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Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D. Competing in the Global Economy. Scarce Recourses. Limited Capabilities. Global Ambitions. Economies of Scale. Why Nations Trade. Theories of Production and Trading. Absolute Advantage. Comparative Advantage. - PowerPoint PPT Presentation
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Introduction to Business 1BUS-101
Instructor: Erlan Bakiev, Ph.D.
Competing in the Global Competing in the Global EconomyEconomy
© Prentice Hall, 2005 Business In Action 3eChapter 3 - 2
Why Nations TradeWhy Nations TradeWhy Nations TradeWhy Nations Trade
© Prentice Hall, 2005 Business In Action 3eChapter 3 - 3
Scarce Scarce RecoursesRecoursesScarce Scarce
RecoursesRecourses
GlobalGlobalAmbitionsAmbitions
GlobalGlobalAmbitionsAmbitions
Limited Limited CapabilitiesCapabilities
Limited Limited CapabilitiesCapabilities
Economies Economies of Scaleof Scale
Economies Economies of Scaleof Scale
Theories of Theories of Production and TradingProduction and Trading
© Prentice Hall, 2005 Business In Action 3eChapter 3 - 4
AbsoluteAbsoluteAdvantageAdvantageAbsoluteAbsolute
AdvantageAdvantageComparativeComparativeAdvantageAdvantage
ComparativeComparativeAdvantageAdvantage
MeasuringMeasuringInternational TradeInternational Trade
© Prentice Hall, 2005 Business In Action 3eChapter 3 - 5
Balance Balance of Tradeof TradeBalance Balance of Tradeof Trade
SurplusSurplusSurplusSurplus
DeficitDeficitDeficitDeficit
BalanceBalanceof Paymentsof Payments
BalanceBalanceof Paymentsof Payments
Cash InflowCash InflowCash InflowCash Inflow
Cash OutflowCash OutflowCash OutflowCash Outflow
US Exports and Imports – GoodsUS Exports and Imports – Goods(in $ billions, 2002 data)(in $ billions, 2002 data)
© Prentice Hall, 2005 Business In Action 3eChapter 3 - 6
Foods, Feeds andBeverages
IndustrialSupplies &Materials(including
Petroleum)
Machinery &TransportEquipment(not autos)
AutomotiveVehicles,Engines &
Parts
ConsumerGoods
(non-food)
OtherGoods
Exports
Imports
49,616
49,687
156,837
267,681
290,496
283,323
78,942
203,743
84,359
307,854
32,854
49,078
US Exports and Imports – ServicesUS Exports and Imports – Services(in $ billions, 2002 data)(in $ billions, 2002 data)
© Prentice Hall, 2005 Business In Action 3eChapter 3 - 7
Travel andPassenger
Fares
OtherTransport
Royaltiesand License
Fees
OtherPrivate
Services
Military,DefenseServices
Misc.Government
Services
Exports
Imports
83,593
78,013
29,166
38,527
44,142
19,258
122,594
69,436
11,943
19,245
795
2,920
Trade Deficit on the RiseTrade Deficit on the Rise
© Prentice Hall, 2005 Business In Action 3eChapter 3 - 8
Trade deficit (in $ billions)
Global Trade IssuesGlobal Trade Issues
© Prentice Hall, 2005 Business In Action 3eChapter 3 - 9
Free TradeFree TradeFree TradeFree Trade
Fair TradeFair TradeFair TradeFair Trade
Trade RestrictionsTrade RestrictionsTrade RestrictionsTrade Restrictions
Protectionism Protectionism and Trade Restrictionsand Trade Restrictions
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 10
SanctionsSanctionsSanctionsSanctions RestrictiveRestrictiveImportsImports
RestrictiveRestrictiveImportsImports SubsidiesSubsidiesSubsidiesSubsidies DumpingDumpingDumpingDumping
TariffsTariffsTariffsTariffs QuotasQuotasQuotasQuotas EmbargoesEmbargoesEmbargoesEmbargoes
Promoting Free TradePromoting Free Trade
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 11
World Trade Organization
(WTO)
World Trade Organization
(WTO)
InternationalMonetary Fund
(IMF)
InternationalMonetary Fund
(IMF)The World BankThe World Bank
General Agreementon Tariffs and Trade
(GATT)
General Agreementon Tariffs and Trade
(GATT)
Asia Pacific Econ CooperationCouncil (APECC)
Asia Pacific Econ CooperationCouncil (APECC)
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 12
Trading BlocsTrading Blocs
