Understand the role of business in the global
economy.
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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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Factors and regulations companies have to consider
when doing business in the global market place
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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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 What activities are included in domestic business
transactions? Where do they take place?
 What activities are included international business
transactions? Where do they take place?
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 Absolute advantage exists when a country can
produce a good or service at a lower cost than other
countries.
 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.
 What are some examples of absolute and comparative
advantages?
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 From where do imports come?.
 From where do exports come?
 What are some examples of imports?
 What are some examples of exports?
 Make a chair
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 Advantages
 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.
 Disadvantages
 Some goods would cost more without competition of
imported goods.
 Possibly goods may be unavailable.
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 Advantages
 Exporting creates jobs.
 Exporting provides access to goods usually
unavailable.
 Disadvantage(s)
 Jobs may depend on global business.
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 What is a way to measure trade relations?
 Balance of trade or balance of payments
 Why are measures of trade relations
completed?
 Nations are concerned with balancing
income with expenditures.
 Foreign debt is the amount of money a
country owes to other countries.
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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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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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 The 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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Main factors affecting currency exchange rates are:
 Balance of payments
 Economic conditions
 Political stability
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 What are the main
environmental issues that
could make a difference
when conducting business
in the global marketplace?
 Cultural influences,
economic development,
geography, and politicallegal issues
 How could these issues
impact businesses?
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Four main factors:
 Geography
 A country with a lot of natural resources may
have to rely on exports more.
 Cultural Influences
 In a country company executives may prefer to
meet with people of the same culture.
 Economic Development
 -A country may have limited transportation
methods that may limit travel distances to
purchase imported goods.
 Political and 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?
 Location
 Climate
 Terrain
 Seaports
 Natural Resources
 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?
----------------------------------- 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?
----------------------------------- A country’s economic
development impacts its
citizens standard of living
and business activities.
Education and Literacy
level
Inflation
Technology
Exchange rate
Agricultural dependency
Infrastructure
Transportation
Communication
Utilities systems
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 What political and legal
concerns may influence
business activities in a
global marketplace?
------------------------------- Political and legal
concerns influence
business activities in the
global marketplace.
Type of Government
Stability of government
Government policies for
businesses relevant to
trade barriers
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
Embargo

Government bans the import or export of specified goods.
Why would a government place an embargo?

Quotas



A limit on the quantity of good that may be imported or exported
within a given period to regulate international trade.
Why would a company or country set a quota?
Tariffs


Taxes on certain imported products which increases prices.
Why would a government use a tariff?
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International Trade
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.
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.
Why would a government use a tariff?
•To protect the supply of goods.
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Main factors are:
 Common Market: Countries that are members freely
invest in one another.
 Examples:
 European Union (EU)
 Latin American Integration
Association (LAIA)
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 Free-Trade Agreement: Countries that are
members remove duties and trade barriers on products
traded among them to increase trade between members.
 Example
 NAFTA (the North American Free Trade
Agreement) between the United States,
Canada, and Mexico.
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 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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Main entry modes for companies to enter the global
marketplace
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 Franchising is allowing a business the rights to use
another company’s name or process in a specific way.
 What are some examples?
 Licensing is selling the right to a company to use some
intangible property (production process, trademark, or
brand name) for a fee or royalty.
 What are some examples?
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 Joint venture happens when two or more companies
agree to share a business project.
 What are some examples?
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Main international trade organizations
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 International
Monetary Fund (IMF)
 World Bank
 World Trade
Organization (WTO)
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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.
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 World Trade Organization (WTO)
 Settles trade disputes and enforces free-trade
agreements among its members.
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