Presentation on theme: "3 Business in the Global Economy 3-1 International Business Basics"— Presentation transcript:
1 3 Business in the Global Economy 3-1 International Business Basics C H A P T E R3Business in the Global Economy3-1 International Business Basics3-2 The Global Marketplace3-3 International Business Organizations
2 3-1 International Business Basics Goal 1 Describe importing and exporting activities.Goal 2 Compare balance of trade and balance of payments.Goal 3 List factors that affect the value of global currencies.
3 KEY TERMS imports exports balance of trade balance of payments exchange rate
4 TRADING AMONG NATIONS Absolute advantage Comparative advantage ImportingExporting
10 Checkpoint How does balance of trade differ from balance of payments?Balance of trade is the difference between a country’s total exports and total imports.Balance of payments is the difference between the amount of money that comes into a country and the amount that goes out of it.
11 INTERNATIONAL CURRENCY Foreign exchange ratesFactors affecting currency valuesThree main factors affect currencyBalance of paymentsEconomic conditionsPolitical disability
13 Checkpoint What factors affect the value of a country’s currency? Balance of paymentsEconomic conditionsPolitical stability
14 3-2 The Global Marketplace Goal 1 Describe the components of the international business environment.Goal 2 Identify examples of formal trade barriers.Goal 3 Explain actions to encourage international trade.
18 Checkpoint List the four main elements of the international business environment.GeographyCultural influencesEconomic developmentPolitical and legal concerns
19 INTERNATIONAL TRADE BARRIERS QuotasTariffsEmbargoes
20 QUOTAS Reasons for quotas To keep supply low and prices the same To express displeasure at the policies of the importing countryTo protect one of a country’s industries from too much competition from abroad
21 TARIFFS Reasons for tariffs To set amount per pound, gallon, or other unitTo set the value of a good
22 EMBARGOES Reasons for embargoes To protect a country’s industries from international competition more than the quota or tariff will achieveTo prevent sensitive products from falling into the hands of unfriendly groups or nations
23 Checkpoint What are three formal trade barriers? Quotas Tariffs Embargoes
24 ENCOURAGING INTERNATIONAL TRADE Free-trade zonesFree-trade agreementsCommon markets
25 FREE-TRADE ZONESUsed to promote international business in a selected area where products can be imported duty-free and then stored, assembled, and/or used in manufacturingUsually located around a seaport or airport
26 FREE-TRADE AGREEMENTS Member countries agree to remove duties and trade barriers on products traded among themResults in increased trade between members
27 COMMON MARKETSAllow companies to invest freely in each member’s countryAllow workers to move freely across bordersExamplesEuropean Union (EU)Latin American Integration Association (LAIA)
28 Checkpoint What actions could be taken to encourage international trade?Actions that could be taken to encourage international trade include free-trade zones, free-trade agreements, and common markets.
29 3-3 International Business Organizations Goal 1 Discuss activities of multinational organizations.Goal 2 Explain common international business entry modes.Goal 3 Describe activities of international trade organizations and agencies.
30 KEY TERMSmultinational company (MNC)joint venture
31 MULTINATIONAL COMPANIES (MNC) Organizations that do business in several countriesHome countryHost country
33 MNC BENEFITS Large amount of goods available Lower prices Career opportunitiesFoster understanding, communication, and respectFriendly international relations
34 DRAWBACKS OF MULTINATIONAL COMPANIES Economic powerWorker dependence on the MNCConsumer dependencePolitical power
35 Checkpoint What are two strategies commonly used by multinational companies?Global strategy (offering the same product the same way everywhere)Multinational strategy (approaching each country market differently).
36 GLOBAL MARKET ENTRY MODES LicensingFranchisingJoint venture
37 LICENSINGAllows companies to produce items in other countries without being actively involvedHas a low financial investment, so the potential financial return for the company is often lowThe risk for the company is low
38 FRANCHISINGAllows organizations to enter into contracts with people in other countries to set up a business that looks and runs like the parent companyMarketing elements, such as food products, packaging, and advertising, must meet both cultural sensitivities and legal requirementsCommonly involves selling a product or service
39 JOINT VENTUREAllows two or more companies to share raw materials, shipping facilities, management activities, or production activitiesConcerns include the sharing of profits and not as much control because several companies are involvedVery popular for manufacturing, such as Japanese and U.S. automobile manufacturers
40 Checkpoint How does licensing differ from a franchise? Licensing does not require as much financial investment or risk as franchising.Both licensing and franchising involve royalty payments, but licensing usually involves a manufacturing process, while franchising commonly involves selling a product or service.
41 INTERNATIONAL TRADE ORGANIZATIONS World Trade OrganizationInternational Monetary FundWorld Bank
42 WORLD TRADE ORGANIZATION (WTO) 150 member countriesPromotes tradeSettles trade disputesEnforces free-trade agreementsOther goalsLowering tariffs that discourage free tradeEliminating import quotasReducing barriers for banks, insurance companies, and other financial servicesAssisting poor countries with economic growth
43 INTERNATIONAL MONETARY FUND (IMF) Helps to promote economic cooperationMaintains an orderly system of world trade and exchange ratesIncludes more than 150 member nations
44 WORLD BANKCreated in 1944 to provide loans for rebuilding after World War IIToday the World Bank has more than 180 member countries and two main divisionsInternational Development Association (IDA), which makes loans to help developing countriesInternational Finance Corporation (IFC), which provides technical capital and technical help to private businesses in nations with limited resources
45 Checkpoint How does the International Monetary Fund assist countries?The International Monetary Fund assists countries by promoting economic cooperation and maintaining an orderly system of world trade and exchange rates.This cooperation makes harmful trade wars among IMF nations less likely.