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Myriads of terms and concepts come to mind and all need to be taken into consideration when contemplating entry into the world market. Entering into the world market can prove to be very beneficial to your business and industry. The term world market is on a major scale and when looking at it through an aspect of both macroeconomics and microeconomics. In this meeting I’ll discuss some key terms and concepts you’ll want to familiarize yourself with before the end of this meeting. I will touch on the following terms during the course of this meeting: The World Bank and International Monetary Fund, Imports and exports as part of, Multinational corporations, foreign direct investment and capital flows, Foreign exchange market and exchange rates, Labor theory of value, Marginal rate of transformation, Gains from trade, comparative advantage, and Economies of scale.

The Word bank was created in 1944 after World War II. It is an international financial institution. The primary goal for the bank is to help provide financial relief to countries that are devastated by the impact of the war. Here are some lesser known facts about the word bank as time passed its goals and functions changed with the time the as everything does. The bank began to provide loans to developing countries for use of building establishing, ad or improving capital programs. “The World Bank is a component of the World Bank Group, and a member of the United Nations Development Group (Investopedia, 2014).”

The economy has drastically changed since then in today’s market; the bank serves a purpose much bigger and much grander than that of the past. The International Monetary Fund is a relief aid made to help and assist today’s World Bank in mustering up global growth. In addition to this it also helps in aiding third world countries achieve economic stability. The main function of the world back in today’s economy is acting as an international organization that lends an aided hand and helps fight against poverty. You may ask in what ways does The Worlds Bank helps fights against poverty. It helps by offering developmental assistance to middle and poor-income countries. The bank in addition to the fight against poverty also gives out loans, offering advice, and training in both the private sector as well as the public sector. One can say the World Banks slogan is helping others help themselves (Investopedia, 2014).

The International Monetary Fund provides policy advice to its members. In addition to the policy advice it also offers financing to members that are suffering economic difficulties. “The IMF also works with developing nations to help them achieve macroeconomic stability and reduce poverty (Investopedia, 2014).” “The IMF can provide other sources of financing to countries in need that would not be available in the absence of an economic stabilization program supported by the Fund (Woods, 2003).”

Exports are also referenced as gross exports when referring to the Gross Domestic Product (GDP). GDP number refers to the amount that a country produces. This number includes a mixture of both goods and services that a country produces to be sold on the world market for the consumption of other nations. Do to that simple fact exports are to be added and not subtracted. Imports referenced as gross imports when referring to the GDP. Imports are subtracted and not added; imports must be deducted to avoid counting foreign supply as domestic. The reason that imports are subtracted is due to the fact that imported goods will be included in the terms of Consumer spending, Government spending, and or a country’s businesses spending on capital (Dickinson, 2012).

A business organization whose activities are located and or split amongst two and or more countries is called a multinational corporation. Organizational formations of this kind are what define foreign direct investment. You will come to find companies such as these often have offices in one country and factories in another. This means that they have a centralized head office where they co-ordinate global management (Investopedia, 2014). Most multinationals organizations originate in one country and then expand internationally therefore splitting the company between countries such as: American, Japanese or Western European. To name a few multinational companies such as: Nike, Coca-Cola, Walmart, AOL, Toshiba, Adidas and Volts Wagon (Investopedia, 2014).

The movement of money for the purpose of investment, trade or business production is Foreign direct Investment and Cash Flow. “Capital flows occur within corporations in the form of investment capital and capital spending on operations and research & development. (Investopedia, 2014).” Direct Investment flows are the least volatile types of income source when it comes to international investment.

This is the case for most countries. However there are exceptions that exist and the main exception to this rule is the United States. This is because the United States is the largest country. One moment the United States is a net supplier and in the next moment it’s not instead it has reversed roles and become a dominant recipient. Because of the continuous flipping back and forth from dominant net supplier to dominant net recipient and then back again it’s just harder to keep up with what we are as a country. Developing countries, direct investment particularly has been the most dependable source of foreign investment (Lipsey, 2000).

