1. Business in the Global Economy
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Business in the Global Economy
3-1 International Business Basics
3-2 The Global Marketplace
3-3 International Business Organizations
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2. LESSON 3-1 International Business Basics
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LESSON 3-1 International Business Basics
Goals
Describe importing and exporting activities.
Compare balance of trade and balance of payments.
List factors that affect the value of global currencies.
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3. Key Terms balance of payments balance of trade exchange rate exports
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Key Terms
balance of payments
balance of trade
exchange rate
exports
imports
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4. Domestic vs. International
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Domestic vs. International
Domestic Business: making, buying, selling within a country
International Business: making, buying, selling across national borders
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5. CHAPTER 3
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TRADING AMONG NATIONS
Absolute advantage- exists when a country can produce a good or service at a lower cost than other countries
Comparative advantage- when a country specializes in the production of a good or service at which it is relatively more efficient
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6. TRADE AMONG NATIONS What are imports?
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TRADE AMONG NATIONS
What are imports?
Items bought from other countries
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7. CHAPTER 3
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IMPORTING
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8. MEASURING TRADE RELATIONS
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MEASURING TRADE RELATIONS
Balance of trade- the difference between a country’s total exports and total imports
Trade Surplus: exports > imports
Trade Deficit: exports < imports
Balance of payments- the difference between the amount of money that comes in and the amount that goes out
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9. CHAPTER 3
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U.S. TRADE BALANCES
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10. CHAPTER 3
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BALANCE OF TRADE
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11. CHAPTER 3
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How does balance of trade differ from balance of payments?
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12. INTERNATIONAL CURRENCY
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INTERNATIONAL CURRENCY
Foreign Exchange Market- the process of exchanging one currency for another occurs on the foreign exchange market
Foreign exchange rates- the value of one currency compared to the value of another
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13. INTERNATIONAL CURRENCY
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INTERNATIONAL CURRENCY
Three main factors affect currency
Balance of payments
positive  value rising
Negative  value decreasing
Economic conditions- high prices, inflation, or interest rates tend to low currency value
Political disability- reduces foreign confidence
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14. RECENT VALUES OF CURRENCIES
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RECENT VALUES OF CURRENCIES
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15. CHAPTER 3
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What factors affect the value of a country’s currency?
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16. LESSON 3-2 The Global Marketplace
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LESSON 3-2 The Global Marketplace
Goals
Describe the components of the international business environment.
Identify examples of formal trade barriers.
Explain actions to encourage international trade.
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17. Key Terms infrastructure trade barrier quota tariff embargo Chapter 3
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Key Terms
infrastructure
trade barrier
quota
tariff
embargo
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18. THE INTERNATIONAL BUSINESS ENVIRONMENT
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THE INTERNATIONAL BUSINESS ENVIRONMENT
Geography
Cultural influences
Economic development
Literacy level
Technology
Agricultural dependency
Political and legal concerns
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19. THE INTERNATIONAL BUSINESS ENVIRONMENT
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GEOGRAPHY
location
climate
terrain
waterways
natural resources
ECONOMICS
technology
education
inflation
exchange rate
infrastructure
THE INTERNATIONAL BUSINESS ENVIRONMENT
CULTURE
language
family
religion
customs
traditions
food
POLITICAL–LEGAL
FACTORS
government system
political stability
trade barriers
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20. International Business Environment
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International Business Environment
Infrastructure: refers to a nation’s transportation, communication, and utility systems
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21. CHAPTER 3
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List the four main elements of the international business environment.
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22. INTERNATIONAL TRADE BARRIERS
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INTERNATIONAL TRADE BARRIERS
Quotas- governments set a limit on the quantity of a product that may be imported or exported within a given period
Tariffs- a tax that a government places on certain imported products
Embargoes- stop the export or import of a product completely
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23. QUOTAS Reasons for quotas To keep supply low and prices the same
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QUOTAS
Reasons for quotas
To keep supply low and prices the same
To express displeasure at the policies of the importing country
To protect one of a country’s industries from too much competition from abroad
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24. TARIFFS Reasons for tariffs
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TARIFFS
Reasons for tariffs
To set amount per pound, gallon, or other unit
To set the value of a good
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25. EMBARGOES Reasons for embargoes
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EMBARGOES
Reasons for embargoes
To protect a country’s industries from international competition more than the quota or tariff will achieve
To prevent sensitive products from falling into the hands of unfriendly groups or nations
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26. >> C H E C K P O I N T What are three formal trade barriers?
