Obj: 1.03

Understand the role of business in the global
Understand business in the global marketplace.
 Factors and regulations companies have to consider
when doing business in the global market place
 Main entry modes for companies to enter the global
 Main international trade organizations
Factors and regulations companies have to consider
when doing business in the global market place
 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.
 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?
 Absolute advantage exists when a country can
produce a good or service at a lower cost than other
 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
 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
 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.
 Advantages
 Exporting creates jobs.
 Exporting provides access to goods usually
 Disadvantage(s)
 Jobs may depend on global business.
 What is a way to measure trade relations?
 Balance of trade or balance of payments
 Why are measures of trade relations
 Nations are concerned with balancing
income with expenditures.
 Foreign debt is the amount of money a
country owes to other countries.
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.
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.
 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.
Main factors affecting currency exchange rates are:
 Balance of payments
 Economic conditions
 Political stability
 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?
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.
 What is included in a country’s
 Location
 Climate
 Terrain
 Seaports
 Natural Resources
 The geography of a country could impact
its natural resources and export and
import of resources.
 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.
 What key effects of a
country’s economics that
may influence conducting
business in a global
----------------------------------- A country’s economic
development impacts its
citizens standard of living
and business activities.
Education and Literacy
Exchange rate
Agricultural dependency
Utilities systems
 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
Government bans the import or export of specified goods.
Why would a government place an embargo?
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?
Taxes on certain imported products which increases prices.
Why would a government use a tariff?
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.
Main factors are:
 Common Market: Countries that are members freely
invest in one another.
 Examples:
 European Union (EU)
 Latin American Integration
Association (LAIA)
 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.
 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.
Main entry modes for companies to enter the global
 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?
 Joint venture happens when two or more companies
agree to share a business project.
 What are some examples?
Main international trade organizations
 International
Monetary Fund (IMF)
 World Bank
 World Trade
Organization (WTO)
 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.