1. International Business
Intro to Business
9/13/2018

2. Global Economy
The Global Economy is the interconnected economies of the nations of the world.
We live in a global economy fueled by international trade
International trade involves the exchange of goods and services between nations. (also called globalization)

3. Multinational Company/Corporation (MNC)
A Multinational Company or Corporation (MNC) Is an organization that conducts business in several countries and has management capable of doing business worldwide

4. What is trade? Trade has several meanings
A specific area of business or industry
Ex. The diamond trade
A skilled occupation
Ex. Auto Mechanics
The people who work in a specific area of business or industry
Ex. Construction Workers
The activity of buying and selling goods and services in domestic or international markets

5. Why do we trade?
While America has many natural resources, a skilled labor force, and modern machines and methods of production, we cannot provide ourselves with all of the things we want - We must go outside of our borders to get some of the things that other countries specialize in.

6. Types of Trade
Domestic Business – production, purchase, and sale of goods and services within a country.
World Trade– exchange of goods and services across international boundaries.
Better transportation and telecommunications, along with a decrease in trade barriers has lead to an increase in world trade.

7. Advantages over America

8. America’s Advantages over other countries
Machines, Engines, Pumps
Electronic equipment

9. Importing
Imports – goods or services one country BUYS from another country
Imports to America account for 100% of:

10. Exporting
Exports – the goods and services one country SELLS to other county
Exports benefit consumers in other countries
Factory and farm machinery made in U.S.
Food grown on U.S. farms
Chemicals, pesticides, medicines and plastics produced in U.S.
U.S. Movies, Television (CNN, MTV, ESPN)
U.S. Books, magazines, newspapers
1 out of every 6 U.S. jobs depends on international business

11. Foreign Trade
Without foreign trade, many of the things we buy would cost more or not be available to our consumers.
Other countries can produce some goods at lower costs because they have the needed raw materials or have lower labor costs.
Some consumers may still purchase foreign goods at higher prices if they perceive the value to be higher.
Or they may simply just enjoy owning foreign products:
French Perfumes, Norwegian Sweaters, Swiss Watches

12. Measuring trade between nations
Just like people try to spend less than they earn, countries try to maintain a positive balance of trade

13. Balance of Trade
Balance of Trade - The difference in value between a country’s total exports and imports
Trade surplus – exports are greater than imports
Trade deficit – imports are greater than exports

14. Specialization
Specialization – to focus on a particular activity, area, or product.
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.

15. Comparative Advantage
Comparative Advantage – the ability of a country or company to produce a particular good more efficiently than another country or company.

16. International Currency
Each nation has its own banking system and its own type of money
Mexico: peso
Japan: yen
India: rupees
Exchanging one currency for another occurs in the foreign exchange market

17. Exchange Rate
The price at which one currency can buy another currency is called the exchange rate
Exchange rates change from day to day and from country to country.
How much the currency of a country is worth depends on how many other countries want to buy its products.

18. Global Trade
Global competition often leads to trade disputes between countries.
At the heart of most trade disputes is whether there should be limits on trade.

19. Protectionism
Protectionism is the practice of the government putting limits on foreign trade to protect businesses at home.
EX. Rice farming and the automobile industries are extremely important to Japan’s economy. To limit competition from other countries, Japan practices protectionism to ensure Japanese consumers buy Japanese rice and automobiles.

20. Reasons for Protectionism
Foreign competition can lower the demand for domestic products.
Companies at home need to be protected from unfair foreign competition.
Industries that make products related to national defense need to be protected.
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.
Other countries might not have the same environmental or human rights standards.

21. Barriers to International Trade
Governments establish international policies that guide trade with other countries – through control of importing and exporting
Quotas
Tariffs
Embargos

22. Trade Barriers
Quota - a limit set on the quantity of a product that may be imported
Tariff - A tax placed on imports to increase their price in the domestic market
Embargo – complete ban of an import or export

23. Free Trade
Free Trade – occurs when there are few or no limits on trade between countries.
Supporters of free trade believe there should be no limits on trade.

24. Free Trade opens up new markets in other countries.
creates new jobs, especially in areas related to global trade.
Competition forces businesses to be more efficient and productive.
Consumers have more choice in the variety, price, and quality of products.
promotes cultural understanding and cooperation between countries.
helps all countries raise their standard of living.

25. Trade Alliance
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.

26. Trade Alliances
Some of the major trade alliances in the world today are:
NAFTA
European Union (EU)
Association of Southeast Asian Nations (ASEAN)

27. NAFTA North American Free Trade Agreement
Combined the economies of the United States, Canada, and Mexico.
Made it easier for United States to buy oil from Mexico and Mexico to buy cars from the United States
Trade among all three nations would increase, stimulating growth and bringing a wider variety of lower-cost goods to consumers