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Back to Table of Contents pp. 146-159 Chapter 10 Business in a Global Economy.

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Presentation on theme: "Back to Table of Contents pp. 146-159 Chapter 10 Business in a Global Economy."— Presentation transcript:

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2 Back to Table of Contents pp. 146-159 Chapter 10 Business in a Global Economy

3 Introduction to Business, Business in a Global Economy Slide 2 of 61 Learning Objectives After completing this chapter, you’ll be able to: 1.Explain 1.Explain why nations need to trade with each other. 2.Describe 2.Describe how currency exchange works. continued

4 Introduction to Business, Business in a Global Economy Slide 3 of 61 Learning Objectives After completing this chapter, you’ll be able to: 3.State 3.State the advantages of protectionism and free trade. 4.Name 4.Name types of trade barriers. continued

5 Introduction to Business, Business in a Global Economy Slide 4 of 61 Learning Objectives After completing this chapter, you’ll be able to: 5.Identify 5.Identify some of the major trade alliances in the world today.

6 Introduction to Business, Business in a Global Economy Slide 5 of 61 Why It’s Important Global trade doesn’t just influence business, it also affects all the countries and people of the world.

7 Introduction to Business, Business in a Global Economy Slide 6 of 61 Key Words multinational company imports exports exchange rate balance of trade protectionism continued

8 Introduction to Business, Business in a Global Economy Slide 7 of 61 Key Words tariff quota embargo free trade

9 Introduction to Business, Business in a Global Economy Slide 8 of 61 Global Producers and Consumers We are all part of the global marketplace. The global marketplace exists anywhere business crosses national borders.

10 Introduction to Business, Business in a Global Economy Slide 9 of 61 Global Producers and Consumers Countries can satisfy their citizens’ wants and needs by buying them in the global market.

11 Introduction to Business, Business in a Global Economy Slide 10 of 61 The Global Marketplace A multinational corporation is a company that does business in many countries and has facilities and offices in many countries around the world.

12 Introduction to Business, Business in a Global Economy Slide 11 of 61 The Global Marketplace The global marketplace works much like a shopping mall or a supermarket.

13 Introduction to Business, Business in a Global Economy Slide 12 of 61 The Global Marketplace The United States is rich in resources— human, natural, and production—but it still needs things from other countries.

14 Introduction to Business, Business in a Global Economy Slide 13 of 61 Figure 10.1 MAJOR EXPORTS AND IMPORTS OF THE UNITED STATES Look at the graph to see what products the United States imports and exports. Name the product that the United States exports more than it imports. Source: Standard & Poor’s

15 Introduction to Business, Business in a Global Economy Slide 14 of 61 Specialization Countries specialize in producing certain goods and services. By specializing, countries can sell what they produce best so they can buy the products they need from other countries.

16 Introduction to Business, Business in a Global Economy Slide 15 of 61 Specialization The kinds of resources available to a country often influence what it specializes in producing.

17 Introduction to Business, Business in a Global Economy Slide 16 of 61 Specialization A country with little money or advanced technology but a large population might specialize in manual labor.

18 Introduction to Business, Business in a Global Economy Slide 17 of 61 Types of Trade Imports are goods and services that one country buys from another country. Exports are goods and services that one country sells to another country.

19 Introduction to Business, Business in a Global Economy Slide 18 of 61 Types of Trade Other types of trade include: Investment Exchange of human resources Tourism Military aid Loans

20 Introduction to Business, Business in a Global Economy Slide 19 of 61 Currency Countries have to pay for each other’s products with currency. Currency is another name for money. Just as countries use different lan- guages, they use different currencies, such as dollars, pesos, and yen.

21 Introduction to Business, Business in a Global Economy Slide 20 of 61 Currency The foreign exchange market is made up of banks where different currencies are exchanged.

22 Introduction to Business, Business in a Global Economy Slide 21 of 61 Exchange Rates The exchange rate is the price at which one currency can buy another currency. Exchange rates change from day to day and from country to country.

23 Introduction to Business, Business in a Global Economy Slide 22 of 61 Exchange Rates How much the currency of a country is worth depends on how many other countries want to buy its products.

