Understand the role of business in the global economy.

Essential Standard1.00

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Understand business in the global marketplace.

Objective 1.03

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Factors and regulations companies have to consider when doing business in the global market place

Main entry modes for companies to enter the global marketplace

Main international trade organizations

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Topics

Factors and regulations companies have to consider when doing business in the

global market place

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Domestic business is the making, buying, and selling of goods and service within a country.

International business, also called foreign or world trade, refers to business activities needed for creating, shipping, and selling goods and services across national borders.

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Domestic vs. InternationalBusinesses

What activities are included in domestic business transactions? Where do they take place?

What activities are included international business transactions? Where do they take place?

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Domestic vs. InternationalBusinesses

Absolute advantage exists when a country can produce a good or service at a lower cost than other countries.

Comparative advantage is a situation in which a country specializes in the production of a good or service at which it is relatively more efficient.

What are some examples of absolute and comparative advantages?

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Business Advantage Factors

From where do imports come?.From where do exports come?What are some examples of imports?What are some examples of exports?Make a chair

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International Trade

AdvantagesGoods available for purchase. Goods could have cost less since they were

imported. Goods may be a better quality since imported. Goods imported and owned may provide

satisfaction.Disadvantages

Some goods would cost more without competition of imported goods.

Possibly goods may be unavailable.9

ImportingAdvantages and Disadvantages

AdvantagesExporting creates jobs.Exporting provides access to goods

usually unavailable.Disadvantage(s)

Jobs may depend on global business.

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ExportingAdvantages and Disadvantage(s)

What is a way to measure trade relations? Balance of trade or balance of

payments

Why are measures of trade relations completed?Nations are concerned with

balancing income with expenditures.

Foreign debt is the amount of money a country owes to other countries.

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Measuring of Trade Relations

Balance of trade is the difference between a country’s total exports and total imports.

If a country exports more than it imports, it has a trade surplus. This is favorable.

If a country imports more than it exports, it has a trade deficit. This is unfavorable.

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Measuring of Trade Relations continued

Balance of payments is the difference between the amount of money that comes into a country and the amount that goes out of it.

If a country receives more money in a year than it pays out, it has favorable balance.

If a country sends more money out than it brings in, it has an unfavorable balance.

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Measuring of Trade Relationscontinued

The foreign exchange market is where banks buy and sell different currencies.

The exchange rate is the value of a currency in one country when compared with the value in another.

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International Currency Exchange Rate Main Factors

Main factors affecting currency exchange rates are:Balance of paymentsEconomic conditionsPolitical stability

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International Currency Exchange Rate Main Factors Continued

International Business Environment Factors

What are the main environmental issues that could make a difference when conducting business in the global marketplace?

Cultural influences, economic development, geography, and political-legal issues

How could these issues impact businesses? 16

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Business Environment Factors How could these issues impact businesses?Four main factors:

GeographyA country with a lot of natural resources may

have to rely on exports more.

Cultural Influences In a country company executives may prefer

to meet with people of the same culture.Economic Development -A country may have limited transportation

methods that may limit travel distances to purchase imported goods.

Political and Legal Concerns -A country’s government only collects about ¼ of his housing property taxes. This could be a sign of weak government that is ignored by the its citizens.

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International Business Environment Factors continued

What is included in a country’s geography?LocationClimateTerrainSeaportsNatural Resources

The geography of a country could impact its natural resources and export and import of resources.

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International Business Environment Factors continued

What main cultural factors may Influence how business is conducted in the global marketplace?

-------------------------------------The accepted

behavior, customs and values of a society could impact business activities.

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International Business Environment Factors Continued

What key effects of a country’s economics that may influence conducting business in a global marketplace?

-------------------------------------A country’s economic

development impacts its citizens standard of living and business activities.

Education and Literacy levelInflationTechnologyExchange rateAgricultural dependencyInfrastructure

TransportationCommunicationUtilities systems

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International Business Environment Factors continued

What political and legal concerns may influence business activities in a global marketplace?

--------------------------------Political and legal

concerns influence business activities in the global marketplace.

Type of Government

Stability of government

Government policies for businesses relevant to trade barriers

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Main International Trade Barrier Factors Embargo

Government bans the import or export of specified goods.Why would a government place an embargo?

Quotas A limit on the quantity of good that may be imported

or exported within a given period to regulate international trade.

Why would a company or country set a quota?

Tariffs Taxes on certain imported products which increases

prices. Why would a government use a tariff?

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Why would a government place an embargo?• To protect a good or service from too much

competition in a global market place more that what a quota or tariff could.

• To protect sensitive goods.

Why would a company or country set a quota?• To regulate the supply and prices.• To protect a good or service from too much

competition in a global market place.Why would a government use a tariff?• To protect the supply of goods.

International Trade

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Encouragement of InternationalTrade Factors

Main factors are:Common Market: Countries that are

members freely invest in one another.Examples:

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

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Encouragement of InternationalTrade Factors continued

Free-Trade Agreement: Countries that are members remove duties and trade barriers on products traded among them to increase trade between members.Example

NAFTA (the North American Free Trade Agreement) between the United States, Canada, and Mexico.

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Encouragement of InternationalTrade Factors continued

Free-trade zones: Include selected areas that allow duty-free products to be imported, and then stored, assembled, and/or used in manufacturing. The activities usually occur around a seaport or airport.

Main entry modes for companies to enter the global marketplace

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Main Entry Modes to the Global Marketplace

Franchising is allowing a business the rights to use another company’s name or process in a specific way.What are some examples?

Licensing is selling the right to a company to use some intangible property (production process, trademark, or brand name) for a fee or royalty. What are some examples?

Joint venture happens when two or more companies agree to share a business project.What are some examples?

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Main Entry Modes to the Global Marketplace continued

Main international trade organizations

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Main International Trade OrganizationsInternational

Monetary Fund (IMF)

World Bank

World Trade Organization (WTO)

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Main International Trade Organizations continuedInternational Monetary Fund (IMF)

Helps promote economic cooperation and maintain an orderly system of world trade and exchange rates.

World BankProvides economic aid to developing countries

to fund building communications systems, transportation networks, and energy plans.

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Main International Trade Organizations continued

World Trade Organization (WTO)Settles trade disputes and enforces free-trade

agreements among its members.