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What are three formal trade barriers?
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27. ENCOURAGING INTERNATIONAL TRADE
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ENCOURAGING INTERNATIONAL TRADE
Free-trade zones- a selected area where products can be imported duty free and then stored, assembled, and/or used in manufacturing
Free-trade agreements- member countries agree to remove duties and trade barriers on products
Common markets- members do away with duties and other trade barriers
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FREE-TRADE ZONES
Used to promote international business in a selected area where products can be imported duty-free and then stored, assembled, and/or used in manufacturing
Usually located around a seaport of airport
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29. FREE-TRADE AGREEMENTS
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FREE-TRADE AGREEMENTS
Member countries agree to remove duties and trade barriers on products traded among them
Results in increased trade between members
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COMMON MARKETS
Allows companies to invest freely in each member’s country
Allows workers to move freely across borders
Examples
European Union (EU)
Latin American Integration Association (LAIA)
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31. CHAPTER 3
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What actions could be taken to encourage international trade?
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32. LESSON 3-3 International Business Organizations
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LESSON 3-3 International Business Organizations
Goals
Discuss activities of multinational organizations.
Explain common international business entry modes.
Describe activities of international trade organizations and agencies.
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33. Key Terms multinational company (MNC) joint venture Chapter 3
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Key Terms
multinational company (MNC)
joint venture
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34. CHAPTER 3
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MNC STRATEGIES
Global strategy- uses the same product and marketing strategy world-wide (Coca-Cola)
Multinational strategy- treats each country market differently
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35. MNC BENEFITS Large amount of goods available Lower prices
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MNC BENEFITS
Large amount of goods available
Lower prices
Career opportunities
Foster understanding, communication, and respect
Friendly international relations
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36. DRAWBACKS OF MULTINATIONAL COMPANIES
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DRAWBACKS OF MULTINATIONAL COMPANIES
Economic power
Worker dependence on the MNC
Consumer dependence
Political power
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37. CHAPTER 3
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What are two strategies commonly used by multinational companies?
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38. GLOBAL MARKET ENTRY MODES
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GLOBAL MARKET ENTRY MODES
Licensing- selling the right to use some intangible property for a fee or royalty (production process, trademark, brand name)
Franchising- the right to use a company name or business process in a specific way (fast food)
Joint venture- an agreement between two or more companies to share a business project (Japanese and American automobile manufacutring)
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LICENSING
Allows companies to produce items in other countries without being actively involved
Has a low financial investment, so the potential financial return for the company is often low
The risk for the company is low
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FRANCHISING
Allows organizations to enter into contracts with people in other countries to set up a business that looks and runs like the parent company
Marketing elements, such as food products, packaging, and advertising must meet both cultural sensitivities and legal requirements
Commonly involves selling a product or service
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41. CHAPTER 3
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JOINT VENTURE
Allows two or more companies to share raw materials, shipping facilities, management activities, or production activities
Concerns include the sharing of profits and not as much control since several companies are involved
Very popular for manufacturing, such as Japanese and U.S. automobile manufacturers
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42. CHAPTER 3
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How does licensing differ from a franchise?
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43. INTERNATIONAL TRADE ORGANIZATIONS
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INTERNATIONAL TRADE ORGANIZATIONS
World Trade Organization- settles trade disputes and enforces free-trade agreements
International Monetary Fund- helps to promote economic cooperation; maintains an orderly system of world trade
World Bank- provide economic aid to less developed countries
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44. WORLD TRADE ORGANIZATION (WTO)
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WORLD TRADE ORGANIZATION (WTO)
WTO Goals
Lowering tariffs that discourage free trade
Eliminating import quotas
Reducing barriers for banks, insurance companies, and other financial services
Assisting poor countries with economic growth
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45. INTERNATIONAL MONETARY FUND (IMF)
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INTERNATIONAL MONETARY FUND (IMF)
Helps to promote economic cooperation
Maintains an orderly system of world trade and exchange rates
Includes over 150 member nations
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46. CHAPTER 3
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WORLD BANK
Created in 1944 to provide loans for rebuilding after World War II
Today the World Bank has over 180 member countries and two main divisions
International Development Association (IDA), which makes loans to help developing countries
International Finance Corporation (IFC), which provides technical capital and technical help to private businesses in nations with limited resources
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47. CHAPTER 3
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How does the International Monetary Fund assist countries?
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