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Understand the role of business in the global economy. 1.

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Presentation on theme: "Understand the role of business in the global economy. 1."— Presentation transcript:

1 Understand the role of business in the global economy. 1

2 Understand business in the global marketplace. 2

3 Factors and regulations companies have to consider when doing business in the global market place Main entry modes for companies to enter the global marketplace Main international trade organizations 3

4 Factors and regulations companies have to consider when doing business in the global market place 4

5 Domestic business is the making, buying, and selling of goods and service within a country. International business, also called foreign or world trade, refers to business activities needed for creating, shipping, and selling goods and services across national borders. 5

6 What activities are included in domestic business transactions? Where do they take place? What activities are included international business transactions? Where do they take place? 6

7 Absolute advantage exists when a country can produce a good or service at a lower cost than other countries. Comparative advantage is a situation in which a country specializes in the production of a good or service at which it is relatively more efficient. What are some examples of absolute and comparative advantages? 7

8 From where do imports come?. From where do exports come? What are some examples of imports? What are some examples of exports? Make a chair 8

9 Advantages Goods available for purchase. Goods could have cost less since they were imported. Goods may be a better quality since imported. Goods imported and owned may provide satisfaction. Disadvantages Some goods would cost more without competition of imported goods. Possibly goods may be unavailable. 9

10 Advantages Exporting creates jobs. Exporting provides access to goods usually unavailable. Disadvantage(s) Jobs may depend on global business. 10

11 What is a way to measure trade relations? Balance of trade or balance of payments Why are measures of trade relations completed? Nations are concerned with balancing income with expenditures. Foreign debt is the amount of money a country owes to other countries. 11

12 Balance of trade is the difference between a country’s total exports and total imports. If a country exports more than it imports, it has a trade surplus. This is favorable. If a country imports more than it exports, it has a trade deficit. This is unfavorable. 12

13 Balance of payments is the difference between the amount of money that comes into a country and the amount that goes out of it. If a country receives more money in a year than it pays out, it has favorable balance. If a country sends more money out than it brings in, it has an unfavorable balance. 13

14 The foreign exchange market is where banks buy and sell different currencies. The exchange rate is the value of a currency in one country when compared with the value in another. 14

15 Main factors affecting currency exchange rates are: Balance of payments Economic conditions Political stability 15

16 What are the main environmental issues that could make a difference when conducting business in the global marketplace? Cultural influences, economic development, geography, and political- legal issues How could these issues impact businesses? 16

17 17 Four main factors: Geography A country with a lot of natural resources may have to rely on exports more. Cultural Influences In a country company executives may prefer to meet with people of the same culture. Economic Development -A country may have limited transportation methods that may limit travel distances to purchase imported goods. Political and Legal Concerns -A country’s government only collects about ¼ of his housing property taxes. This could be a sign of weak government that is ignored by the its citizens.

18 18 What is included in a country’s geography? Location Climate Terrain Seaports Natural Resources The geography of a country could impact its natural resources and export and import of resources.

19 19 What main cultural factors may Influence how business is conducted in the global marketplace? The accepted behavior, customs and values of a society could impact business activities.

20 20 What key effects of a country’s economics that may influence conducting business in a global marketplace? A country’s economic development impacts its citizens standard of living and business activities. Education and Literacy level Inflation Technology Exchange rate Agricultural dependency Infrastructure Transportation Communication Utilities systems

21 21 What political and legal concerns may influence business activities in a global marketplace? Political and legal concerns influence business activities in the global marketplace. Type of Government Stability of government Government policies for businesses relevant to trade barriers

22 22 Embargo Government bans the import or export of specified goods. Why would a government place an embargo? Quotas A limit on the quantity of good that may be imported or exported within a given period to regulate international trade. Why would a company or country set a quota? Tariffs Taxes on certain imported products which increases prices. Why would a government use a tariff?

23 23 Why would a government place an embargo? To protect a good or service from too much competition in a global market place more that what a quota or tariff could. To protect sensitive goods. Why would a company or country set a quota? To regulate the supply and prices. To protect a good or service from too much competition in a global market place. Why would a government use a tariff? To protect the supply of goods. International Trade

24 24 Main factors are: Common Market: Countries that are members freely invest in one another. Examples: European Union (EU) Latin American Integration Association (LAIA)

25 25 Free-Trade Agreement: Countries that are members remove duties and trade barriers on products traded among them to increase trade between members. Example NAFTA (the North American Free Trade Agreement) between the United States, Canada, and Mexico.

26 26 Free-trade zones: Include selected areas that allow duty-free products to be imported, and then stored, assembled, and/or used in manufacturing. The activities usually occur around a seaport or airport.

27 Main entry modes for companies to enter the global marketplace 27

28 28 Franchising is allowing a business the rights to use another company’s name or process in a specific way. What are some examples? Licensing is selling the right to a company to use some intangible property (production process, trademark, or brand name) for a fee or royalty. What are some examples?

29 Joint venture happens when two or more companies agree to share a business project. What are some examples? 29

30 Main international trade organizations 30

31 31 International Monetary Fund (IMF) World Bank World Trade Organization (WTO)

32 32 International Monetary Fund (IMF) Helps promote economic cooperation and maintain an orderly system of world trade and exchange rates. World Bank Provides economic aid to developing countries to fund building communications systems, transportation networks, and energy plans.

33 33 World Trade Organization (WTO) Settles trade disputes and enforces free-trade agreements among its members.


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