AFM 131 Chapter Summaries (Midterm)

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Accounting & Financial Management
AFM 131
Robert Sproule

AFM 131 MidtermChapter 3 competing in global marketsWhy trade with other nationsNo country can produce all products that people want and needEven if selfsufficient other nations seek to trade with country in order to meet needs of own peopleSome have abundance of natural resources lack of technology vice versaEnhances quality of life for Canadians and contributes to countrys economic wellbeingFree Trademovement of goods and services among nations without political or economic obstructionComparative advantagesell to countries products that it produces most effectively and efficiently and buy from countries whose products it cannot produce as effectivelyefficientlyAbsolute advantagecountry has monopoly on producing specific product or able to produce more efficiently than all other countriesBalance of tradenations ratio of exports to importsfavorableexports exceeds imports surplus oppositedeficitBalance of paymentsdifference between money coming into country exports and money leaving imports plus money flows from other factors tourism foreign aid military expenditures foreign investment etc goalmore money flowing in Strategies for reaching global marketsExportingLicensinga firm allows foreign company to produce its product in exchange for a feeSpends little or no money to produce and market productsGain additional revenues from product it would not have generated in home marketLicensees must purchase supplies component materials consulting servicesfrom licensing firmFranchisingsomeone with good idea for business sells rights to use business name and sell a product or service to others in given territoryContract manufacturing foreign countrys production of privatelabel goods to which adomestic company attaches its brand name or trademark outsourcingJoint venturepartnership in which two or more companies undertake major project to form new companyBenefits shared technology and risk shared marketing and management expertise entry into markets where foreign companies are not allowed unless goods produced locally shared knowledge of local market
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