1. Business in a Changing World
Part 1 Chapter 3
Business in a Changing World
We continue part 1 of your textbook, Business in a Changing World, with chapter 3, Business in a Borderless World
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2. CHAPTER 1 CHAPTER 2 APPENDIX B CHAPTER 3
The Dynamics of Business and Economics
CHAPTER 2
Business Ethics and Social Responsibility
APPENDIX B
The Legal and Regulatory Environment
CHAPTER 3
Business in a Borderless World
In chapter 3, we take a look at business in a borderless world. First, we look at the nature of international business, including barriers and promoters of trade across international boundaries. Next, we consider the levels of organizational involvement in international business. Finally, we briefly discuss strategies for trading across national borders.
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3. Learning Objectives
LO 3-1 Explore some of the factors within the international trade environment that influence business. LO 3-2 Investigate some of the economic, legal-political, social, cultural and technological barriers to international business. LO 3-3 Specify some of the agreements, alliances and organizations that may encourage trade across international boundaries. LO 3-4 Summarize the different levels of organizational involvement in international trade. LO 3-5 Contrast two basic strategies used in international business.
After reading this chapter, you will be able to:
Explore some of the factors within the international trade environment that influence business.
Investigate some of the economic, legal-political, social, cultural and technological barriers to international business.
Specify some of the agreements, alliances and organizations that may encourage trade across international boundaries.
Summarize the different levels of organizational involvement in international trade.
Contrast two basic strategies used in international business.
© 2017 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

4. The Role of International Business
The buying, selling and trading of goods and services across national boundaries
Most of the world’s population and two-thirds of its total purchasing power are outside the U.S.
Global marketing requires balancing global brands with the needs of local consumers
We live in a global economy -- consumers around the world drink Coca-Cola, Pepsi, and eat at McDonalds. As differences among nations continues to narrow along with falling political barriers and new technology, the trend toward globalization of business becomes increasingly important.
We define international business as the buying, selling, and trading of goods and services across national boundaries.
Most of the world’s population and two-thirds of its total purchasing power are outside the United States. Global marketing requires balancing global brands with the need of local consumers.
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5. McDonald’s in China
American companies such as McDonald’s have become widely popular in China
This restaurant in Beijing features elements from the Chinese culture as well as Ronald McDonald
American companies such as McDonald’s have become widely popular in China. This restaurant in Beijing features elements from the Chinese culture as well as Ronald McDonald.
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6. Why Nations Trade Absolute Advantage Comparative Advantage Outsourcing
A monopoly that exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item
Comparative Advantage
The basis of most international trade, when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items
Outsourcing
The transferring of manufacturing or other tasks – such as data processing – to countries where labor and supplies are less expensive
Nations and businesses engage in international trade to obtain raw materials and goods that are otherwise unavailable to them or are available elsewhere at a lower price. A nation, or individuals and organizations from a nation, sell surplus materials and goods to acquire funds to buy the goods, services, and ideas its people need.
Some nations have a monopoly on a resource or product. Such a monopoly, or absolute advantage, exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item.
A comparative advantage is the basis of most international trade. This occurs when a country specializes in products that it can supply more efficiently or at a lower cost. Most nations have such an advantage in some areas and trade for those that they do not have.
India and Ireland are examples of countries that are gaining a comparative advantage over the United States in the provision of some services, such as call-center operations, engineering, and software programming. As a result, U.S. companies are increasingly outsourcing, or transferring manufacturing and other tasks to countries where labor and supplies are less expensive. Outsourcing has become a controversial practice in the United States because many jobs have moved overseas, where those tasks can be accomplished for lower costs.
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7. Trade between Countries
Exporting
The sale of goods and services to foreign markets
2013 U.S. exports = $2.3 trillion+
Importing
The purchase of goods and services from foreign markets
2013 U.S. imports = $2.7 trillion+
Most nations trade globally. To obtain needed goods and services, and the funds to pay for them, nations trade by exporting and importing.
Exporting is the sale of goods and services to foreign markets. As you can see from this slide, the United States annually exports over 2.3 trillion dollars in goods and services in 2013.
However, the US also imports goods and services. Imports totaled more than 2.7 trillion dollars in 2013.
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8. Balance of Trade Balance of Trade Trade Deficit Balance of Payments
The difference in value between what a nation exports and its imports
Trade Deficit
A nation’s negative balance of trade, which exists when that country imports more products than it exports
Balance of Payments
The difference between the flow of money into and out of a country
The level of imports and exports are important when looking at a country’s economy. It is critically important in global trade. The difference between imports and exports for a country represents the balance of trade for that country.
Because the United States (and some other nations as well) imports more products than it exports, it has a negative balance of trade, or trade deficit. Of course, when a nation exports more goods than it imports, it has a favorable balance of trade, or trade surplus. Until about 1970, the United States had a trade surplus due to an abundance of natural resources and the relative efficiency of its manufacturing systems.
The difference between the flow of money into and out of a country is called its balance of payments. A country’s balance of trade, foreign investments, foreign aid, loans, military expenditures, and money spent by tourists constitute its balance of payments.
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9. U.S. Trade Deficit (in billions of dollars)
As this table shows, the United States has been working with a trade deficit for quite some time.
Sources: U.S. Bureau of the Census, Foreign Trade Division, U.S. Trade in Goods and Services – Balance of Payments (BOP) Basis, February 6, 2014, (accessed February 9, 2015)
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10. China Faces Growing Concerns over Pollution
With China’s growing middle class, pollution has also grown and the Chinese government has taken action
China is closing their worst polluting factories, adopting stringent environmental laws and planning for a cap-and-trade system
Even though China releases the most greenhouse gas emissions, they still give off less per person than the U.S.
With China’s growing middle class, pollution has also grown and the Chinese government has taken action.
China is closing their worst polluting factories, adopting stringent environmental laws and planning for a cap-and-trade system.
Even though China releases the most greenhouse gas emissions, they still give off less per person than the U.S.
© 2017 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.