Presentation on theme: "Business in a Global Economy"— Presentation transcript:
1 Business in a Global Economy Intro To BusinessChapter 10
2 The Global Marketplace Learning TargetsExplain why the world has become a global economyExplain why people and countries specialize in producing goods and servicesThe Global EconomyThe interconnected economies of the nations of the worldWe live in a global economy fueled by international tradeGlobalization – the development of the global economyMultinational CorporationA company that does business in many countries and has facilities and offices around the world.8-1
3 The Global Marketplace International TradeThe exchange of goods and services between nationsTypes of TradeDomestic TradeThe production, purchase and sale of goods within a countryWorld TradeThe exchange of goods and services across international boundariesWhy?Cannot produce good because it does not have a suitable climate or raw materialsBusiness in one country may produce a better product or service at a cheaper rate.
4 The Global Marketplace ImportsGoods and services that one country buys from anotherWhat are some imports the U.S. receives?ExportsGoods and services that one country sells to anotherWhat are some of the U.S. exports?Balance of TradeDifference in value between a country’s imports and exports over a period of timeTrade surplus – Exports more than importsTrade deficit – Imports more than exportsA country can have a trade deficit with one country but a surplus with another.
5 The Global Marketplace SpecializationTo focus on a particular activity, area or product.Many countries specialize in certain products or serviceTake advantage of these specialties by trading them in the global marketplaceUsing Resources to SpecializeCountries specialize and trade some of the items that they produce in order to obtain other countries goods and servicesComparative AdvantageThe ability of a country or company to produce a particular good more efficiently than another country or companyEx. U.S., Japan and Germany have a comparative advantage in producing vehicles.
6 The Global Marketplace CurrencyCountries pay for products and services using currency (money).Every country has their own form of currencyTo trade with another country businesses/countries have to convert their money into that nations currency.Currency is exchanged on the Foreign Exchange MarketExchange Rates (The price at which one currency can buy another currency (Changes day to day and from country to country)PricesCompanies follow the change in exchange rates to find the best prices for products
7 Questions/Reflection What is the global economy?What is the difference between domestic trade and international trade?Why would a country want its currency rate to appreciate?What are 2 reasons why the world has become a global economy?Explain why people and countries specialize in producing goods and servicesWhy does free trade generally increase people’s standard of living?If the dollar decreases in value in relation to the Euro, what is the probable effect that this will have on exports to Europe?If the dollar increases in relation to the British pound, what is the probable effect on imports from Britain?
8 Global competition Learning Targets Protectionism and Free Trade Describe Free TradeIndicate who benefits and who does not benefit from free tradeProtectionism and Free TradeGlobal competition can lead to trade disputesThese occur when nations put barriers on trading particular items with another countryShould there be limits on trade?10-2
9 Global competition Protectionism The practice of the government putting limits on foreign trade to protect businesses at home.To keep out foreign competitionAlso some countries don’t want to share what they produceReasons to restrict trade:Foreign competition can lower the demand for products made at homeCompanies at home need to be protected from unfair foreign competitionIndustries that make products related to national defense need to be protectedThe use of cheap labor in other countries can lower wages or threaten jobs at homeA country can become too dependant on another country for important productsOther countries might not have the same environmental or human rights standards
10 Global competition Trade Barriers Government limiting competition from other countries, 3 types of trade barriers:TariffA tax placed on imports to increase their price in the domestic marketQuotaA limit placed on the quantities of a product that can be importedEmbargoA ban on the import or export of a product.Rare and usually used against another country for political or military reasons
11 Global competition Free Trade Occurs when there are few or no limits on trade between countriesEconomic or foreign policy determine which countries trade with each other.Free Trade offers:Opens up new markets in other countriesIt creates new jobs, especially in areas related to global trade (shipping, banking, and communication)Competition forces businesses to be more efficient and productiveConsumers have more choices in the variety, prices, and quality of productsPromotes cultural understanding and encourages countries to cooperate with each otherHelps countries raise their standard of living
12 Global Competition Trade Alliances Many countries merge their economies into one huge marketMajor Alliances:North American Free Trade Alliance (NAFTA)Free trade between U.S., Canada and MexicoEuropean UnionAn economic and political union of 28 European membersFree movement of people (no passports), goods, services and capital.One common currencyAssociation of Southeast Asian Nations (ASEAN)Group of 10 Southeast Asian countriesAims for economic growth, social progress, cultural development among its members, and peace and stability.
15 Questions/Reflection Give 3 reasons for protectionism?Give 3 reasons for free trade?What are some of the major trade alliances in the world today?Describe Free TradeIndicate who benefits and who does not benefit from free tradeWhy would a nation choose not to produce everything its citizens want?Why is an embargo a stronger measure against free trade than tariffs?Should companies making items for national defense b protected by trade barriers?