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© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 1
3-1 International Business Basics
3-2 The Global Marketplace
3-3 International Business Organizations
3 C H A P T E R
Business in the
Global Economy
© 2012 Cengage Learning. All Rights Reserved. SLIDE 2
3-1 International
Business Basics
Goal 1 Describe importing and exporting
activities.
Goal 2 Compare balance of trade and
balance of payments.
Goal 3 List factors that affect the value of
global currencies.
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 3
KEY TERMS
● imports
● exports
● balance of trade
● balance of payments
● exchange rate
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 4
TRADING AMONG NATIONS
● Absolute advantage
● Comparative advantage
● Importing
● Exporting
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 5 EXAMPLE OF U.S. IMPORT
RELIANCE
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 6
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.
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 7 MEASURING TRADE
RELATIONS
● Balance of trade
● Balance of payments
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 8
U.S. TRADE BALANCES
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 9
BALANCE OF TRADE
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 10
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.
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 11
INTERNATIONAL CURRENCY
● Foreign exchange rates
● Factors affecting currency values
● Three main factors affect currency
● Balance of payments
● Economic conditions
● Political disability
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 12 RECENT VALUES OF
CURRENCIES
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 13
Checkpoint
● What factors affect the value of a
country’s currency?
● Balance of payments
● Economic conditions
● Political stability
© 2012 Cengage Learning. All Rights Reserved. SLIDE 14
3-2 The Global
Marketplace
Goal 1 Describe the components of the
international business environment.
Goal 2 Identify examples of formal trade
barriers.
Goal 3 Explain actions to encourage
international trade.
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 15
KEY TERMS
● infrastructure
● trade barrier
● quota
● tariff
● embargo
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 16 INTERNATIONAL BUSINESS
ENVIRONMENT
● Geography
● Cultural influences
● Economic development
● Literacy level
● Technology
● Agricultural dependency
● Political and legal concerns
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 17 ELEMENTS OF INTERNATIONAL
BUSINESS ENVIRONMENT
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 18
Checkpoint
● List the four main elements of the
international business environment.
● Geography
● Cultural influences
● Economic development
● Political and legal concerns
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 19 INTERNATIONAL
TRADE BARRIERS
● Quotas
● Tariffs
● Embargoes
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 20
QUOTAS
● Reasons for quotas
● To keep supply low and prices the same
● To express displeasure at the policies of the
importing country
● To protect one of a country’s industries from
too much competition from abroad
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 21
TARIFFS
● Reasons for tariffs
● To set amount per pound, gallon, or other unit
● To set the value of a good
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 22
EMBARGOES
● Reasons for embargoes
● To protect a country’s industries from
international competition more than the quota
or tariff will achieve
● To prevent sensitive products from falling into
the hands of unfriendly groups or nations
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 23
Checkpoint
● What are three formal trade barriers?
● Quotas
● Tariffs
● Embargoes
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 24 ENCOURAGING
INTERNATIONAL TRADE
● Free-trade zones
● Free-trade agreements
● Common markets
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 25
FREE-TRADE ZONES
● Used to promote international business in
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
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 26
FREE-TRADE AGREEMENTS
● Member countries agree to remove duties
and trade barriers on products traded
among them
● Results in increased trade between
members
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 27
COMMON MARKETS
● Allow companies to invest freely in each
member’s country
● Allow workers to move freely across
borders
● Examples
● European Union (EU)
● Latin American Integration Association (LAIA)
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 28
Checkpoint
● What actions could be taken to
encourage international trade?
● Actions that could be taken to encourage
international trade include free-trade zones,
free-trade agreements, and common
markets.
© 2012 Cengage Learning. All Rights Reserved. SLIDE 29
3-3 International Business
Organizations
Goal 1 Discuss activities of multinational
organizations.
Goal 2 Explain common international
business entry modes.
Goal 3 Describe activities of international
trade organizations and agencies.
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 30
KEY TERMS
● multinational company (MNC)
● joint venture
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 31 MULTINATIONAL
COMPANIES (MNC)
● Organizations that do business in several
countries
● Home country
● Host country
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 32
MNC STRATEGIES
● Global strategy
● Multinational strategy
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 33
MNC BENEFITS
● Large amount of goods available
● Lower prices
● Career opportunities
● Foster understanding, communication, and
respect
● Friendly international relations
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 34 DRAWBACKS OF
MULTINATIONAL COMPANIES
● Economic power
● Worker dependence on the MNC
● Consumer dependence
● Political power
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 35
Checkpoint
● What are two strategies commonly used
by multinational companies?
● Global strategy (offering the same product
the same way everywhere)
● Multinational strategy (approaching each
country market differently).
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 36 GLOBAL MARKET
ENTRY MODES
● Licensing
● Franchising
● Joint venture
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 37
LICENSING
● Allows companies to produce items in
other countries without being actively
involved
● Has a low financial investment, so the
potential financial return for the company
is often low
● The risk for the company is low
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 38
FRANCHISING
● Allows organizations to enter into contracts with
people in other countries to set up a business
that looks and runs like the parent company
● Marketing elements, such as food products,
packaging, and advertising, must meet both
cultural sensitivities and legal requirements
● Commonly involves selling a product or service
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 39
JOINT VENTURE
● Allows two or more companies to share raw
materials, shipping facilities, management
activities, or production activities
● Concerns include the sharing of profits and not
as much control because several companies are
involved
● Very popular for manufacturing, such as
Japanese and U.S. automobile manufacturers
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 40
Checkpoint
● How does licensing differ from a franchise?
● Licensing does not require as much financial investment or risk as franchising.
● Both licensing and franchising involve royalty payments, but licensing usually involves a manufacturing process, while franchising commonly involves selling a product or service.
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 41 INTERNATIONAL TRADE
ORGANIZATIONS
● World Trade Organization
● International Monetary Fund
● World Bank
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 42 WORLD TRADE
ORGANIZATION (WTO)
● 150 member countries
● Promotes trade
● Settles trade disputes
● Enforces free-trade agreements
● Other goals ● Lowering tariffs that discourage free trade
● Eliminating import quotas
● Reducing barriers for banks, insurance companies, and other financial services
● Assisting poor countries with economic growth
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 43 INTERNATIONAL MONETARY
FUND (IMF)
● Helps to promote economic cooperation
● Maintains an orderly system of world trade
and exchange rates
● Includes more than 150 member nations
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 44
WORLD BANK
● Created in 1944 to provide loans for rebuilding
after World War II
● Today the World Bank has more than 180
member countries and two main divisions
● International Development Association (IDA), which
makes loans to help developing countries
● International Finance Corporation (IFC), which
provides technical capital and technical help to private
businesses in nations with limited resources
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 3 SLIDE 45
Checkpoint
● How does the International Monetary
Fund assist countries?
● The International Monetary Fund assists
countries by promoting economic
cooperation and maintaining an orderly
system of world trade and exchange rates.
● This cooperation makes harmful trade wars
among IMF nations less likely.