing business globally believe it is important for their
employees to have experience working in other countries.
2. Importing is the selling of products to another country.
3. Exporting is the selling of products to another country.
4. The United States imports more products and services than any nation in the world.
5. The United States is the largest exporter in the world.
3-2
6. While the U.S. is a large exporter, Germany exports a higher percentage of their GDP.
7. Competition in exporting is very intense.
8. One reason countries trade with other countries is that even technologically advanced
nations cannot produce all the products their people want and need.
9. Free trade is the movement of goods and services between nations without political or
economic barriers.
10. Global trade is the exchange of goods and services between countries.
3-3
11. Global trade includes the exchange of art, sports, and cultural events.
12. Absolute advantage is the basis for most global trade today.
13. Comparative advantage theory states that a country should sell to other countries those
products that it produces most efficiently and buy from other countries those products it
cannot produce as efficiently.
14. A country has an absolute advantage if it has a monopoly in the production of a specific
product or is able to produce it more efficiently than all other nations.
15.
Chapter 03 – Doing Business in Global Markets
Today, there are more countries that have some form of absolute advantage in a product or
service, than years ago.
16. Free trade results in a mutually beneficial exchange between and among nations.
Feedback: Trading countries generally benefit from a free trade environment because global
trade enables a nation to produce what it is most capable of producing and to buy what it
needs from others in a mutually beneficial exchange relationship.
17. With respect to free trade, many U.S. citizens prefer “fair trade, not free trade.”
Feedback: Many in the U.S. take the position: “fair trade, not free trade.” Free trade continues
to be a hotly debated topic. Figure 3.2 in the textbook provides common pros and cons on this
subject.
3-10
38. Even though the U.S. exports a vast amount of goods globally, it exports a much lower
percentage of its products than other countries do.
39. Dumping is the practice of selling products in foreign markets at lower prices than what
domestic firms are charging for the same product.
40. In order to prevent dumping, U.S. law stipulates that foreign firms selling similar products
as domestic firms to U.S. customers must charge at least 10% more than what U.S. firms
charge.
41. When trading in global markets, most countries prefer to import more than they export.
42.
Chapter 03 – Doing Business in Global Markets
Compared to many other industrialized countries, the United States has historically
exported a lower percentage of its products than other countries do.
43. Compared to many other industrialized countries, the United States has historically
exported a much higher percentage of its products than other countries do.
44. The United States currently enjoys a favorable balance of trade with the rest of the world.
45. A favorable balance of trade occurs when the value of a nation’s exports exceeds its
imports.
3-17
64.
Chapter 03 – Doing Business in Global Markets
3-18
One advantage of licensing as a strategy to enter the global market is the sharing of trade
secrets.
65. While franchising is popular in the United States, it is not an accepted strategy for firms in
the global market.
66. One advantage of franchising is that the parent corporation does not need to concern itself
with adapting to the culture of another country.
67. Contract manufacturing is when a firm pays foreign manufacturers to produce its product.
The Foreign manufacturer places the domestic company’s label on the products.
68.
Chapter 03 – Doing Business in Global Markets
3-19
Contract manufacturing requires heavy start-up costs by the domestic company.
69. Contract manufacturing is a form of outsourcing.
70. A joint venture is a partnership in which two or more companies join to undertake a major
project. All parties commit financing and risk to the project.
71. According to current U.S. laws, American firms are prohibited from participating in joint
ventures with foreign firms.
72.
Chapter 03 – Doing Business in Global Markets
The purpose of forming strategic alliances is to share the costs of marketing new products
and services to several countries.
73. A disadvantage of creating a foreign subsidiary is the loss of control over technology and
expertise used in the production of the product.
74. Foreign direct investment refers to the buying of goods produced in another country.
75. Expropriation occurs when a host government takes over the assets of a foreign company.
76.