24 Introduction to Business, Business in a Global Economy Slide 23 of 61 Prices A company follows the change in exchange rates to find the best prices for products.

25 Introduction to Business, Business in a Global Economy Slide 24 of 61 Prices When the value of a country’s currency goes up compared to another country’s, it has a favorable exchange rate.

26 Introduction to Business, Business in a Global Economy Slide 25 of 61 Prices When the value of a country’s currency goes down compared to another country’s, it has an unfavorable exchange rate.

27 Introduction to Business, Business in a Global Economy Slide 26 of 61 Prices Some countries choose to lower the value of their currency to bring in more business. When this happens, it costs less to buy products from that country.

28 Introduction to Business, Business in a Global Economy Slide 27 of 61 Balance of Trade Balance of trade is the difference in the value between how much a country imports and how much it exports.

29 Introduction to Business, Business in a Global Economy Slide 28 of 61 Balance of Trade When a country exports more than it imports, it has a trade surplus. When a country imports more than it exports, it has a trade deficit.

30 Introduction to Business, Business in a Global Economy Slide 29 of 61 Balance of Trade A country can have an unfavorable balance of trade with one country and a favorable balance with another.

31 Introduction to Business, Business in a Global Economy Slide 30 of 61 Graphic Organizer How Exchange Rates Affect the Balance of Trade Graphic Organizer Weak Currency FAVORABLE BALANCE OF TRADE More exports than imports Strong Currency More imports than exports NEGATIVE BALANCE OF TRADE Trade surplus (leftover money) Trade deficit (debt)

32 Introduction to Business, Business in a Global Economy Slide 31 of 61 Fast Review 1.Explain what trade is. 2.Explain exchange rates. 3.Why would a country want to devalue its currency?

33 Introduction to Business, Business in a Global Economy Slide 32 of 61 Global Competition Global competition often leads to trade disputes between countries. At the heart of most trade disputes is whether there should be limits on trade.

34 Introduction to Business, Business in a Global Economy Slide 33 of 61 Protectionism Protectionism is the practice of putting limits on foreign trade to protect businesses at home.

35 Introduction to Business, Business in a Global Economy Slide 34 of 61 http://www.rescueamericanjobs.org/stories/voiceofamerica.mp3

36 Introduction to Business, Business in a Global Economy Slide 35 of 61 Protectionism Some of the reasons in favor of protectionism are: Foreign competition can lower the demand for products made at home. continued

37 Introduction to Business, Business in a Global Economy Slide 36 of 61 Protectionism Companies at home need to be protected from unfair foreign competition. Industries that make products related to national defense need to be protected. continued

38 Introduction to Business, Business in a Global Economy Slide 37 of 61 Protectionism The use of cheap labor in other countries can lower wages or threaten jobs at home. A country can become too dependent on another country for important products like oil, steel, or grain. continued

39 Introduction to Business, Business in a Global Economy Slide 38 of 61 Protectionism Other countries might not have the same environmental or human rights standards.

40 Introduction to Business, Business in a Global Economy Slide 39 of 61 Introduction to Business39 ‘Other Arguments’ For “Keep Money at Home” -Country gets the goods & the foreigners get the money. “Home Market” -More jobs can be created. “National Security” -A nation dependent on foreign sources of supply is a vulnerable position during war. “Infant Industry” New industry needs protection for time to develop against established competition. For “Keep Money at Home” -Country gets the goods & the foreigners get the money. “Home Market” -More jobs can be created. “National Security” -A nation dependent on foreign sources of supply is a vulnerable position during war. “Infant Industry” New industry needs protection for time to develop against established competition. Against “Keep Money at Home” -Money is not the only form of wealth. Money paid for imports will return sooner or later in the form of exports or investments (stocks) “Home Market” -Why would we not specialize in something that we have a competitive advantage over our competition? “National Security” -We are less likely to go to war with countries who depend on us for key goods and/or services. “Infant Industry” -New companies successfully start everyday in this country competing against current competition. Against “Keep Money at Home” -Money is not the only form of wealth. Money paid for imports will return sooner or later in the form of exports or investments (stocks) “Home Market” -Why would we not specialize in something that we have a competitive advantage over our competition? “National Security” -We are less likely to go to war with countries who depend on us for key goods and/or services. “Infant Industry” -New companies successfully start everyday in this country competing against current competition.

