Presentation on theme: "Business in the Global Economy"— Presentation transcript:
1 Business in the Global Economy Intro to BusinessChapter 3
2 Trading Among NationsCountries have become economically interdependentAbsolute Advantage – when a country can produce a good/service at a lower cost than other countriesComparative Advantage – situation when a country specializes in the production of a good/service at which it is relatively more efficient
3 Importing/ExportingImporting – items bought from another country . US imports 50% of its crude oil and fish. Also must import raw materials not readily available in US (see figure 3-1)Exporting – goods and services sold to other countries. Main US exports are food stuffs, movies, media.
4 Trade RelationsBalance of Trade – the difference between a countries total imports and total exports.The US has a trade imbalance of approx. $490 billionBalance of Payments – difference between the amount of money that comes into a country and the amount that goes out.
5 International Currency Exchange Rate – the value of a currency in one country compared with the value of anotherFactors Affecting Currency Values:Balance of PaymentsEconomic Conditions (Interest Rates)Political Stability
6 International Business Envorinment Geography (location, climate, terrain, seaports, natural resources)Cultural Influences (language, religion, values, customs, social relationships)Economic Development (literacy level, technology, agricultural dependency, infrastructure)Political and Legal Concerns
7 International Trade Barriers Quotas – limit on the quantity of a product that may be imported/exported within a given periodTariffs – a tax that a government places on certain imported productsEmbargoes – stopping the import/export of a particular product (Cuba)
8 Encouraging Int’l Trade Free Trade Zones - a selected are where products can be imported duty-free and then stored, assembled, and/or used in manufactureFree Trade Agreements – removes duties and trade barriers between countriesCommon Markets – More freedom than free trade agreements. Workers may cross borders; expands trade and promote economic integration.
9 Multinational Companies (MNC) MNC – an organization that does business in several countriesGlobal Strategy – uses the same product and marketing strategy worldwideMultinational Strategy – treats each country market differently. Adapt products and marketing strategies to customs, tastes, and buying habits.
10 MNC (continued) MNC Benefits: Consumers have large amount of goods availableLower PricesExpanded Career OpportunitiesFoster understanding/respect of people from different culturesDrawbacks of MNC – becomes too involved and powerful in culture a nd politics of host country
11 Global Market Entry Modes Licensing – selling the right to use intangible property for a fee or royaltyFranchising – right to use a company name or business process in a specific wayJoint Venture – agreement between two or more companies to share a business product
12 International Trade Organizations World Trade Organization (WTO) – created in 1995 to promote trade around the worldLower tariffs that discourage free tradeEliminate import quotasReduce barriers for banks, insurance companies, and other financial servicesAssist poor countries with economic growth
13 Int’l Trade Organizations (cont.) International Monteary Fund – promotes economic cooperation by stabilizing monetary exchange system.World Bank:Created to provide loans for rebuilding after WWIIToday gives economic aide to undeveloped countries