1.  Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D.

2. Competing in the Global Economy © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 2

3. Why Nations Trade © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 3 ScarceRecoursesScarceRecourses GlobalAmbitionsGlobalAmbitions LimitedCapabilitiesLimitedCapabilities Economies of Scale Economies

4. Theories of Production and Trading © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 4 AbsoluteAdvantageAbsoluteAdvantageComparativeAdvantageComparativeAdvantage

5. Measuring International Trade © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 5 Balance of Trade Balance SurplusSurplus DeficitDeficit Balance of Payments Balance Cash Inflow Cash Outflow

6. US Exports and Imports – Goods (in $ billions, 2002 data) © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 6 Foods, Feeds and Beverages Industrial Supplies & Materials (including Petroleum) Machinery & Transport Equipment (not autos) Automotive Vehicles, Engines & Parts Consumer Goods (non-food) Other Goods Exports Imports 49,616 49,687 156,837 267,681 290,496 283,323 78,942 203,743 84,359 307,854 32,854 49,078

7. US Exports and Imports – Services (in $ billions, 2002 data) © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 7 Travel and Passenger Fares Other Transport Royalties and License Fees Other Private Services Military, Defense Services Misc. Government Services Exports Imports 83,593 78,013 29,166 38,527 44,142 19,258 122,594 69,436 11,943 19,245 795 2,920

8. Trade Deficit on the Rise © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 8 Trade deficit (in $ billions)

9. Global Trade Issues © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 9 Free Trade Fair Trade Trade Restrictions

10. Protectionism and Trade Restrictions © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 10 SanctionsSanctionsRestrictiveImportsRestrictiveImportsSubsidiesSubsidiesDumpingDumping TariffsTariffsQuotasQuotasEmbargoesEmbargoes

11. Promoting Free Trade © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 11 World Trade Organization (WTO) World Trade Organization (WTO) International Monetary Fund (IMF) International Monetary Fund (IMF) The World Bank General Agreement on Tariffs and Trade (GATT) General Agreement on Tariffs and Trade (GATT) Asia Pacific Econ Cooperation Council (APECC) Asia Pacific Econ Cooperation Council (APECC)

12. © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 12 Trading Blocs Advantages Help smaller countries Promote competition Widen markets Foster economic growth Disadvantages Economic isolation Trade restrictions Decline in world trade Fewer choices

13. North American Free Trade Agreement (NAFTA) © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 13 United States Canada Mexico

14. © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 14 The European Union MinimizingEstablishing Local Regulations Variations in Product Standards Trade Protectionism Global Product Standards Consumer Protection EnvironmentalProtection

15. The Economic and Monetary Union (EMU) © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 15 EconomicImpactEconomicImpact CurrencyExchangeCurrencyExchange CentralizedBankingCentralizedBanking CurrencyUnificationCurrencyUnification The EURO

16. Foreign Exchange Rates and Currency Valuations © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 16 Floating Rates Government Action Currency Devaluation Fixed Value System

17. The Global Business Environment © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 17 Opportunities  Growth Potential  Increased Sales  Operating Efficiencies  New Technologies  More Consumer Choices Challenges  Laws and Customs  Consumer Preferences  Ethical Standards  Labor Skills  Politics and Economics

18. Cultural Differences In Global Business  Consider the other person’s customs  Deal with the individual  Clarify your intent and meaning  Adapt your style to the other person  Show respect © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 18

19. Legal Differences In Global Business  Common Law (US, UK)  Civil Law (France, Italy, Turkey etc.)  Theocratic Law (Iran, Saudi Arabia)  IMF and WTO (found restrictive laws in TR and RUS)  Issues (Bribery different Acts against it.. Foreign Corrupt Practices Act ) © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 19

20. © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 20

21. International Business Activity © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 21 Importing and Exporting Licensing and Franchising Strategic Alliances and Joint Ventures Direct Foreign Investment OwnershipFinancialRisk LowLowLow LowLowLow ModerateModerateModerate HighHighHigh Common Forms Levels of Commitment

22. Strategic Approaches to International Markets Products Support Promotion Pricing Staffing © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 22

23. © Prentice Hall, 2005 Business In Action 3e Cha pter 3 - 23 Impact of Terrorism on Global Business GovernmentExpendituresBusinessExpenditures BankingTransportation