Presentation on theme: "INTRODUCTION TO BUSINESS"— Presentation transcript:
1 INTRODUCTION TO BUSINESS CHAPTER 4Assessing Global Conditions
2 How International Business Can Enhance Performance Attract Foreign DemandCapitalize on TechnologyUse Inexpensive ResourcesDiversify InternationallyCombination of Motives
3 How International Business Can Enhance Performance Use Inexpensive ResourcesDiversify InternationallyThe amount of products imported through harbors is higher when international trade restrictions are reduced or eliminated.Combination of Motives
4 How International Business Can Enhance Performance The economy of China has grown substantially because of its ability to produce products at very low cost. Many firms in the United States and other countries have their products produced in China.
5 How International Business Can Enhance Performance Approximate Hourly Compensation Costs for Manufacturing Across Countries
6 How to Conduct International Business ImportingThe purchase of foreign products or services.Tariff: a tax on imported products.Quota: a limit on the amounts of specific products that can be imported.ExportingThe sale of products or services (called exports) to purchasers residing in other countries.Balance of trade: the level of exports minus the level of imports.Trade deficit: the amount by which imports exceed exports.
7 How to Conduct International Business Trend of U.S. Exports and Imports
8 How to Conduct International Business Direct Foreign Investment (DFI)A means of acquiring or building subsidiaries in one or more foreign countries.OutsourcingSending some services to foreign countries as a means of using cheaper labor.
9 How to Conduct International Business Strategic AlliancesA business agreement between firms whereby resources are shared to pursue mutual interests.Joint venture: an agreement between two firms about a specific project.International licensing agreement: a type of alliance in which a firm allows a foreign company (called the “licensee”) to produce its products according to specific instructions.
10 How to Conduct International Business U.S. firms commonly engage in strategic alliances with manufacturers where labor costs are very low, such as Africa and Asia.
11 Barriers to International Business Reduction in BarriersNAFTA: North American Free Trade Agreement.GATT: General Agreement on Tariffs and Trade.Remaining BarriersDumping: selling products in a foreign country at a price below the cost of producing those products.
12 Barriers to International Business Disagreements About International Trade PolicyFirms in different countries are subject to different environmental restrictions.Firms in different countries are not subject to the same labor laws.Firms in different countries have different policies concerning bribery.Firms in different countries sometimes have more governmental financial support.
13 How Foreign Characteristics Influence International Business CultureA foreign country’s culture can result in poor decisions concerning that country’s tastes, habits, and customs.
14 How Foreign Characteristics Influence International Business Economic SystemCapitalism: an economic system that allows for private ownership of businesses.Communism: an economic system that involves public ownership of businesses.Socialism: an economic system that contains some features of both capitalism and communism.Privatization: the sale of government-owned businesses to private investors.
15 How Foreign Characteristics Influence International Business Economic ConditionsEconomic growthSensitivity to foreign economic conditionsExchange RatesPolitical Risk and RegulationsPolitical risk: the risk that a country’s political actions can adversely affect a business.CorruptionRegulatory climate
16 How Foreign Characteristics Influence International Business The euro is the currency used by many European countries today. Its value against the U.S. dollar changes over time. As the value changes, it affects the amount of dollars needed to purchase European products (denominated in euros) and the amount of euros needed to purchase U.S. products (denominated in dollars).
17 How Exchange Rate Movements Can Affect Performance Impact of a Weak Dollar on U.S. ImportersAppreciates: strengthens in valueImpact of a Strong Dollar on U.S. ImportersDepreciates: weakens in valueActual Effects of Exchange Rate Movements on U.S. Importers
18 How Exchange Rate Movements Can Affect Performance
19 How Exchange Rate Movements Can Affect Performance Hedging Against Exchange Rate MovementsHedge: action taken to protect a firm against exchange rate movements.Hedging future payments in foreign currencies.Forward contract: provides that an exchange of currencies will occur at a specified exchange rate at a future point in time.Forward rate: the exchange rate that a bank will be willing to offer at a future point in time.Spot exchange rate: the exchange rate quoted for immediate transactions. WHY USE THIS????
20 Business Plan You will all use the spot rate LIBRARY RESEARCH: Culture, Economic System, Economic Conditions, Political RiskExchange Rate : Three year history and projection for first 12 months of business5-7 CITED sources MINIMUM (MLA)Sample
21 Setting up shop in another country China…Guest Speaker: Industry, Location, Investment structure, Mgmt., legal protection.