1. UNIT 2 – BUSINESS IN THE GLOBAL ECONOMY Unit 2.02 The Global Marketplace

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

3.  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 INTERNATIONAL BUSINESS ENVIRONMENT

4.  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 INTERNATIONAL BUSINESS ENVIRONMENT

5.  Cultural influences  Most Common world language? 1.Mandarin Chinese 2.Spanish 3.English 4.Hindi 5.Arabic  Most Common world religion? 1.Christianity 2.Islam 3.Secular/Nonreligious/Agnostic/Atheist 4.Hinduism 5.Chinese Traditional Religion INTERNATIONAL BUSINESS ENVIRONMENT

6.  Cultural influences  Most Common US language? Most Common US language? 1.English80.0% 2.Spanish12.4% 3.Indo-European 3.7% 4.Asian 3.0%  Most Common US religion? Most Common US religion? 1.Christianity70.6%  Protestant 46.5%  Catholic 25.4%  Mormon 2%  Other 1% 2.None22.8% 3.Judaism 1.9% 4.Islam 0.9% 5.Hinduism 0.7% 6.Other 2.7% INTERNATIONAL BUSINESS ENVIRONMENT  US education levels US education levels  High School88%  Some College58%  Bachelors32%  Masters 11%  Doctorate 2%

7.  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 INTERNATIONAL BUSINESS ENVIRONMENT

8.  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  Approx. 50 countries  Africa – 34 countries  Asia – 9 countries  Oceania – 4 countries  Americas – 1 country (Haiti) INTERNATIONAL BUSINESS ENVIRONMENT

9.  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 INTERNATIONAL BUSINESS ENVIRONMENT

10. ELEMENTS OF INTERNATIONAL BUSINESS ENVIRONMENT

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

12. 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) QUOTAS

13. 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 TARIFFS

14. 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 EMBARGOES

15.  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 EMBARGOES

16.  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 EMBARGOES

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

18. 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 FREE-TRADE ZONES

19. 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 FREE-TRADE AGREEMENTS

20. 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) COMMON MARKETS

21.  NAFTA Pros & Cons ASSIGNMENT Largest US Trading Partners (in billions for year 2011) CountryExportsImportsTotalTrade Balance Canada 286.9316.5597.4-35.7 China 103.9399.3503.2-295.4 Mexico 197.5263.1460.6-65.6 Japan 66.2128.8195-62.6