8Global Producers and Consumers We are all part of the global marketplace.The global marketplace exists anywhere business crosses national borders.
9Global Producers and Consumers Countries can satisfy their citizens’ wants and needs by buying them in the global market.
10The 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.
11The Global Marketplace The global marketplace works much like a shopping mall or a supermarket.
12The Global Marketplace The United States is rich in resources—human, natural, and production—but it still needs things from other countries.
13Name the product that the United States exports more than it imports. Figure10.1MAJOR EXPORTS AND IMPORTS OF THE UNITED STATESLook 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
14SpecializationCountries 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.
15SpecializationThe kinds of resources available to a country often influence what it specializes in producing.
16SpecializationA country with little money or advanced technology but a large population might specialize in manual labor.
17Types of TradeImports are goods and services that one country buys from another country.Exports are goods and services that one country sells to another country.
18Types of Trade Other types of trade include: Investment Exchange of human resourcesTourismMilitary aidLoans
19CurrencyCountries 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.
20CurrencyThe foreign exchange market is made up of banks where different currencies are exchanged.
21Exchange RatesThe 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.
22Exchange RatesHow much the currency of a country is worth depends on how many other countries want to buy its products.
23PricesA company follows the change in exchange rates to find the best prices for products.
24PricesWhen the value of a country’s currency goes up compared to another country’s, it has a favorable exchange rate.
25PricesWhen the value of a country’s currency goes down compared to another country’s, it has an unfavorable exchange rate.
26PricesSome 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.
27Balance of TradeBalance of trade is the difference in the value between how much a country imports and how much it exports.
28Balance of TradeWhen 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.
29Balance of TradeA country can have an unfavorable balance of trade with one country and a favorable balance with another.
30How Exchange Rates Affect the Graphic OrganizerGraphic OrganizerHow Exchange Rates Affect theBalance of TradeMoreexportsthanimportsTradesurplus(leftovermoney)WeakCurrencyFAVORABLEBALANCEOFTRADEMoreimportsthanexportsNEGATIVEBALANCEOFTRADETradedeficit(debt)StrongCurrency
31Explain exchange rates. Fast ReviewExplain what trade is.Explain exchange rates.Why would a country want to devalue its currency?
32Global CompetitionGlobal competition often leads to trade disputes between countries.At the heart of most trade disputes is whether there should be limits on trade.
33ProtectionismProtectionism is the practice of putting limits on foreign trade to protect businesses at home.
35Protectionism Some of the reasons in favor of protectionism are: Foreign competition can lower the demand for products made at home.continued
36ProtectionismCompanies at home need to be protected from unfair foreign competition.Industries that make products related to national defense need to be protected.continued
37ProtectionismThe 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
38ProtectionismOther countries might not have the same environmental or human rights standards.
39Introduction to Business ‘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.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.Introduction to Business
40Trade BarriersTo limit competition from other countries, governments put up trade barriers to keep foreign products out.
41Trade BarriersA tariff is a tax placed on imports to increase their price in the domestic market.
42Trade BarriersA quota is a limit placed on the quantities of a product that can be imported.
43Trade BarriersAn embargo is when the government decides to stop an import or export of a product.
44Free TradeSupporters of free trade believe there should be no limits on trade.
45Free 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
46Free TradeCompetition forces businesses to be more efficient and productive.Consumers have more choice in the variety, price, and quality of products.continued
47Free TradeIt promotes cultural understanding and cooperation between countries.It helps all countries raise their standard of living.
48Trade AlliancesTo 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.
49Trade AlliancesNAFTA (North American Free Trade Agreement) was controversial because some workers would be displaced when trade barriers were lowered.
50Trade AlliancesSome of the major trade alliances in the world today are:NAFTAEuropean Union (EU)Association of Southeast Asian Nations (ASEAN)
51MAP OF TRADE ALLIANCES IN THE WORLD Figure10.2MAP OF TRADE ALLIANCES IN THE WORLDThe 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?
52International Business and Finance Affects Everyone Understanding international business and finance has become increasingly important for the consumer, wage earner, investor, citizen, and business leader.
53International Business and Finance Affects Everyone An understanding of international business helps you understand why goods and services are at particular prices.
54International Business and Finance Affects Everyone The business leader of tomorrow will have a good grasp of international business and finance.
55Fast ReviewDevelop 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?
56As a restaurant owner, what kind of things might you import and export? continued
57In the global marketplace, what is the importance of specialization? continued
58By expanding operations domestically and internationally, how does this affect the economies involved?continued
59How can a small company, like Panda Express, change domestic culture?
60Business in a Global Economy End ofChapter 10Business in a Global Economypp