SLIDE 1 3-1 3-1International Business Basics 3-2 3-2The Global Market Place 3-3 3-3International...
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Transcript of SLIDE 1 3-1 3-1International Business Basics 3-2 3-2The Global Market Place 3-3 3-3International...
SLIDE 1
3-1 International Business Basics
3-2 The Global Market Place
3-3 International Business Organizations
3C H A P T E R
Business in the Global Economy
3-1 International Business Basics Goals
1.Describe importing and exporting activities
2.Compare balance of trade and balance of payments
3.List factors that affect the value of global currencies
Trading Among Nations Most business activities occur within a
country’s own boarders Domestic Business – the making, buying, and
selling of goods and services within a country. International Business – refers to business
activities needed for creating, shipping, and selling goods and services across national boarders.
Foreign or World Trade
Absolute/Comparative Advantage
Two economic principles define buying and selling among companies in different countries1. Absolute Advantage – exists when a country
can produce a good or service at a lower cost than other countries
2. Comparative Advantage – a situation in which a country specializes in the production of a good or service at which it is relatively more efficient
Importing / Exporting
Imports – Items bought from other countries Without foreign trade, many things you buy would cost
more or not be available. Exports – Goods and services sold to other
countries The goods and services exported by the U.S. create many
jobs.
1 out of 6 jobs in the U.S. depend on international business.
U.S Trade Balance With Top Trading Partners (In Billions)
Country Goods Exported Goods Imported U.S Trade Balance
All Countries 1056.9 1558.1 -501.2
1. Canada 204.7 224.9 -20.2
2. China 69.6 296.4 -226.8
3. Mexico 129.0 176.5 -47.5
4. Japan 51.2 95.9 -44.7
5. Germany 43.3 71.3 -28.0
6. United Kingdom 45.7 47.5 -1.8
7. South Korea 28.6 39.2 -10.6
8. France 26.5 34.0 -7.5
9. Netherlands 32.3 16.1 16.2
Checkpoint #1 How does importing differ from
exporting ? Importing is bringing items from
other countries into a country. Exporting is selling goods and services to other countries.
Measuring Trade Relations
People usually try to keep their income and spending in a balance. Nations are also concerned about
balancing income with expenditures.
Foreign Debt – the amount the country owes to other countries
Balance of Trade The difference between a country’s total
exports and total imports. Trade Surplus - If a country exports more than
it imports (Trade favorable) Trade Deficit - Country imports more than its
exports (Trade is unfavorable)
U.S. has had a trade deficit in recent years
Balance of Payments
Money goes from one country to another through investments and tourism Business Factory Financial or Military aid Bank deposit funds in foreign banks
Balance of Payments – the difference between the amount of money that comes into a country and the amount that goes out.
Checkpoint #2 How does balance of trade differ from
balance of payments?Trade is not the only thing influencing the
balance of payments.Money can enter or leave a country
through investments, tourism, financial aid, and bank deposits.
International Currency
A challenge faced by many businesses are the various currencies used around the world. Foreign Exchange Market – exchanging one
currency for another. Consists of banks that buy and sell different currencies
Exchange Rate – the value of a currency in one country compared with the value of another. Supply and demand affect the value of currency
Factors Affecting Currency Values
3 main factors affect currency exchange rates:
1. Balance of Payments – favorable balance of payments, the value of its currency is usually constant or rising.
2. Economic Conditions – Buying power in decline, inflation, interest rates.
3. Political Stability – Government change might create unfriendly setting got foreign business. New laws might be put in placed.
