Decision to Move into an International Market

605 WordsJan 31, 20182 Pages
Terms and Definitions Upon a company making the decision to move into an international market there are many economic terms, definitions and laws that are to be researched and understood. While there are lots of terms and definitions, five of these terms include: multinational corporations, economies of scale, imports and exports as part of GDP, foreign exchange market and exchange rates and marginal rate of transformation. Each definition will be researched and defined below and their importance to a company going global will be discussed. Multinational Corporations A multinational corporation or a “MNC” can be defined as a company operating in at least one other country besides its home country. A MNC can be a closed system, in which it produces within said country and sells to that country only. Most MNC’s, though, are open systems in which they produce in one country and sell to another. MNC’s are driven by the law of supply and demand. Supply and demand affect open systems differently as labor is in one country and the selling of products in another and the cycle of products is on a much larger scale. A company looking to become international, if incorporated, will become a multinational corporation. II. Economies of Scale A. Factors that cause the cost of producing something to fall as the scale of its output increases are known as economies of scale. An example is it might cost $5000 to produce 200 copies of a book but only $6000 to produce
Open Document