AFM131 Chapter Notes - Chapter 3: Joint Venture, Strategic Alliance, Contract Manufacturer

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM131
• Professor: Mohsin Bashir

Document Summary

Free trade: movement of goods and services among nations without political or economic barriers. Advantages: global market full of potential consumers, productivity grows with the comparative advantage, inflation < economic growth, innovation, uninterrupted capital flow = foreign investments. Disadvantages: loss of jobs, pay cuts, competitive pressure = outsourcing, domestic companies < low wage country production. Comparative advantage: country should sell to other countries those products it produces most efficiently and buy from other countries those products it can"t produce efficiently. Absolute advantage: country produces a product more efficiently than all other countries. Balance of trade: total value of a nation"s exports compares to its imports (over a certain time period) Balance of payments: difference between money coming into a country and money that flows from other factors. Dumping: selling products in a foreign country at lower prices than those charged in the producing country. Licensing: firm allows a foreign company to produce its product for a fee.