2 Unit 5 Vocabulary Balance of Payments Bill of Lading Certificate of OriginCost, Insurance, and Freight (CIF)Cost & Freight (C&F)CountertradeCustoms OfficialDirect BarterEconomic CommunityFree On Board (FOB)Freight ForwarderIndustryMonopolistic CompetitionMonopolyOligopolyPure CompetitionTrade Deficit
3 Unit 5 Essential Question How do international companies trade?
4 Chapter 610/24/2000Essential Question 1 Trade Relations What are the procedures for importing goods?Amplifying QuestionsWhy is importing important?What are the steps for importing goods?International Business pg
5 Importance of Importing Product demand:Some goods and services are available only from other countries.Lower costs:Some goods and services are less expensive when produced in one country than another.Production inputs:Companies purchase raw materials and component parts from other countries.
7 Chapter 610/24/2000Essential Question 2 Trade Relations What are the procedures for exporting goods?Amplifying QuestionsWhy is the exporting process?What are the various sales terms?What documents are required for exporting goods?What are some barriers to exporting?International Business pg
8 The Exporting Process Find potential customers STEP 1FindpotentialcustomersSTEP 2Meet the needs of customersSTEP 3Agree on salestermsSTEP 4Provide productsor servicesSTEP 5Complete the transaction
9 Sales Terms FOB - Free on board: Selling price of the product includes the cost of loading the exported goods onto transport vessels at the specified place.
10 Sales Terms CIF - Cost, insurance, and freight: Cost of goods, insurance, and freight are included in the price quoted.
11 Sales Terms C&F - Cost and freight: Price includes the cost of the goods and freight, but the buyer must pay for insurance separately.
12 Export Documents Bill of lading: Certificate of origin: Document stating the agreement between the exporter and the transportation company.Certificate of origin:Document that states the name of the country in which the shipped goods were produced.
13 Exporting Hurdles No company representatives in foreign countries Products not appropriate for foreign consumersInsufficient production facilities to manufacture enough goods for exportingHigh costs of doing business in other countriesDifficulty understanding foreign business proceduresDifficulty obtaining payment from foreign customers
14 Commonly Exported Services Hospitality:Hotels, food serviceEntertainment:Movies, television production, amusement parksFinancial services:Insurance, real estate
15 Chapter 610/24/2000Essential Question 3 Trade Relations Why is it important for countries to have trade relations?Amplifying QuestionsWhat are the economic effects of foreign trade?What type of trade agreements exist between countries?International Business pg
16 The Economic Effect of Foreign Trade Balance of trade:The difference between a country’s exports and imports.
18 The Economic Effect of Foreign Trade Trade deficit:Total amount a country owes to other countries as a result of importing more goods and services than the country is exporting.
19 Trade Agreements The World Trade Organization: GATT was established in January 1948.WTO replaced GATT in 1995 with over 140 member nations.Based in Geneva, Switzerland.Has the power to settle trade disputes and enforce free-trade agreements between members, unlike GATT.
20 Trade Agreements The World Trade Organization Goals: Lowering tariffs that discourage free trade.Eliminating import quotas and subsidies that reduce competition in the world market.Recognize protection for patents, copyrights, and other intellectual properties.Reduce barriers for banks, insurance companies and other financial institutions.Assisting poor countries with creating trade policies and stimulating economic growth.
21 Trade Agreements Economic communities: An organization of countries that bond together to allow the free flow of products.Also called a common market.Benefits:Expanded trade with other regions of the world.Reduced tariffs for member countries.Lower prices for consumers within the group.Expanded employment and investment opportunities.
22 Trade Agreements Economic communities: Examples: EU - European Union LAFTA - Latin American Free Trade AssociationASEAN - Association of Southeast Asian NationsECOWAS - Economic Community of West African States.NAFTA - North American Free Trade Agreement
23 Trade Agreements Barter agreements: The trade of one item for another. Direct trade: The exchange of goods and services with no money involved.Countertrade: The exchange of products or services between companies in different countries with the possibility of currency exchange.
24 Trade Agreements Free-trade zones: An area designated by a government for duty-free entry of non-prohibited goods.Commonly located at a point of entry into a nation.Merchandise may be stored, displayed, or used without duties being paid.Duties are imposed on the goods only when items enter into an area of the country subject to customs.
25 Chapter 610/24/2000Essential Question 4 Trade Relations How does competition affect international trade?Amplifying QuestionsWhat factors affect international business competition?What are the various types of competitive market situations?International Business pg
26 International Business Competition Factors affecting competitionNumber of companiesBusiness costsProduct differencesBenefits and concerns of competitionImprove economic situation and living conditions of a country.Companies may become to powerful.
27 Types of Competitive Situations Pure competitionMany sellersSame productMonopolistic competitionSlightly different productOligopolyFew sellersSlightly different productMonopolyOne sellerUsually government regulated