The development of the foreign exchange market was to help assists countries in international trade and investments by way currency conversion. For example $1 U.S. dollars is equal to 0.58395 £ Great British Pounds (GBP). I want to buy a shipment from a European dealer and the shipment in GBP is 8,467.25£; I would need to pay $14,500 U.S. dollars to receive the shipment because of the exchange rate difference. The foreign exchange market also facilitates the value of currencies, and the carry trade. It is done so on the basis of the interest rate differential between two currencies (Investopedia, 2014).

Labor theory of value is an economic theory. In this theory it stipulates the value of a good and or service that is dependent upon the labor used in its production. This theory was first proposed by Adam Smith (1723-1790) who was one of the founders of economics as we have come to know it today. This concept of this was so important because of the contribution it played to the philosophical ideals of Karl Marx. This theory further states that any goods which take the same amount of time to produce should cost the same (Investopedia, 2014).Contrary to his theory some believe rather than that it is simply a function of supply and demand for a given good or service that determines its price (Investopedia, 2014).

The rate at which one good must be sacrificed in order to produce a single extra unit of another good is the marginal rate of transformation. This is in the assumption that both goods require the same inputs. The marginal rate of transformation is synced along with the production possibilities frontier (PPF). The PPF is used to show the output potential for two goods using the same resources. If you produce more of one good means producing less of the other; because the resources are allocated between the two products (Investopedia, 2014). “The marginal rate of transformation allows economists to analyze the opportunity costs to produce one extra unit of something; in this case the opportunity cost is represented in the lost production of another specific good (Investopedia, 2014).”

A gain from trade refers to net benefits allocated to agents from allowing an increase in voluntary trading amongst one another. It is the increase of consumer surplus plus and producer surplus from lower fixed prices mandated on a product through trade. Market prices therefore reflect in price through the number of outputs and inputs used to make the product. They are theorized to show factors of production, including labor, into activities according to comparative advantage. Comparative advantage is having a low opportunity cost (Dickinson, 2012).

Economies of scale are the results of cost advantages that enterprises obtain due to size. In addition, to that it is equally the result of cost advantage due to output, scale of operation, and cost per unit. Usually it will be the results of decreasing with an increasing scale. As fixed costs become more and more spread out over units of output. Operational efficiency is often also greater with an increasing scale, leading to lower variable cost as well (Chandler Jr., 1993).Economies of scale apply to a myriad of different varieties of organizational and business situations.

The degree in which the economies of scale vary is dependent upon the number of levels in which it uses. A larger manufacturing facility would be expected to have a lower cost per unit of output than a smaller facility. This is in light of all other factors being equal. So it can be stated that a company with many facilities should have a cost advantage over a competitor with fewer (Chandler Jr., 1993).

You should familiarize yourself with the above terms as much as possible. You will be running into these terms a lot during the course of your businesses expansion into the world market. There are a myriad of terms and concepts you will encounter on the world market of these the above mentioned are of top most importance. Entering into the world market can prove to be very beneficial ad lucrative to your business and industry. Remember to make the decision that is best fit for you.

References Chandler Jr., A. D. (1993). The Visible Hand: The Management Revolution in American Business. Cambridge: Belknap Press of Harvard University Press. Dickinson, E. (2012, April 25). GDP: a brief history. Retrieved from ForiegnPolicy.com: http://www.foreignpolicy.com/articles/2011/01/02/gdp_a_brief_history Investopedia. (2014, January 10). Investopedia. Retrieved from Investopedia.com: http://www.investopedia.com/terms/m/multinationalcorporation.asp Lipsey, R. E. (2000). The Role of Foreign Direct Investment in International Capital Flows. Cambridge, MA: NBER digest. Woods, N. (2003). The United States and the International Financial Institutions: Power and Influence Within the World Bank and the IMF. Oxford University Press.