1. Unit 2.02 The Global Marketplace
Unit 2 – Business in the global economy
Unit 2.02
The Global Marketplace

2. INTERNATIONAL BUSINESS ENVIRONMENT
Geography
Cultural influences
Economic development
Political and legal concerns

3. INTERNATIONAL BUSINESS ENVIRONMENT
Geography
Location, climate, terrain, seaports, natural resources…
How does this influence international business?:
Very hot – limits the types of crops that can be grown
Many rivers/seaports – easily ship products for foreign trade
Limited natural resources – must depend on imports

4. INTERNATIONAL BUSINESS ENVIRONMENT
Cultural influences
Culture – the accepted behaviors, customs, and values of a society
How does this influence international business?:
Language – communication
Religion – what is sacred to one may not be to another
Values – is bribery considered wrong in different cultures?
Customs – is it offensive to give a gift?
Social Relationships – how men and women interact in business

5. INTERNATIONAL BUSINESS ENVIRONMENT
Cultural influences
Most Common world language?
Mandarin Chinese
Spanish
English
Hindi
Arabic
Most Common world religion?
Christianity
Islam
Secular/Nonreligious/Agnostic/Atheist
Hinduism
Chinese Traditional Religion

6. INTERNATIONAL BUSINESS ENVIRONMENT
Cultural influences
Most Common US language?
English 80.0%
Spanish 12.4%
Indo-European 3.7%
Asian %
Most Common US religion?
Christianity 70.6%
Protestant %
Catholic %
Mormon %
Other %
None 22.8%
Judaism 1.9%
Islam %
Hinduism 0.7%
Other %
US education levels
High School 88%
Some College 58%
Bachelors 32%
Masters 11%
Doctorate 2%

7. INTERNATIONAL BUSINESS ENVIRONMENT
Economic development
Progress in an economy
Going to work on a high-speed bullet train to manage a computer network in a high-rise building versus riding an oxcart to a grass hut to operate a hand loom to make cloth for people in their village
How does this influence international business?:
Literacy Level – high levels literacy > better education > more and better goods & services
Technology – high automation > create and deliver goods quickly
Agricultural Dependency – highly dependent > weaker manufacturing base > fewer quantity/quality of products
Infrastructure – nations’ transportation, communication, and utility systems
Stronger infrastructure > better prepared for international business

8. INTERNATIONAL BUSINESS ENVIRONMENT
Economic development
Developed Countries
High Human Development Index (HDI)
Approx. 50 countries
Norway, Australia, Netherlands, USA, New Zealand, Canada, Japan, Hong Kong, Chile, Croatia
Developing Countries
Newly industrialized countries
Approx. 100 countries
Afghanistan, Argentina, China, Mexico, Peru, Poland, Russia
Less Developed Countries
Low standard of living, low industrial base, low HDI
Africa – 34 countries
Asia – 9 countries
Oceania – 4 countries
Americas – 1 country (Haiti)

9. INTERNATIONAL BUSINESS ENVIRONMENT
Political and legal concerns
Type of government, stability of government, and the government’s policies toward business
How does this influence international business?:
Regulations on fair trade
Require safety inspections
Enforce contracts

10. ELEMENTS OF INTERNATIONAL BUSINESS ENVIRONMENT

11. INTERNATIONAL TRADE BARRIERS
Trade Barriers – restriction to free trade
Quotas
Tariffs
Embargoes

12. QUOTAS
A limit on the quantity of a product that may be imported or exported within a given period
Reasons for quotas
To keep supply low and prices the same
Protects domestic producers from international competition
To express displeasure at the policies of the importing country
To protect one of a country’s industries from too much competition from abroad
Critics of import quotas
Corruption (bribes to get a quota allocation)
Smuggling (circumventing a quota)

13. A tax that a government places on certain imported products
TARIFFS
A tax that a government places on certain imported products
Reasons for tariffs
To set amount per pound, gallon, or other unit
To set the value of a good
In 2010, the US collected over $25 Trillion in import tariffs
Example of tariffed goods:
Chickens $0.90 each
Rice $0.018/kg

14. Government stops the export or import of a product completely
EMBARGOES
Government stops the export or import of a product completely
Reasons for embargoes
To protect a country’s industries from international competition more than the quota or tariff will achieve
Sanctions related to
Terrorism
Diamond Trading
Narcotics
Nuclear proliferation
Human rights violations

15. EMBARGOES Sanctions imposed by the US government
No arms-related exports
Controls over dual-use exports
Restrictions on economic assistance
Financial restrictions
Requiring the US to oppose loans by the World Bank
Tax credits denied for companies who earned income in listed countries
Authority to prohibit a US citizen from engaging in financial transactions with the government on the list without a license from the US
Prohibition of Defense Department contracts above $100,000 with companies controlled by countries on the list

16. EMBARGOES The US currently has sanctions against 6 countries
Cuba  Sudan
Iran  Syria
North Korea  Burma
18 persons or groups within the country of
Belarus  Russia  Ukraine/ Russia/ Crimea
Ivory Coast  Somalia  Central African Republic
DRC  Yugoslavia  South Sudan
Iraq  Yemen  Libya
Lebanon  Zimbabwe  Venezuela

17. ENCOURAGING INTERNATIONAL TRADE
Free-trade zones
Free-trade agreements
Common markets

18. FREE-TRADE ZONES
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
Importer pays duty only when the product leaves the zone

19. FREE-TRADE AGREEMENTS
Member countries agree to remove duties (import taxes) and trade barriers on products traded among them
US has 14 Free-Trade Agreements in place with 20 countries
Results in increased trade between members
NAFTA (North American Free Trade Agreement)
Began on January 1, 1994
Canada & Mexico are US #1 and #3 trading partners, respectively

20. Members do away with duties and other trade barriers
COMMON MARKETS
Members do away with duties and other trade barriers
Allow companies to invest freely in each member’s country
Allow workers to move freely across borders
Examples
European Union (EU)
27 member states
Single market with common standardized laws
Common currency
Highest GDP in world
Latin American Integration Association (LAIA)

21. Largest US Trading Partners (in billions for year 2011)
assignment
NAFTA Pros & Cons
Largest US Trading Partners (in billions for year 2011)
Country
Exports
Imports
Total
Trade Balance
Canada
286.9
316.5
597.4
-35.7
China
103.9
399.3
503.2
-295.4
Mexico
197.5
263.1
460.6
-65.6
Japan
66.2
128.8
195
-62.6