Chapter 3 questions
Chapter 3 questions BMGT 1010-001
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Date Created: 10/13/16
Check Your Progress 1. Distinguish between an absolute advantage and a comparative advantage. Cite an example of a country that has an absolute advantage and one with a comparative advantage. Absolute advantage is a monopoly that exists when a country is the only source of an item, only producer and efficiently producer of an item while comparative advantage is when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items. Example country of absolute advantage is Mexico in oil production and example country of comparative advantage is United States in mining and exporting of natural gas by adopted new technological methods in hydraulic fracturing. 4. How do political issues affect international business? Political considerations are affects international business daily as governments enact tariffs, embargoes, or other types of trade restrictions in response to political events. Companies are often involved directly or indirectly in international politics. Political concerns lead a group of nations or firms to form a cartel which agrees to act as monopoly and not compete with each other, in order to generate a competitive advantages in world markets. 5. What is an import tariff? A quota? Dumping? How might a country use import tariffs and quotas to control its balance of trade and payments? Why can dumping result in the imposition of tariffs and quotas? Import tariff is a tax levied by a nation on goods imported into the country. A quota is a restriction on the number of units of a particular product that can be imported into a country which designed to protect the industries and jobs of the country imposing the quota. Dumping is the act of a country or business selling a products at less than what it costs to produce then so setting quotas or tariffs is to prohibit dumping. They formed General Agreement on Tariffs and Trade (GATT) which is trade agreement that provided a forum for tariff negotiations and a place where international trade problems could be discussed and resolved. The World Trade Organization (WTO), an international organization dealing with the rules of trade between nations and the goal is to help producers of goods and services and exporters and importers conduct their business. GATT and WTO were formed to control its balance of trade and payments. Dumping can result in the imposition of tariffs and quotas because permits quick entry into a market, when the domestic market for a firm’s product is too small to support an efficient level of production and technologically obsolete products that are no longer able to sold in the country of origin are dumped overseas. 9. Compare and contrast licensing, franchising, contract manufacturing, and outsourcing. Licensing is a trade agreement in which one company to use its company name, products, patents, brands, trademarks, raw materials, and production processes in exchange for a fee or royalty. Franchising is a form of licensing in which a company agrees to provide a franchisee a name, logo, methods of operation, advertising, products, and other elements in return for a financial commitment and the agreement to conduct business in accordance with the franchiser’s standard of operations. Contract manufacturing occur when a company hiring of a foreign company to produce a specified volume of the initiating company’s product to specification; the final product carries the domestic firm’s name. Outsourcing is transferring manufacturing or other to companies in countries where labor and supplies are less expensive. All of these are similar to helps companies to expand businesses into own country or oversea. Build Your Skills 1. When people in this country table a motion, they want to discuss it. In America, “to table a motion” means to put off discussion. Great Britain 2. In this country, special forms of speech called keigo convey status among speakers. When talking with a person in this country, one should know the person’s rank. People from this country will not initiate a conversation without a formal introduction. Japan 3. People from this country pride themselves on enhancing their image by keeping others waiting. Venezuela 4. When writing a business letter, people in this country like to provide a great deal of background information and detail before presenting their main points. Germany 5. For a man to inquire about another man’s wife (even a general question about how she is doing) is considered very offensive in this country. . Saudi Arabia 6. When in this country, you are expected to negotiate the price on goods you wish to purchase. India 7. While North Americans want to decide the main points at a business meeting and leave the details for later, people in this country need to have all details decided before the meeting ends to avoid suspicion and distrust. Mexico 8. Children in this country learn from a very early age to look down respectfully when talking to those of higher status. Greece 9. In this country the husband is the ruler of the household, and the custom is to keep the women hidden. Korea 10. Many businesspeople from the United States experience frustration because yes does not always mean the same thing in other cultures. For example, the word yes in this country means, “OK, I want to respect you and not offend you.” It does not necessarily show agreement. China