Itb Chap 03

Business in the Global Economy 3-1 International Business Basics 3-2 The Global Marketplace 3-3 International Business Organizations 3

LESSON 3-1 International Business Basics Goals Describe importing and exporting activities. Compare balance of trade and balance of payments. List factors that affect the value of global currencies. Chapter 3 Slide

Key Terms balance of payments balance of trade exchange rate exports imports Chapter 3 Slide

TRADING AMONG NATIONS Absolute advantage Comparative advantage Importing Exporting Chapter 3 Slide

MEASURING TRADE RELATIONS Balance of trade Balance of payments Chapter 3 Slide

U.S. TRADE BALANCES Chapter 3 Slide

BALANCE OF TRADE Chapter 3 Slide

>> C H E C K P O I N T How does balance of trade differ from balance of payments? Chapter 3 Slide

INTERNATIONAL CURRENCY Foreign exchange rates Factors affecting currency values Three main factors affect currency Balance of payments Economic conditions Political disability Chapter 3 Slide

RECENT VALUES OF CURRENCIES Chapter 3 Slide

>> C H E C K P O I N T What factors affect the value of a country’s currency? Chapter 3 Slide

LESSON 3-2 The Global Marketplace Goals Describe the components of the international business environment. Identify examples of formal trade barriers. Explain actions to encourage international trade. Chapter 3 Slide

Key Terms infrastructure trade barrier quota tariff embargo Chapter 3 Slide

THE INTERNATIONAL BUSINESS ENVIRONMENT Geography Cultural influences Economic development Literacy level Technology Agricultural dependency Political and legal concerns Chapter 3 Slide

Chapter 3 Slide GEOGRAPHY location climate terrain waterways natural resources ECONOMICS technology education inflation exchange rate infrastructure CULTURE language family religion customs traditions food POLITICAL–LEGAL FACTORS government system political stability trade barriers THE INTERNATIONAL BUSINESS ENVIRONMENT

>> C H E C K P O I N T List the four main elements of the international business environment. Chapter 3 Slide

INTERNATIONAL TRADE BARRIERS Quotas Tariffs Embargoes Chapter 3 Slide

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 form abroad Chapter 3 Slide

TARIFFS Reasons for tariffs To set amount per pound, gallon, or other unit To set the value of a good Chapter 3 Slide

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 Chapter 3 Slide

>> C H E C K P O I N T What are three formal trade barriers? Chapter 3 Slide

ENCOURAGING INTERNATIONAL TRADE Free-trade zones Free-trade agreements Common markets Chapter 3 Slide

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 of airport Chapter 3 Slide

FREE-TRADE AGREEMENTS Member countries agree to remove duties and trade barriers on products traded among them Results in increased trade between members Chapter 3 Slide

COMMON MARKETS Allows companies to invest freely in each member’s country Allows workers to move freely across borders Examples European Union (EU) Latin American Integration Association (LAIA) Chapter 3 Slide

>> C H E C K P O I N T What actions could be taken to encourage international trade? Chapter 3 Slide

LESSON 3-3 International Business Organizations Goals Discuss activities of multinational organizations. Explain common international business entry modes. Describe activities of international trade organizations and agencies. Chapter 3 Slide

Key Terms multinational company (MNC) joint venture Chapter 3 Slide

MULTINATIONAL COMPANIES (MNC) MNC strategies MNC benefits Drawbacks of multinational companies Chapter 3 Slide

MNC STRATEGIES Global strategy Multinational strategy Chapter 3 Slide

MNC BENEFITS Large amount of goods available Lower prices Career opportunities Foster understanding, communication, and respect Friendly international relations Chapter 3 Slide

DRAWBACKS OF MULTINATIONAL COMPANIES Economic power Worker dependence on the MNC Consumer dependence Political power Chapter 3 Slide

>> C H E C K P O I N T What are two strategies commonly used by multinational companies? Chapter 3 Slide

GLOBAL MARKET ENTRY MODES Licensing Franchising Joint venture Chapter 3 Slide

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 Chapter 3 Slide

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 Chapter 3 Slide

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 since several companies are involved Very popular for manufacturing, such as Japanese and U.S. automobile manufacturers Chapter 3 Slide

>> C H E C K P O I N T How does licensing differ from a franchise? Chapter 3 Slide

INTERNATIONAL TRADE ORGANIZATIONS World Trade Organization International Monetary Fund World Bank Chapter 3 Slide

WORLD TRADE ORGANIZATION (WTO) WTO 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 Chapter 3 Slide

INTERNATIONAL MONETARY FUND (IMF) Helps to promote economic cooperation Maintains an orderly system of world trade and exchange rates Includes over 150 member nations Chapter 3 Slide

WORLD BANK Created in 1944 to provide loans for rebuilding after World War II Today the World Bank has over 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 Chapter 3 Slide

>> C H E C K P O I N T How does the International Monetary Fund assist countries? Chapter 3 Slide

Itb Chap 03

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