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Introduction to Business © Thomson South-Western ChapterChapter Business in the Global Economy 3-1 3-1International Business Basics 3-2 3-2The Global Marketplace.

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Presentation on theme: "Introduction to Business © Thomson South-Western ChapterChapter Business in the Global Economy 3-1 3-1International Business Basics 3-2 3-2The Global Marketplace."— Presentation transcript:

1 Introduction to Business © Thomson South-Western ChapterChapter Business in the Global Economy 3-1 3-1International Business Basics 3-2 3-2The Global Marketplace 3-3 3-3International Business Organizations 3

2 Introduction to Business © Thomson South-Western Chapter 3 Slide 2 LESSON 3-1 LESSON 3-1 International Business Basics Goals Describe importing and exporting activities. Compare balance of trade and balance of payments. List factors that affect the value of global currencies.

3 Introduction to Business © Thomson South-Western Chapter 3 Slide 3 Key Terms balance of payments balance of trade exchange rate exports imports

4 Introduction to Business © Thomson South-Western Chapter 3 Slide 4 TRADING AMONG NATIONS Absolute advantage Comparative advantage Importing Exporting

5 Introduction to Business © Thomson South-Western Chapter 3 Slide 5 IMPORTING

6 Introduction to Business © Thomson South-Western Chapter 3 Slide 6 MEASURING TRADE RELATIONS Balance of trade Balance of payments

7 Introduction to Business © Thomson South-Western Chapter 3 Slide 7 U.S. TRADE BALANCES

8 Introduction to Business © Thomson South-Western Chapter 3 Slide 8 BALANCE OF TRADE

9 Introduction to Business © Thomson South-Western Chapter 3 Slide 9 >> C H E C K P O I N T How does balance of trade differ from balance of payments?

10 Introduction to Business © Thomson South-Western Chapter 3 Slide 10 INTERNATIONAL CURRENCY Foreign exchange rates Factors affecting currency values Three main factors affect currency Balance of payments Economic conditions Political disability

11 Introduction to Business © Thomson South-Western Chapter 3 Slide 11 RECENT VALUES OF CURRENCIES

12 Introduction to Business © Thomson South-Western Chapter 3 Slide 12 >> C H E C K P O I N T What factors affect the value of a country’s currency?

13 Introduction to Business © Thomson South-Western Chapter 3 Slide 13 LESSON 3-2 LESSON 3-2 The Global Marketplace Goals Describe the components of the international business environment. Identify examples of formal trade barriers. Explain actions to encourage international trade.

14 Introduction to Business © Thomson South-Western Chapter 3 Slide 14 Key Terms infrastructure trade barrier quota tariff embargo

15 Introduction to Business © Thomson South-Western Chapter 3 Slide 15 THE INTERNATIONAL BUSINESS ENVIRONMENT Geography Cultural influences Economic development Literacy level Technology Agricultural dependency Political and legal concerns

16 Introduction to Business © Thomson South-Western Chapter 3 Slide 16 GEOGRAPHY  location  climate  terrain  waterways  natural resources ECONOMICS  technology  education  inflation  exchange rate  infrastructure CULTURE  language  family  religion  customs  traditions  food POLITICAL–LEGAL FACTORS  government system  political stability  trade barriers THE INTERNATIONAL BUSINESS ENVIRONMENT

17 Introduction to Business © Thomson South-Western Chapter 3 Slide 17 >> C H E C K P O I N T List the four main elements of the international business environment.

18 Introduction to Business © Thomson South-Western Chapter 3 Slide 18 INTERNATIONAL TRADE BARRIERS Quotas Tariffs Embargoes

19 Introduction to Business © Thomson South-Western Chapter 3 Slide 19 QUOTAS Reasons for quotas To keep supply low and prices the same To express displeasure at the policies of the importing country To protect one of a country’s industries from too much competition form abroad

20 Introduction to Business © Thomson South-Western Chapter 3 Slide 20 TARIFFS Reasons for tariffs To set amount per pound, gallon, or other unit To set the value of a good

21 Introduction to Business © Thomson South-Western Chapter 3 Slide 21 EMBARGOES Reasons for embargoes To protect a country’s industries from international competition more than the quota or tariff will achieve To prevent sensitive products from falling into the hands of unfriendly groups or nations

22 Introduction to Business © Thomson South-Western Chapter 3 Slide 22 >> C H E C K P O I N T What are three formal trade barriers?

