1. POB 1.03 Part 2 Understand business in the global marketplace.

2. What Factors Impact the International Business Environment? Geography Culture Economy Political & legal Concerns

3. Geographic Factors Location Climate Terrain Seaports Natural Resources

4. Cultural Factors Culture – accepted behaviors, customs and values of a society Factors include … ◦ Language ◦ Religion ◦ Values ◦ Customs ◦ Social relationships

5. Economic Factors What are the differences in the living and work environments? 3 Key Effects: ◦ Literacy Level – better ed = more & better products for citizens ◦ Technology – automated production, distribution and communication = ability to create and deliver products quickly ◦ Agricultural Dependency – usually either heavy ag focus or manufacturing Infrastructure: nation’s transportation, communication, and utility systems

6. Political and Legal Factors Regulations on advertising and the enforcement of contracts Safety inspections Type of government, stability of government and policies towards businesses

7. What are trade barriers? Trade barrier – a restriction to free trade Formal barriers ◦ Embargo ◦ Quota ◦ Tariff Informal barriers ◦ Culture ◦ Tradition ◦ Religion

8. Embargo Embargo – an action imposed by a government to stop the export or import of a product completely Why? ◦ To protect its own industries from international competition ◦ Prevent products from getting to other countries (ex: defense weapons) ◦ Express disapproval of actions/policies

9. Quota Quota – limit on the quantity of a product that may be imported or exported within a given time period Why? ◦ To keep prices stable (high) ◦ Express displeasure toward a country ◦ Protect its own country’s industry

10. Tariff Tariff – tax the government places on certain imported goods and services Why? ◦ Increase the price of a good ◦ High tariff lowers demand and reduces the amount imported

11. Encouraging International Trade A few things that encourage international trade ◦ Common Markets ◦ Free-Trade Agreements ◦ Free-Trade Zones

12. Common Markets In a common market, the member countries do away with the duties and other trade barriers AKA “economic community” Examples: European Union (EU), Latin American Integration Association (LAIA)

13. Free-Trade Agreements In a Free-Trade Agreement, member countries agree to remove the duties and trade barriers on products traded among them Example: North American Free Trade Agreement (NAFTA) 1993

14. Free Trade Zone A Free Trade Zone is a selected area where products can be imported duty free and then stored, assembled, and/or used in manufacturing Usually near a seaport or airport Importer pays duties when items leave the zone