1. Understand the role of business in the global economy.
Essential Standard1.00
Understand the role of business in the global economy.

2. Understand business in the global marketplace.
Objective 1.03
Understand business in the global marketplace.

3. Topics
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

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

5. Domestic vs. International Businesses
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?
What activities are included in domestic business transactions? Where do they take place?
Domestic business is the making, buying, and selling of goods and service within a country.
What activities are included international business transactions? Where do they take place?
International business, also called foreign or world trade, refers to business activities needed for creating, shipping, and selling goods and services across national borders.

6. Business Advantage Factors
How can a country have a business advantage over another country?
What are some examples of absolute and comparative advantages?
How can a country have a business advantage over another country? What are some examples of absolute and comparative advantages?
Absolute advantage exists when a country can produce a good or service at a lower cost than other countries.
Examples: Saudi Arabia-Oil production, Columbia-coffee, Virgin Islands-sand
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.
Examples: China-manufacturing of clothes and household goods
America-Technology
Japan-Electronics

7. International Trade From where do imports come?
From where do exports come?
What are some examples of imports?
What are some examples of exports?
From where do imports come?
Imports are items bought from other countries.
From where do exports come?
Exports are goods and services sold to other countries.
What are some examples of imports?
Import examples may include furniture, tax preparation services, bananas, or automobile parts.
What are some examples of exports?
Export examples may include silver, automobile parts, or software.

8. Importing and Exporting Advantages and Disadvantages
What are some advantages of importing?
What are some disadvantages of importing?
What are some advantages of exporting?
What are some disadvantages of exporting?
What are some advantages of importing?
Advantages
Goods 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.
What are some disadvantages of importing?
Some goods would cost more without competition of imported goods.
Possibly goods may be unavailable.
What are some advantages of exporting?
Exporting creates jobs.
Exporting provides access to goods usually unavailable.
What are some disadvantages of exporting?
Jobs may depend on global business.
A natural disaster may curtail production tremendously.

9. Measuring of Trade Relations
What is a way to measure trade relations?
Why are measures of trade relations completed?
Foreign debt is the amount of money a country owes to other countries.
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.

10. Measuring of Trade Relations continued
What is a balance of trade?
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.
What is a balance of trade?
Balance of trade is the difference between a country’s total exports and total imports.

11. Measuring of Trade Relations continued
What is a balance of payments?
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.
What is a balance of payments?
Balance of payments is the difference between the amount of money that comes into a country and the amount that goes out of it.

12. International Currency Exchange Rate Main Factors
Where do banks buy and sell different currencies?
What is an exchange rate?
What are the main factors affecting currency exchange rates?
Where do banks buy and sell different currencies?
The foreign exchange market is where banks buy and sell different currencies.
What is an exchange rate?
The exchange rate is the value of a currency in one country when compared with the value in another.
What are the main factors affecting currency exchange rates?
Main factors affecting currency exchange rates are:
Balance of payments - Balance of payments is influenced by demand for a nations goods and services. If the balance of payment is favorable, then usually currency is steady and rising in value. If unfavorable, then usually the currency is declining in value.
Economic conditions - Economic Conditions include the following:
inflation decreases buying power of currency
interest rates that are high decreases demand to borrow money.
Political stability could be impacted by changes in government or laws.

13. International Business Environment Factors
What are the main environmental issues that could make a difference when conducting business in the global marketplace?
How could these issues impact businesses?
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?
Cultural influences-In a country company executives may prefer to meet with people of the same culture.
Geography-A country with a lot of natural resources may have to rely on exports more.
Economic development-A country may have limited transportation methods that may limit travel distances to purchase imported goods.
Political-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.

14. International Business Environment Factors continued
Four main factors:
Geography
Cultural Influences
Economic Development
Political and Legal Concerns

15. International Business Environment Factors continued
What is included in a country’s geography?
How can this affect a country’s trade?
What is included in a country’s geography? How can this affect a country’s trade?
The geography of a country could impact its natural resources and export and import of resources.
Location
Climate
Terrain
Seaports
Natural Resources

16. International Business Environment Factors continued
What main cultural factors may influence how business is conducted in the global marketplace?
How can this affect a country’s trade?
What main cultural factors may influence how business is conducted in the global marketplace?
Language
Religion
Family
Food
Values
Customs
Social Relationships
How can this affect a country’s trade?
The accepted behavior, customs, and values of a society could impact business activities.

17. International Business Environment Factors Continued
What key effects of a country’s economics that may influence conducting business in a global marketplace?
How can this affect a country’s trade?
What key effects of a country’s economics that may influence conducting business in a global marketplace?
Education and Literacy level
Inflation
Technology
Exchange rate
Agricultural dependency
Infrastructure
Transportation
How can this affect a country’s trade?
A country’s economic development impacts its citizens standard of living and business activities.
Communication
Utilities systems

18. International Business Environment Factors continued
What political and legal concerns may influence business activities in a global marketplace?
How can this affect a country’s trade?
What political and legal concerns may influence business activities in a global marketplace?
Type of Government
Stability of government
Government policies for businesses relevant to trade barriers
How can this affect a country’s trade?
Political and legal concerns influence business activities in the global marketplace.

19. Main International Trade Barrier Factors
Trade barriers are restrictions to free trade.
Embargo
Why would a government place an embargo?
Quota
Why would a company or country set a quota?
Tariffs
Why would a government use a tariff?
Embargo is when a government bans the import or export of specified goods.
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.
A quota is 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?
To regulate the supply and prices.
To protect a good or service from too much competition in a global market place.
Tariffs are taxes on certain imported products which increases prices.
Why would a government use a tariff?
To protect the supply of goods.

20. Encouragement of International Trade Factors
Main factors are:
Common Markets
Free-Trade Agreements
Free-Trade Zone
How do each of these encourage international trade?
What are some examples of each?
Main factors of encouragement of international trade factors:
Common markets
Free-trade agreements
Free-trade zone
How do each of these encourage international trade?
What are some examples of each?
Common market is when countries that are members freely invest in one another.
Examples:
European Union (EU)
Latin American Integration Association (LAIA)
Free-Trade Agreement is when countries that are members remove duties and trade barriers on products traded among them to increase trade between members.
Example: NAFTA (North American Free Trade Agreement between the United States, Canada, and Mexico.
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.

21. Main entry modes for companies to enter the global marketplace

22. Main Entry Modes to the Global Marketplace
Franchising
How can this be used by a business as an entry mode?
What are some examples?
Licensing
Joint venture
Franchising is allowing a business the rights to use another company’s name or process in a specific way.
What are some examples?
H & R Block
Dunkin’ Donuts
Licensing is selling the right to a company to use some intangible property (production process, trademark, or brand name) for a fee or royalty.
Dick Idol furniture/products
Beyond Juice Cafés
Joint venture happens when two or more companies agree to share a business project.
Cable company and television stations
Oil lube and tire service company

23. Main international trade organizations

24. Main International Trade Organizations
International Monetary Fund (IMF)
World Bank
World Trade Organization (WTO)
International Monetary Fund (IMF)
Helps promote economic cooperation and maintain an orderly system of world trade and exchange rates.
World Bank
Provides economic aid to developing countries to fund building communications systems, transportation networks, and energy plans.
World Trade Organization (WTO)
Settles trade disputes and enforces free-trade agreements among its members.