3-1 International Business Basics 3-2 The Global Marketplace

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© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e

C H A P T E R 3

3-13-1 International Business Basics

3-23-2 The Global Marketplace

3-33-3 International Business Organizations

33C H A P T E R

Business in the Business in the Global EconomyGlobal Economy

SLIDE 2© 2012 Cengage Learning. All Rights Reserved.

3-13-1 International International Business Basics 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.

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C H A P T E R 3

KEY TERMS

● imports

● exports

● balance of trade

● balance of payments

● exchange rate

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C H A P T E R 3

TRADING AMONG NATIONS

● Absolute advantage

● Comparative advantage

● Importing

● Exporting

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C H A P T E R 3EXAMPLE OF U.S. IMPORT RELIANCE

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C H A P T E R 3

Checkpoint

● How does importing differ from exporting? ● Importing is bringing items from other

countries into a country. ● Exporting is selling goods and services to

other countries.

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C H A P T E R 3MEASURING TRADE RELATIONS

● Balance of trade

● Balance of payments

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C H A P T E R 3

U.S. TRADE BALANCES

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C H A P T E R 3

BALANCE OF TRADE

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C H A P T E R 3

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.

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C H A P T E R 3

INTERNATIONAL CURRENCY

● Foreign exchange rates

● Factors affecting currency values

● Three main factors affect currency● Balance of payments● Economic conditions● Political disability

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C H A P T E R 3RECENT VALUES OF CURRENCIES

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C H A P T E R 3

Checkpoint

● What factors affect the value of a country’s currency?● Balance of payments● Economic conditions● Political stability


3-23-2 The Global The Global MarketplaceMarketplace

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.

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C H A P T E R 3

KEY TERMS

● infrastructure

● trade barrier

● quota

● tariff

● embargo

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C H A P T E R 3INTERNATIONAL BUSINESS ENVIRONMENT

● Geography

● Cultural influences

● Economic development● Literacy level● Technology● Agricultural dependency

● Political and legal concerns

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C H A P T E R 3ELEMENTS OF INTERNATIONAL BUSINESS ENVIRONMENT

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C H A P T E R 3

Checkpoint

● List the four main elements of the international business environment. ● Geography● Cultural influences● Economic development● Political and legal concerns

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C H A P T E R 3INTERNATIONAL TRADE BARRIERS

● Quotas

● Tariffs

● Embargoes

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C H A P T E R 3

QUOTAS

● Reasons for quotas● To keep supply low and prices the same● To express displeasure at the policies of the

importing country● To protect one of a country’s industries from

too much competition from abroad

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C H A P T E R 3

TARIFFS

● Reasons for tariffs● To set amount per pound, gallon, or other unit● To set the value of a good

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C H A P T E R 3

EMBARGOES

● Reasons for embargoes● To protect a country’s industries from

international competition more than the quota or tariff will achieve

● To prevent sensitive products from falling into the hands of unfriendly groups or nations

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C H A P T E R 3

Checkpoint

● What are three formal trade barriers?● Quotas● Tariffs● Embargoes

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C H A P T E R 3ENCOURAGING INTERNATIONAL TRADE

● Free-trade zones

● Free-trade agreements

● Common markets

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C H A P T E R 3

FREE-TRADE ZONES

● Used to promote international business in a selected area where products can be imported duty-free and then stored, assembled, and/or used in manufacturing

● Usually located around a seaport or airport

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C H A P T E R 3

FREE-TRADE AGREEMENTS

● Member countries agree to remove duties and trade barriers on products traded among them

● Results in increased trade between members

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C H A P T E R 3

COMMON MARKETS

● Allow companies to invest freely in each member’s country

● Allow workers to move freely across borders

● Examples● European Union (EU)● Latin American Integration Association (LAIA)

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C H A P T E R 3

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.


3-33-3 International Business International Business OrganizationsOrganizations

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.

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C H A P T E R 3

KEY TERMS

● multinational company (MNC)

● joint venture

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C H A P T E R 3MULTINATIONAL COMPANIES (MNC)

● Organizations that do business in several countries

● Home country

● Host country

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C H A P T E R 3

MNC STRATEGIES

● Global strategy

● Multinational strategy

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C H A P T E R 3

MNC BENEFITS

● Large amount of goods available

● Lower prices

● Career opportunities

● Foster understanding, communication, and respect

● Friendly international relations

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C H A P T E R 3DRAWBACKS OF MULTINATIONAL COMPANIES

● Economic power

● Worker dependence on the MNC

● Consumer dependence

● Political power

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C H A P T E R 3

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).

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C H A P T E R 3GLOBAL MARKET ENTRY MODES

● Licensing

● Franchising

● Joint venture

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C H A P T E R 3

LICENSING

● Allows companies to produce items in other countries without being actively involved

● Has a low financial investment, so the potential financial return for the company is often low

● The risk for the company is low

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C H A P T E R 3

FRANCHISING

● Allows organizations to enter into contracts with people in other countries to set up a business that looks and runs like the parent company

● Marketing elements, such as food products, packaging, and advertising, must meet both cultural sensitivities and legal requirements

● Commonly involves selling a product or service

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C H A P T E R 3

JOINT VENTURE

● Allows two or more companies to share raw materials, shipping facilities, management activities, or production activities

● Concerns include the sharing of profits and not as much control because several companies are involved

● Very popular for manufacturing, such as Japanese and U.S. automobile manufacturers

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C H A P T E R 3

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.

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C H A P T E R 3INTERNATIONAL TRADE ORGANIZATIONS

● World Trade Organization

● International Monetary Fund

● World Bank

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C H A P T E R 3WORLD TRADE ORGANIZATION (WTO)

● 150 member countries● Promotes trade● Settles trade disputes● Enforces free-trade agreements● Other goals

● Lowering tariffs that discourage free trade● Eliminating import quotas● Reducing barriers for banks, insurance companies,

and other financial services● Assisting poor countries with economic growth

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C H A P T E R 3INTERNATIONAL MONETARY FUND (IMF)

● Helps to promote economic cooperation

● Maintains an orderly system of world trade and exchange rates

● Includes more than 150 member nations

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C H A P T E R 3

WORLD BANK

● Created in 1944 to provide loans for rebuilding after World War II

● Today the World Bank has more than 180 member countries and two main divisions● International Development Association (IDA), which

makes loans to help developing countries● International Finance Corporation (IFC), which

provides technical capital and technical help to private businesses in nations with limited resources

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C H A P T E R 3

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.

Documents

3-1 International Business Basics 3-2 The Global Marketplace