Page 114 - Business Principles and Management

C HAPTER 4 A SSESSMENT

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CHAPTER CONCEPTS

• Firms go into international business because of the potential for
larger profits and limited opportunities in the home market. Removal
of barriers to trade and investment, creation of trading blocs, and
technological advances in communication and transportation have
created a positive environment for conducting international business.
• International business occurs in various forms, such as exporting and
importing, licensing, joint ventures, wholly owned subsidiaries, strate-
gic alliances, and multinational firms.
• International business faces unique challenges, such as the need to
work within the rules set by more than one government, currency
exchange rates, and cultural differences.
• Two theories explain international trade and investments. The theory
of comparative advantage explains why a particular country special-
izes in producing a particular product or service. The product life
cycle theory explains how a product’s life stage encourages inter-
national business.
• Data on trade and investment are used to set business and economic
policies. The balance of trade between countries is evidence of a
nation’s financial strength or weakness.

REVIEW TERMS AND CONCEPTS

Write the letter of the term that matches each definition. Some terms will
not be used.
1. Business activities that occur between two or more countries
2. Buying goods or services made in a foreign country a. capital account
3. Business arrangement in which two or more firms share the costs b. dumping
of doing business and also share the profits c. embargo
4. Type of business in which a firm sets up a business abroad on its d. exchange rate
own without any partners e. home country
5. Firm that owns or controls production or service facilities in more f. host country
than one country g. importing
6. Foreign location where a firm has facilities h. international
7. Value of one country’s currency expressed in the currency of another business
8. Taxes on foreign goods to protect domestic industries and to earn i. joint venture
revenue j. multinational firm
9. Nontax methods of discouraging trade k. nontariff barrier
l. parent firm
10. Government block preventing companies from doing business with m. tariffs
particular countries n. wholly owned
11. Selling goods in a foreign market at a price that is below cost or subsidiary
below what is charged in the home country
12. Record of investment funds coming into and going out of a country

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