Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE1 CHAPTER International Business Basics The Global Marketplace International Business Organizations Business in the Global Economy

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE2 International Business Basics Learning Targets: Describe importing and exporting activities. Compare balance of trade and balance of payments. List factors that affect the value of global currencies. 3-1

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 3 TRADING AMONG NATIONS Absolute advantage – a country can produce a good or service at a lower cost than other countries. Comparative advantage – a country specializes in the production of a good or service over another good or service (could be good at two things, but concentrate one just one). Importing – account for the total supply of bananas, cocoa, some spices, and tea. Exporting – chemicals, fertilizers, medicines. Other countries also like to view U.S. movies and television shows.

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 4 U.S. Trade Balances

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 5 Balance of Trade

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 6 INTERNATIONAL CURRENCY Three main factors affect currency Balance of payments – the difference between the $ that comes into a country and the $ that goes out of that country Economic conditions – state of a country’s economy Political stability – changes in other country’s government (new president, leader, etc.)

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE7 The Global Marketplace Learning Targets: Describe the components of the international business environment. Identify examples of formal trade barriers. Explain actions to encourage international trade. 3-2

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 8 INTERNATIONAL BUSINESS ENVIRONMENT Geography – location, climate, terrain all affect what can be grown and produced there Cultural influences – accepted behaviors in each country affect how people do business Economic development Literacy level Technology Agricultural dependency Political and legal concerns – safety inspections, freedom in business activities.

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 9  location  climate  terrain  waterways  natural resources  technology  education  inflation  exchange rate  infrastructure  language  family  religion  customs  traditions  food GEOGRAPHYECONOMICS CULTURE  government system  political stability  trade barriers  business regulations INTERNATIONAL BUSINESS ENVIRONMENT POLITICAL–LEGALFACTORS Elements of International Business Environment

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE International Trade Barriers: Quota’s Tariff’s Embargoes 10 Chapter 3

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 11 QUOTAS Reasons for quotas (limit on amount of goods/services imported or exported) To express displeasure at the policies of the importing country To protect one of a country’s industries from too much competition from abroad

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 12 TARIFFS Reasons for tariffs To protect goods made in the U.S. A higher tariff lowers the demand

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 13 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

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 14 ENCOURAGING INTERNATIONAL TRADE Free-trade agreements – members agree to remove taxes and trade barriers (example is NAFTA)

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE15 International Business Organizations Learning Goals Discuss activities of multinational organizations. Explain common international business entry modes. Describe activities of international trade organizations and agencies. 3-3

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 16 Multi-National Company BENEFITS Large amount of goods available Lower prices Career opportunities Foster understanding, communication, and respect Friendly international relations

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 17 DRAWBACKS OF MULTINATIONAL COMPANIES Worker dependence on the MNC Consumer dependence Political power

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 18 LICENSING Allows companies to produce items in other countries without being actively involved The risk for the company is low

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 19 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

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 20 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

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 3 21 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