1. The Global Marketplace
Chapter 3

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Learning Objectives
Explain why nations trade and describe how international trade is measured
Discuss the nature of conflicts in global business, including free trade and government interventions in international trade
Identify the major organizations that facilitate international trade and the major trading blocs around the world
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3. Learning Objectives (cont.)
Discuss the importance of understanding cultural and legal differences in the global business environment
Define the major forms of international business activity
Discuss the strategic choices that must be considered before entering international markets
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4. The World’s Most Competitive Countries
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5. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Why Nations Trade
Economic globalization
The increasing integration and interdependence of national economies around the world
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Why Nations Trade
Focusing on relative strengths
Expanding markets
Pursuing economies of scale
Acquiring materials, goods, and services
Keeping up with customers
Keeping up with competitors
An Economy of scale ensures savings from buying parts and materials, manufacturing, or marketing in large quantities.
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7. How International Trade is Measured
Balance of trade
Total value of the products a nation exports minus the total value of the products it imports, calculated over a period of time
Trade surplus
A favorable trade balance created when a country exports more than it imports
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8. How International Trade is Measured
Trade deficit
An unfavorable trade balance created when a country imports more than it exports
Balance of payments
The sum of all payments a country receives from other countries minus the sum of all payments it makes to the other countries, over some specified period of time
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9. Foreign Exchange Rates and Currency Valuations
The rate at which the money of one country is traded for the money of another
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10. Strong and Weak Currencies: Who Gains and Who Loses?
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Free Trade
Free trade
International trade unencumbered by restrictive measures
Supporters of free trade generally acknowledge that it produces winners and losers but that the winners gain more than the losers lose, so the net effect is positive
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12. Government Intervention in International Trade
Protectionism
Government policies aimed at shielding a country’s industries from foreign competition
Tariffs
Taxes levied on imports
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13. Government Intervention in International Trade
Import quotas
Limits placed on the quantity of imports a nation will allow for a specific product
Embargo
A total ban on trade with a particular nation (a sanction) or of a particular product
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14. Government Intervention in International Trade
Export subsidies
A form of financial assistance, in which producers receive enough money from the government to allow them to lower their prices, in order to compete more effectively in the global market
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15. Government Intervention in International Trade
Dumping
Charging less than the actual cost or less than the home-country price for goods sold in other countries
Sanctions
politically motivated embargoes that revoke a country’s normal trade relations status
often used as forceful alternatives short of war
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16. International Trade Organizations
World Trade Organization (WTO)
Permanent forum for negotiating, implementing, and monitoring international trade procedures and for mediating trade disputes among the150 member countries
The organization’s work is guided by five principles:
preventing discriminatory policies that favor some trading partners over others or a country’s own products over those of other countries,
reducing trade barriers between countries,
making trade policies more predictable and less arbitrary,
discouraging unfair practices, and
helping less-developed countries benefit from international trade.
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17. International Trade Organizations
The International Monetary Fund (IMF)
The IMF was formed to monitor global financial developments, provide technical advice and training, provide short-term loans to countries that are unable to meet their financial obligations, and work to alleviate poverty in developing economies.
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18. International Trade Organizations
The World Bank
Founded to finance reconstruction after World War II and is now involved in hundreds of projects around the world aimed at addressing poverty, health, education, and other concerns in developing countries
Is a United Nations agency owned by its 187 member nations
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Trading Blocs
Trading blocs
Organizations of nations that remove trade barriers among their member countries and establish uniform barriers to trade with non-member nations
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Trading Blocs
North American Free Trade Agreement (NAFTA)
Formed by the United States, Canada, and Mexico to pave the way for the free flow of goods, services, and capital within the bloc through the phased elimination of tariffs and quotas
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Trading Blocs
The European Union (EU)
constitutes more than two dozen countries and a half billion people.
now accounts for the world’s largest economy
EU nations have eliminated hundreds of local regulations, variations in product standards, and protectionist measures that once limited trade among member countries
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Trading Blocs
The Asia-Pacific Economic Cooperation (APEC)
an organization of 21 countries working to liberalize trade in the Pacific Rim
has a long-term goal of liberalizing and simplifying trade and investment among member countries and helping the region as a whole achieve sustainable economic growth.
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23. Members of Major Trading Blocs
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24. Members of Major Trading Blocs
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25. The Global Business Environment
Culture
A shared system of symbols, beliefs, attitudes, values, expectations, and norms for behavior
Ethnocentrism
Judging all other groups according to the standards, behaviors, and customs of one’s own group
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26. The Global Business Environment
Successful global business leaders recognize and respect differences in language, social values, ideas of status, decision-making habits, attitudes toward time, use of space, body language, manners, religions, and ethical standards
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27. The Global Business Environment
Stereotyping
Assigning a wide range of generalized attributes, which are often superficial or even false, to an individual based on his or her membership to a particular culture or social group
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28. Improving Communication with a Person from Another Culture
Be alert to the other person’s customs
Deal with the individual
Clarify your intent and meaning
Adapt your style to that the other person’s
Show respect
• Be alert to the other person’s customs. Expect the other person to have values, beliefs,
expectations, and mannerisms that may differ from yours.
• Deal with the individual. Don’t stereotype the other person or react with pre-conceived
ideas. Regard the person as an individual first, not as a representative of another culture.
• Clarify your intent and meaning. The other person’s body language may not mean
what you think, and the person may read unintentional meanings into your message.
Clarify your true intent by repetition and examples. Ask questions and listen carefully.
• Adapt your style to the other person’s. If the other person appears to be direct and
straightforward, follow suit. If not, adjust your behavior to match.
• Show respect. Learn how respect is communicated in various cultures—through gestures,
eye contact, social customs, and other actions.
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29. Forms of International Business Activity
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30. Forms of International Business Activity
Importing
Purchasing goods or services from another country and bringing them into one’s own country
Exporting
Selling and shipping goods or services to another country
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31. Forms of International Business Activity
Licensing
Agreement to produce and market another company’s product in exchange for a royalty or fee
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32. Forms of International Business Activity
Foreign Direct Investment (FDI)
Investment of money by foreign companies in domestic business enterprises
Multinational Corporations (MNCs)
Companies with operations in more than one country
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33. Strategic Approaches to International Markets
Multidomestic strategy
A decentralized approach to international expansion in which a company creates highly independent operating units in each new country
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34. Strategic Approaches to International Markets
Global strategy
A highly centralized approach to international expansion, with headquarters in the home country making all major decisions
Transnational strategy
A hybrid approach that attempts to reap the benefits of international scale while being responsive to local market dynamics
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35. Product Strategies for International Strategies
Customer support
Promotion
Pricing
Staffing
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36. Applying What You’ve Learned
Explain why nations trade and describe how international trade is measured
Discuss the nature of conflicts in global business, including free trade and government interventions into international trade
Identify the major organizations that facilitate international trade and the major trading blocs around the world
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

37. Applying What You’ve Learned
Discuss the importance of understanding cultural and legal differences in the global business environment
Define the major forms of international business activity
Discuss the strategic choices that must be considered before entering international markets
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