Checkpoint #3 What factors affect a countries
currency ?1. Balance of payments
2. Economic Conditions
3. Political Stability
3-2 The Global Marketplace
Goals:1. Describe the components of the
international business environment
2. Identify examples of formal trade barriers
3. Explain actions to encourage international trade.
International Business Environment
Businesses must consider 4 main factors when doing business in other countries:
1. Geography
2. Cultural Influence The accepted behaviors, customs, values of society
3. Economic development Infrastructure (transportation, communication,
utility systems)
4. Political and Legal Concerns
Geographic FactorsLocationClimate TerrainWaterwaysNatural Resources
Economic FactorsTechnologyEducationInflationExchange RateInfrastructure
Cultural FactorsLanguage Family ReligionCustoms Traditions Food
Political/Legal FactorsGovernment SystemPolitical Stability Trade Barriers Business Regulations
International Business Environment
Checkpoint #4 List the four main elements of the
international business environment?1. Geography
2. Cultural Influences
3. Economic Development
4. Political and Legal Concerns
International Trade Barriers
Government actions can create Trade Barriers Restrictions to free trade Formal Trade Barriers – political actions
Quotas , Tariffs , Embargos
Informal Trade Barriers – Culture, traditions, and religion
Not based on government actions but they can restrict trade
Quotas Government sets a limit on a quantity of a
product that may be imported or exported within a given period
Quotas can be set for many reasons Crude oil (Supply remains low) Imports (Express displeasure at the politics) Competition abroad
Tariffs A tax that a government places on certain
imported products Some tariffs are a set amount per pound,
gallon, or other unit. High Tariff
Lower Demand Quantity of that import
Embargoes Government stops the export or import of a
product completelyWish to protect their own industries from
international competitionPrevent sensitive products
Vital to a nations defense
Express disapproval of the actions or politics of another country
Checkpoint #5 What are 3 formal trade
barriers?1. Quotas
2. Tariffs
3. Embargos
Encouraging International Trade
Specific actions by government can promote international business activities Exporting is an effective way to create jobs
and foster economic prosperity
1. Free trade zone
2. Free-trade agreements
3. Common Markets
Free-Trade Zones A selected area where products can be
imported duty-free and then stored, assembled, and/or used in manufacturing Located usually around a seaport or airportThe importer only pays duty only when the
product leaves the zone
Fair-Trade Agreements Member countries agree to remove duties
(import taxes), and trade barriers on products traded among themResults in increase tradeNAFTA (North American Free Trade
Agreement)Eases the movement of goods
Common Markets Member do away with duties and other trade
barriers Allow companies to invest freely in each member’s
country Economic Community European Union (EU) Latin American Integration Association (LAIA)
Goal is to expand trade among member nations and promote regional economic integration
Checkpoint #6 What actions can be taken to
encourage international trade?1. Free-Zones
2. Free-Trade Agreements
3. Common Markets
3-3 International Business Organizations
Goals 1.Discuss activities of multinational
organizations
2.Explain common international business entry modes
3.Describe activities of international trade organizations and agencies
Multinational Companies An organization that does business in
several countries Usually consists of a parent company in a
home country and divisions Separate companies in one or more host
countries The country in which a MNC places business
activities
MNC Strategies Global or Multinational Strategy Global Strategy – uses the same product and
some marketing strategy worldwide Product is sold in the manner across the world (Coca-Cola)
Multinational Strategy - treats each country market differently Firms develop products and marketing strategies that
adapt to the customs, tastes, and buying habits of a market.
MNC Benefits Large amount of goods available
Lower price than goods made domestically
Career opportunities expand as a company does business
Foster understanding, communication, and respect among people of different countries.
Drawbacks of MNC Workers of the host country may depend on
the MNC for jobs Consumers become dependent upon it for
goods and services Control or influence the political power of the
country
Checkpoint #7 What are two strategies commonly
used by MNC?Global strategy – offering the same
product the same way everywhereMultinational Strategy – Approaching each
countries market differently
Global Market Entry Modes
1. Licensing – selling the right to use some intangible property (production process, trademark, brand name) for a fee or royalty Gerber company selling in Japan Licensing has a low financial investment, so
return in low
2. Franchising – the right to use a company name or business process in a specific way.
Global Market Entry Modes
Marketing elements such as food product, packaging and advertising must meet cultural sensitivities and legal requirement
3. Joint Venture – an agreement between two or more companies to share a business project
Sharing of Raw materials, shipping facilities, management activities, or production facilities.
Sharing of profits and not as much control
Checkpoint #8 How does licensing differ from a
franchise?Licensing does not require as much
financial investment or risk as a franchise Both involve royalty payments, but
licensing involves manufacturing process, while franchising involves selling a product or service.
World Trade Organization
Created in 1995 to create trade around the world Settles trade disputes and enforces free-trade
agreements Lowering tariffs that discourage free tradeEliminating import quotas Reducing barriers for banks, insurance companies,
and other financial servicesAssisting poor countries with economic growth
International Monetary Fund
Helps promote economic cooperation Maintains an orderly system of world trade and
exchange rates. Cooperation among IMF nations makes trade war
less likely
World Bank Was created in 1944 to provide loans for
rebuilding after WW II Today the bank function is to give economic
aid to less developed countriesBuild communication systems, transportation
networks, and energy plants.
Checkpoint #9 How does the International Monetary
Find assist countries?By promoting economic cooperation and
maintaining an orderly system of world trade and exchange rates.