2Unit 13 Vocabulary Adaptation Balance of Trade Contract Manufacturing CustomizationEmbargoEuropean Union (EU)ExportsForeign Direct Investment (FDI)Free TradeGlobalizationImportsInternational TradeJoint VentureLicensingMultinationalsMini-nationalsNorth American Free Trade Agreement (NAFTA)ProtectionismQuotaTariffWorld Trade Organization (WTO)
3Unit 13 Essential Question How does international business and marketing concepts relate to the scope and impact of marketing on the economy?
4Essential Question 1 International Marketing What is international business/marketing?
5International Marketing International Marketing: is the exchange of goods and services between nations.Imports: are goods and services purchased from other countries.Exports: are goods and services sold to other countries.
6Essential Question 2 International Marketing Why do nations engage in international trade and what factors, such as culture, political structure, barriers to trade, currency fluctuations, comparative advantage, etc., affect trade?
7International TradeNo country has all the resources it needs, nations rely on each other to provide goods and services that they do not have.Economic interdependence happens when countries must rely on each other’s help.
8Types of AdvantageThere are two types of advantages in international trade:Absolute advantage occurs when a country has natural resources or talents that allow it to produce an item at the lowest cost possible.Comparative advantage is the value that a nation gains by selling what it produces most efficiently.
9Benefits of International Trade Consumers benefit because competition encourages the production of high-quality goods with lower prices.Producers gain higher profit by expanding their operations into international markets.
10Benefits of International Trade Workers benefit because international trade leads to higher employment rates.Nations benefit because foreign investment in a country often improves the standard of living for that country’s people.
11Essential Question 3 International Marketing How is marketing important in a global economy and what struggles do companies face when engaging in exporting, importing and contract manufacturing?
12Balance of TradeBalance of Trade: The difference in value between the exports and imports of a nation.A positive balance happens when a nation exports more than it imports.A negative balance, also called a trade deficit, results when a nation imports more than it exports.Reduces nation’s revenueCould cause unemployment
13Trade BarriersFree trade: trade that is done purely on free market principles, without restrictive regulations.Other nations impose controls and restrictions to regulate the flow of goods and services. There are three main types of trade barriers.
14Trade BarriersTariff: a tax on imports. Tariffs come in two different types:Revenue-producing: a source of federal incomeProtective: raises the price of imports to encourage consumers to buy locally made goods.
15Trade BarriersQuota: limits either the quantity or the monetary value of a product that may be imported. These help local business compete with foreign companies.Embargo: a total ban on specific goods coming into and leaving a country. An embargo can be imposed for different reasons:Poisoned or defective goodsPolitical reasons
16Trade BarriersProtectionism: a government’s establishment of economic policies that systematically restrict imports in order to protect domestic industries. It is the opposite of free trade.
17Trade AgreementsGovernments make agreements with each other to establish guidelines for international trade and to set up trade alliances.The World Trade Organization (WTO): A global coalition of more than 153 governments that makes rules governing international trade. It is designed to:Open markets and promote global free tradeReduce tariffsStandardize trade rulesStudy important trade issuesEvaluate the health of the world economy
18Trade AgreementsNorth American Free Trade Agreement (NAFTA): an international trade agreement among the United States, Canada, and Mexico.Founded on January 1, 1994Its goal is to get rid of all trade barriers between the countries by 2009.
19Trade AgreementsEuropean Union (EU): Europe’s trading bloc. It was established to:Establish free trade among its member nationsCreate a single European currency and central bankMaintain competitive practicesMaintain environmental and safety standardsProvide security
20Doing Business Internationally Trade agreements by governments set the guidelines for business to operate in the global marketplace. Getting involved in international trade can mean:ImportingExportingLicensingContract manufacturingJoint venturesForeign direct investment
21Doing Business Internationally ImportingImporting involves purchasing goods from another country. The products must meet the same standards as domestic products.The rules governing importing are complex. Most U.S. businesses hire customs brokers to keep the business within the laws and procedures affecting imports.
22Doing Business Internationally ExportingA domestic company that wishes to enter into the global marketplace with minimal risk and control might consider exporting. These companies can get help from the U.S. government in their trade.
23Doing Business Internationally Licensing: involves letting another company use one of the following for a fee:TrademarkPatentSpecial formulaCompany nameIntellectual propertyA franchise is a different kind of licensing where private investors can operate under the company name.
24Doing Business Internationally Contract manufacturing: involves hiring a foreign manufacturer to make your products, according to your specifications. The finished goods are sold in that country or exported.The major benefit of this technique is lower wages, but the risk is that production information can be lost or stolen in the production countries.Joint venture: a business enterprise that companies set up together; often, the venture involves a domestic company and a foreign company.
25Doing Business Internationally Contract ManufacturingForeign direct investment (FDI): the establishment of a business in a foreign country. This process can include:Setting up a small office in another countryConstructing manufacturing plants and retail stores abroadMultinationals: large corporations that have operations in several countries.Mini-nationals: mid-size or smaller companies that have operations in foreign countries.