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Business in the Global Economy Chapter 3. Throughout the week… Monday: 3-1 Tuesday: 3-2 Wednesday: Review Chapter 2 Review Packet Thursday : Review for.

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Presentation on theme: "Business in the Global Economy Chapter 3. Throughout the week… Monday: 3-1 Tuesday: 3-2 Wednesday: Review Chapter 2 Review Packet Thursday : Review for."— Presentation transcript:

1 Business in the Global Economy Chapter 3

2 Throughout the week… Monday: 3-1 Tuesday: 3-2 Wednesday: Review Chapter 2 Review Packet Thursday : Review for Quiz Friday: Chapter 2 Quiz

3 Overview International Business Basics The Global Marketplace International Business Organizations

4 International Business Basics Describe importing and exporting activities. Comparing balance of trade and balance of payments. List factors that affect the value of global currencies.

5 Trading Among Nations Absolute advantage Comparative advantage Importing Exporting

6 Trading Among Nations Absolute Advantage Exists when a country can produce a good or service at a lower cost than other countries. High number of Natural Resources and Raw Material. South America (Coffee) Saudi Arabia (Oil Production)

7 Trading Among Nations Comparative Advantage Country specializes in the production of a good or services which it is relatively more efficient.

8 Trading Among Nations Importing Items brought from other countries. Imports into the United States: Bananas Coffee Cocoa Spices Tea Silk Crude Rubber 20% to 50%

9 Source: United States Geological Survey Minerals Information

10 Trading Among Nations Exporting Goods and services sold to other countries. Types of U.S. Exports: Food Movies or T.V. (ESPN, CNN, etc…)

11 Measuring Trade Relations Limiting the amount of Foreign Debt. Amount owed to another country. Balance of Trade: Difference between total exports and imports. Balance of Payments: Different between amount of money that comes in and out of a country.

12 Balance of Payments Favorable: Receives more money than it gives out within a year. Unfavorable: Gives out more money than it takes in within a year.

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14 Balance of Trade

15 International Currency Types of Currency: Russia (Ruble) Europe (Euro) India (Rupee) Brazil (Real) Saudi Arabia (Riyal) United States (DOLLAR)

16 Exchange Rate Value of currency from one country in relation to another. Affected by Supply and Demand

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18 Factors Affecting Currency Balance of Payments Economic Conditions Interest Rates: Higher = Lower Consumer Demand Political Stability

19 Review Describe importing and exporting activities. Comparing balance of trade and balance of payments. List factors that affect the value of global currencies.

20 The Global Market Place Describe the components of the international business environment. Identify examples of formal trade barriers Explain actions to encourage international trade.

21 The Environment Doing business in other countries requires knowledge of the differences that exist among people in places. 4 Components: Geography Cultural Economics Political

22 GEOGRAPHYECONOMICSCULTUREPOLITICAL–LEGALFACTORS location climate terrain waterways natural resources technology education inflation exchange rate infrastructure language family religion customs traditions food government system political stability trade barriers business regulations INTERNATIONAL BUSINESS ENVIRONMENT

23 Trade Barriers Government barriers that can create restrictions on free trade. Quotas: Limit on imports and exports set by the government. Why use quotas: Maintain Costs Displeasure with another country Protection from Competition

24 Trade Barriers Tariffs: Tax that a government places on certain imported products. Embargoes: Stopping of exports and imports completely. Competition Weapons (Falling into the wrong hands) Displeasure with another countries actions or policies

25 Encouraging International Trade Free-Trade Zone: Selected area where products can be imported duty-free and then stored, assembled, and/or used in manufacturing. Located usually near Seaports or Airports.

26 Review Describe the components of the international business environment. Identify examples of formal trade barriers Explain actions to encourage international trade.

27 Recap of Chapter 3 Describe absolute advantage and comparative advantage? What is the difference between balance of trade and balance of payment? What 4 environmental factors are considered when doing business internationally? Name 3 trade barriers that affect international trade.

28 International Business Organizations Activities of multinational organizations Explain common international business entry modes. Describe activities of international trade organizations and agencies.

29  Organization that does business in several countries.  Parent Company (Home Country)  Place Business Activity (Host Country)  Global Strategy  Uses the same product and marketing strategy worldwide  Multinational Strategy  Treats each countries market differently.  Adapt to customs, tastes, and buying habits.

30 Benefits of MNC Larger number of goods available to the consumer. Lower prices More career opportunities Global Business provides: Understanding Communication Respect for different nationalities

31 Drawbacks Depending upon the MNC for jobs. Consumers become dependent for the goods and services they were provided. Influence on political powers.

32 Licensing Selling the rights to use some intangible property (production process, trademarks, or brand names). http://www.jiesworld.com/international_corporations _in_china.htm http://www.jiesworld.com/international_corporations _in_china.htm

33 Franchising Expansion of businesses into another country.

34 Joint Venture Agreement between two or more companies to share a business project. Benefits: Share raw materials Shipping facilities Management activities Production facilities Drawbacks: Sharing profits Lack of control

35 Organizations World Trade Organization (WTC) Lowering tariffs that discourage free trade Eliminate importing quotas Reducing barriers for banks, insurance companies, and other financial services. Assisting poor countries with economic growth

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37 International Monetary Fund (IMF) 150 Member nations Promotes economic cooperation. Maintains trade and exchange rates. Limit trade wars Businesses could change legal tender (before IMF) Lose of business = trade restrictions or lower value of currency Value of Currency

38 World Bank Established in 1944 to provide loans for rebuilding after World War II. Today: Gives economic aid to less developed countries Those funds: Build communication systems Transportation Networks Energy Plants

39 Review What strategies does a MNC use? What are some benefits and drawbacks to a MNC? What does the WTO do? Funds provided by the World Bank today are for what?


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