1. 3-1International Business Basics SLI DE 1

2. TRADING AMONG NATIONS Most business activities occur within a country’s own borders. Domestic business is the making, buying, and selling of goods and services within a country. International business refers to business activities needed for creating, shipping, and selling goods and services across national borders SLI DE 2

3. TRADING AMONG NATIONS In the past, economies were viewed in terms of national borders. With international trade expanding every day, these boundaries are no longer fully valid in defining economies. SLI DE 3

4. TRADING AMONG NATIONS http://www.youtube.com/watch?v= RDC2ohDG4BI http://www.youtube.com/watch?v= RDC2ohDG4BI http://www.youtube.com/watch?v= 5_YPidwfylM http://www.youtube.com/watch?v= 5_YPidwfylM http://www.youtube.com/watch?v=1Ebk XmVbTDg http://www.youtube.com/watch?v=1Ebk XmVbTDg Homework: using the news clip as a guide identify the country of origin of 5 products in your home. SLI DE 4

5. TRADING AMONG NATIONS International Business Business activities needed for creating, shipping, and selling goods and services across borders Economies are interconnected Domestic Business The making, buying, and selling of goods and services within a country SLI DE 5

6. TRADING AMONG NATIONS Absolute Advantage When a country can produce a good or service at a lower cost than other countries (can be several items) Abundance of resources or raw materials Saudi Arabia: Oil Brazil: Coffee Comparative Advantage A country specializes in the production of a good or service at which it is relatively more efficient SLI DE 6

7. TRADING AMONG NATIONS Importing Items bought from other countries Lower Cost Availability of goods Exporting Goods and services sold to other countries SLI DE 7

8. TRADING AMONG NATIONS Without foreign trade, many things you buy would cost more or may not be available. (Examples?) Other countries can produce goods at a lower cost because they have the needed raw materials or have lower labor costs. What is the risk of manufacturing in other countries? http://www.youtube.com/watch?v=Fve0xjEyk4U http://www.youtube.com/watch?v=Fve0xjEyk4U SLI DE 8

9. TRADING AMONG NATIONS Some consumers purchase foreign goods, even at higher prices, if they perceive the quality to be better than domestic goods One of every six jobs in the United States depends on International business. SLI DE 9

10. TRADING AMONG NATIONS The United States conducts trade with more than 180 countries. SLI DE 10

11. Checkpoint Checkpoint How does importing differ from exporting? ◦Importing is bringing items from other countries into a country. ◦Exporting is selling goods and services to other countries. SLI DE 11

12. MEASURING TRADE RELATIONS Balance of Trade: the difference between a country’s total exports and total imports ◦Country exports more than it imports has a trade surplus ◦Country imports more than it exports has a trade deficit SLI DE 12

13. MEASURING TRADE RELATIONS Balance of Payments: the difference between the amount of money that comes into a country and goes out of a country ◦Favorable: receives more money in a year than it pays out (positive balance of trade) ◦Unfavorable: sending out more money that it brings in (negative balance of trade) ◦Some countries even limit the amount of money their citizens can take with them when they travel. ◦How?  Investment in a corporation, factory, office building  Give financial aid to a country or military aid  Foreign banking  Travel SLI DE 13

14. U.S. TRADE BALANCES SLI DE 14

15. BALANCE OF TRADE SLI DE 15

16. Checkpoint Checkpoint How does balance of trade differ from balance of payments? ◦Balance of trade is the difference between a country’s total exports and total imports. ◦Balance of payments is the difference between the amount of money that comes into a country and the amount that goes out of it. SLI DE 16

17. INTERNATIONAL CURRENCY Each Country has: ◦Its own banking system ◦currency Foreign exchange rates: the value of currency In one country compared with value in another Exchanging Currency for business or travel ◦Currency exchange business (airport, hotel, train station, etc) ◦Bank ◦Rates vary SLI DE 17

18. International Currency Mary is planning to visit Canada. How much is a dollar worth in Canadian Currency? ◦1,000.00 USD = ◦United States Dollars 1.00 USD =United States Dollars ◦Canada Dollars 1.00 CAD = 1.02429 USDCanada Dollars ◦http://www.xe.com/ucc/ (currency converter website)http://www.xe.com/ucc/

19. INTERNATIONAL CURRENCY Three main factors affect currency rates ◦Balance of payments: favorable balance of payments = stable rate ◦Economic conditions: inflation and higher interest rates reduces buying, lowering value of currency ◦Political stability: government change, new laws create uncertainty SLI DE 19

20. Checkpoint Checkpoint What factors affect the value of a country’s currency? ◦Balance of payments  When a country has a favorable balance of payments, the value of its currency is usually constant or rising ◦Economic conditions  Prosperity increases currency value ◦Political stability  Stable governments favor currency values SLI DE 20