Transcript Slide 1

Understand the role of business in the
global economy.
Obj 1.03 Understand business in the
global marketplace.
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• 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
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• Domestic business is the making, buying, and selling of goods
and service within a country.
• International business, also called foreign or world trade,
refers to business activities needed for creating, shipping, and
selling goods and services across national borders.
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• Absolute advantage exists when a country can produce a good
or service at a lower cost than other countries.
• 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.
• China-clothes and household goods,
• America-Technology
• Japan-Electronics
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• Imports are items bought from other
• Import examples may include furniture, tax preparation services, bananas,
or automobile parts.
• Exports are goods and services sold to other countries
• Export examples may include silver, automobile parts, or software.
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• What are some advantages of importing?
• 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.
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• 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.
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What is a balance of trade?
is the difference between a country’s total exports and total
imports
• 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.
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What is a balance of payments?
is the difference between the amount of money that comes into a
country and the amount that goes out of it.
• 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.
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• Foreign Exchange Market is where banks buy and sell
different currencies
• The exchange rate is the value of a currency in one country
when compared with the value in another
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• Balance of payments- 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.
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• 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.
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• What is included in a country’s geography?
• The geography of a country could impact its natural resources and
export and import of resources.
• Location
• Climate
• Terrain
• Seaports
• Natural Resources
• How can this affect a country’s trade?
• The geography of a country could impact its natural resources and
export and import of resources.
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• What main cultural factors may influence how business is
conducted in the global marketplace?
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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.
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• What key effects of a country’s economics that may influence
conducting business in a global marketplace?
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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
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• 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.
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• Embargo- 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.
• Quota- a limit on the quantity of good that may be imported or exported
within a given period to regulate international trade.
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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- taxes on certain imported products which increases prices.
• Why would a government use a tariff?
• To protect the supply of goods.
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Common market is when countries that are members freely invest in one
another.
• 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.
• 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.
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• Franchising is allowing a business the rights to use another
company’s name or process in a specific way.
• 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
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• 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.
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