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

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

C H A P T E R 3SLIDE 1

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



TRADING AMONG NATIONS

● Absolute advantage● Can produce a good or service at a lower cost than other

countries

● Comparative advantage● Specializes in the production of a good or service at which it is

more efficient

● Importing

● Exporting


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

RELIANCE



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.


C H A P T E R 3SLIDE 5MEASURING TRADE

RELATIONS

● Balance of trade● Trade Surplus & Trade Deficit

● Balance of payments● Negative & Positive



U.S. TRADE BALANCES



BALANCE OF TRADE



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.



INTERNATIONAL CURRENCY

● Foreign exchange rates

● Factors affecting currency values

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


C H A P T E R 3SLIDE 10RECENT VALUES OF

CURRENCIES



Checkpoint

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


C H A P T E R 3SLIDE 12INTERNATIONAL BUSINESS

ENVIRONMENT

● Geography● Location, Climate, terrain

● Cultural influences

● Economic development● Literacy level● Technology● Agricultural dependency

● Political and legal concerns


C H A P T E R 3SLIDE 13ELEMENTS OF INTERNATIONAL

BUSINESS ENVIRONMENT



Checkpoint

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


C H A P T E R 3SLIDE 15INTERNATIONAL

TRADE BARRIERS

● Quotas● Limit on quantity of a product

● Tariffs● Tax that a government places on certain

imports

● Embargoes● Stop on exports or imports



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



TARIFFS

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



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


C H A P T E R 3SLIDE 19ENCOURAGING

INTERNATIONAL TRADE

● Free-trade zones

● Free-trade agreements

● Common markets



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



FREE-TRADE AGREEMENTS

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

● Results in increased trade between members



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)



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.

© 2012 Cengage Learning. All Rights Reserved.SLIDE 24

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.


C H A P T E R 3SLIDE 25MULTINATIONAL

COMPANIES (MNC)

● Organizations that do business in several countries

● Home country

● Host country



MNC STRATEGIES

● Global strategy● Same product and marketing strategy worldwide

● Multinational strategy● Treats each country market different



MNC BENEFITS

● Large amount of goods available

● Lower prices

● Career opportunities

● Foster understanding, communication, and respect

● Friendly international relations


C H A P T E R 3SLIDE 28DRAWBACKS OF

MULTINATIONAL COMPANIES

● Economic power

● Worker dependence on the MNC

● Consumer dependence

● Political power



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).


C H A P T E R 3SLIDE 30GLOBAL MARKET

ENTRY MODES

● Licensing

● Franchising

● Joint venture



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



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



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



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.


C H A P T E R 3SLIDE 35INTERNATIONAL TRADE

ORGANIZATIONS

● World Trade Organization

● International Monetary Fund

● World Bank


C H A P T E R 3SLIDE 36WORLD 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


C H A P T E R 3SLIDE 37INTERNATIONAL MONETARY

FUND (IMF)

● Helps to promote economic cooperation

● Maintains an orderly system of world trade and exchange rates

● Includes more than 150 member nations



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



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