23 Introduction to Business © Thomson South-Western Chapter 3 Slide 23 ENCOURAGING INTERNATIONAL TRADE Free-trade zones Free-trade agreements Common markets

24 Introduction to Business © Thomson South-Western Chapter 3 Slide 24 FREE-TRADE ZONES Used to promote international business in a selected area where products can be imported duty-free and then stored, assembled, and/or used in manufacturing Usually located around a seaport of airport

25 Introduction to Business © Thomson South-Western Chapter 3 Slide 25 FREE-TRADE AGREEMENTS Member countries agree to remove duties and trade barriers on products traded among them Results in increased trade between members

26 Introduction to Business © Thomson South-Western Chapter 3 Slide 26 COMMON MARKETS Allows companies to invest freely in each member’s country Allows workers to move freely across borders Examples European Union (EU) Latin American Integration Association (LAIA)

27 Introduction to Business © Thomson South-Western Chapter 3 Slide 27 >> C H E C K P O I N T What actions could be taken to encourage international trade?

28 Introduction to Business © Thomson South-Western Chapter 3 Slide 28 LESSON 3-3 LESSON 3-3 International Business Organizations Goals Discuss activities of multinational organizations. Explain common international business entry modes. Describe activities of international trade organizations and agencies.

29 Introduction to Business © Thomson South-Western Chapter 3 Slide 29 Key Terms multinational company (MNC) joint venture

30 Introduction to Business © Thomson South-Western Chapter 3 Slide 30 MULTINATIONAL COMPANIES (MNC) MNC strategies MNC benefits Drawbacks of multinational companies

31 Introduction to Business © Thomson South-Western Chapter 3 Slide 31 MNC STRATEGIES Global strategy Multinational strategy

32 Introduction to Business © Thomson South-Western Chapter 3 Slide 32 MNC BENEFITS Large amount of goods available Lower prices Career opportunities Foster understanding, communication, and respect Friendly international relations

33 Introduction to Business © Thomson South-Western Chapter 3 Slide 33 DRAWBACKS OF MULTINATIONAL COMPANIES Economic power Worker dependence on the MNC Consumer dependence Political power

34 Introduction to Business © Thomson South-Western Chapter 3 Slide 34 >> C H E C K P O I N T What are two strategies commonly used by multinational companies?

35 Introduction to Business © Thomson South-Western Chapter 3 Slide 35 GLOBAL MARKET ENTRY MODES Licensing Franchising Joint venture

36 Introduction to Business © Thomson South-Western Chapter 3 Slide 36 LICENSING Allows companies to produce items in other countries without being actively involved Has a low financial investment, so the potential financial return for the company is often low The risk for the company is low

37 Introduction to Business © Thomson South-Western Chapter 3 Slide 37 FRANCHISING Allows organizations to enter into contracts with people in other countries to set up a business that looks and runs like the parent company Marketing elements, such as food products, packaging, and advertising must meet both cultural sensitivities and legal requirements Commonly involves selling a product or service

38 Introduction to Business © Thomson South-Western Chapter 3 Slide 38 JOINT VENTURE Allows two or more companies to share raw materials, shipping facilities, management activities, or production activities Concerns include the sharing of profits and not as much control since several companies are involved Very popular for manufacturing, such as Japanese and U.S. automobile manufacturers

39 Introduction to Business © Thomson South-Western Chapter 3 Slide 39 >> C H E C K P O I N T How does licensing differ from a franchise?

40 Introduction to Business © Thomson South-Western Chapter 3 Slide 40 INTERNATIONAL TRADE ORGANIZATIONS World Trade Organization International Monetary Fund World Bank

41 Introduction to Business © Thomson South-Western Chapter 3 Slide 41 WORLD TRADE ORGANIZATION (WTO) WTO Goals Lowering tariffs that discourage free trade Eliminating import quotas Reducing barriers for banks, insurance companies, and other financial services Assisting poor countries with economic growth

42 Introduction to Business © Thomson South-Western Chapter 3 Slide 42 INTERNATIONAL MONETARY FUND (IMF) Helps to promote economic cooperation Maintains an orderly system of world trade and exchange rates Includes over 150 member nations

43 Introduction to Business © Thomson South-Western Chapter 3 Slide 43 WORLD BANK Created in 1944 to provide loans for rebuilding after World War II Today the World Bank has over 180 member countries and two main divisions International Development Association (IDA), which makes loans to help developing countries International Finance Corporation (IFC), which provides technical capital and technical help to private businesses in nations with limited resources

44 Introduction to Business © Thomson South-Western Chapter 3 Slide 44 >> C H E C K P O I N T How does the International Monetary Fund assist countries?


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