41 Introduction to Business, Business in a Global Economy Slide 40 of 61 Trade Barriers To limit competition from other countries, governments put up trade barriers to keep foreign products out.

42 Introduction to Business, Business in a Global Economy Slide 41 of 61 Trade Barriers A tariff is a tax placed on imports to increase their price in the domestic market.

43 Introduction to Business, Business in a Global Economy Slide 42 of 61 Trade Barriers A quota is a limit placed on the quantities of a product that can be imported.

44 Introduction to Business, Business in a Global Economy Slide 43 of 61 Trade Barriers An embargo is when the government decides to stop an import or export of a product.

45 Introduction to Business, Business in a Global Economy Slide 44 of 61 Free Trade Supporters of free trade believe there should be no limits on trade.

46 Introduction to Business, Business in a Global Economy Slide 45 of 61 Free Trade The benefits of free trade are: It opens up new markets in other countries. It creates new jobs, especially in areas related to global trade. continued

47 Introduction to Business, Business in a Global Economy Slide 46 of 61 Free Trade Competition forces businesses to be more efficient and productive. Consumers have more choice in the variety, price, and quality of products. continued

48 Introduction to Business, Business in a Global Economy Slide 47 of 61 Free Trade It promotes cultural understanding and cooperation between countries. It helps all countries raise their standard of living.

49 Introduction to Business, Business in a Global Economy Slide 48 of 61 Trade Alliances To reduce limits on trade more countries are forming trade alliances with each other. In a trade alliance, several countries merge their economies into one huge market.

50 Introduction to Business, Business in a Global Economy Slide 49 of 61 Trade Alliances NAFTA (North American Free Trade Agreement) was controversial because some workers would be displaced when trade barriers were lowered.

51 Introduction to Business, Business in a Global Economy Slide 50 of 61 Trade Alliances Some of the major trade alliances in the world today are: NAFTA European Union (EU) Association of Southeast Asian Nations (ASEAN)

52 Introduction to Business, Business in a Global Economy Slide 51 of 61 Figure 10.2 MAP OF TRADE ALLIANCES IN THE WORLD The European Union (EU) is the oldest and best- known economic community formed to promote free trade among the members of the community and to foster common economic policies. What nations make up the European Union?

53 Introduction to Business, Business in a Global Economy Slide 52 of 61 International Business and Finance Affects Everyone Understanding international business and finance has become increasingly important for the consumer, wage earner, investor, citizen, and business leader.

54 Introduction to Business, Business in a Global Economy Slide 53 of 61 International Business and Finance Affects Everyone An understanding of international business helps you understand why goods and services are at particular prices.

55 Introduction to Business, Business in a Global Economy Slide 54 of 61 International Business and Finance Affects Everyone The business leader of tomorrow will have a good grasp of international business and finance.

56 Introduction to Business, Business in a Global Economy Slide 55 of 61 Fast Review 1.Develop an opinion as to how you feel about the global market. a. Are you a protectionist? Why or why not? b. Do you believe in free trade? Why or why not? c. Are you some where in the middle? If so, what trade restrictions implemented at what time make the most sense?

57 Introduction to Business, Business in a Global Economy Slide 56 of 61 As a restaurant owner, what kind of things might you import and export? continued

58 Introduction to Business, Business in a Global Economy Slide 57 of 61 In the global marketplace, what is the importance of specialization? continued

59 Introduction to Business, Business in a Global Economy Slide 58 of 61 By expanding operations domestically and internationally, how does this affect the economies involved? continued

60 Introduction to Business, Business in a Global Economy Slide 59 of 61 How can a small company, like Panda Express, change domestic culture?

61 Back to Table of Contents pp. 146-159 End of Chapter 10 Business in a Global Economy


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