AdvantagesAdvantages
Help smaller countries
Promote competition
Widen markets
Foster economic growth
DisadvantagesDisadvantages
Economic isolation
Trade restrictions
Decline in world trade
Fewer choices
North American Free Trade North American Free Trade Agreement (NAFTA)Agreement (NAFTA)
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 13
United StatesUnited States
CanadaCanada
MexicoMexico
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 14
The European UnionThe European Union
MinimizingMinimizing EstablishingEstablishing
Local RegulationsLocal Regulations
Variations in Variations in Product StandardsProduct Standards
Trade ProtectionismTrade Protectionism
GlobalGlobalProduct StandardsProduct Standards
Consumer ProtectionConsumer Protection
Environmental Environmental ProtectionProtection
The Economic and The Economic and Monetary Union (EMU)Monetary Union (EMU)
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 15
EconomicEconomicImpactImpact
EconomicEconomicImpactImpact
CurrencyCurrencyExchangeExchange
CurrencyCurrencyExchangeExchange
CentralizedCentralizedBankingBanking
CentralizedCentralizedBankingBanking
CurrencyCurrencyUnificationUnification
CurrencyCurrencyUnificationUnificationThe EURO
Foreign Exchange Rates and Foreign Exchange Rates and Currency ValuationsCurrency Valuations
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 16
Floating Rates
Government Action
Currency Devaluation
Fixed Value System
The GlobalThe GlobalBusiness EnvironmentBusiness Environment
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 17
Opportunities
Growth Potential
Increased Sales
Operating Efficiencies
New Technologies
More Consumer Choices
Challenges
Laws and Customs
Consumer Preferences
Ethical Standards
Labor Skills
Politics and Economics
Cultural Differences In Cultural Differences In Global BusinessGlobal Business
Consider the other personConsider the other person’’s customss customs
Deal with the individualDeal with the individual
Clarify your intent and meaningClarify your intent and meaning
Adapt your style to the other personAdapt your style to the other person
Show respectShow respect
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 18
Legal Differences In Global Legal Differences In Global BusinessBusiness
Common Law (US, UK)Common Law (US, UK)
Civil Law (France, Italy, Turkey etc.)Civil Law (France, Italy, Turkey etc.)
Theocratic Law (Iran, Saudi Arabia)Theocratic Law (Iran, Saudi Arabia)
IMF and WTO (found restrictive laws in TR and RUS)IMF and WTO (found restrictive laws in TR and RUS)
Issues (Bribery different Acts against it.. Foreign Corrupt Issues (Bribery different Acts against it.. Foreign Corrupt
Practices Act )Practices Act )
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 19
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 20
International Business ActivityInternational Business Activity
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 21
Importing and ExportingImporting and Exporting
Licensing and FranchisingLicensing and Franchising
Strategic Alliances Strategic Alliances and Joint Venturesand Joint Ventures
Direct Foreign InvestmentDirect Foreign Investment
OwnershipOwnership FinancialFinancial RiskRisk
LowLow LowLow LowLow
LowLow LowLow LowLow
ModerateModerate ModerateModerate ModerateModerate
HighHigh HighHigh HighHigh
Common FormsCommon FormsLevels of CommitmentLevels of Commitment
Strategic Approaches to Strategic Approaches to International MarketsInternational Markets
Products
Support
Promotion
Pricing
Staffing
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 22
© Prentice Hall, 2005 Business In Action 3e
Chapter 3 - 23
Impact of Terrorism on Impact of Terrorism on Global BusinessGlobal Business
GovernmentGovernmentExpendituresExpenditures
Business Business ExpendituresExpenditures
BankingBankingTransportationTransportation
