Chapter 7

Business in a Global
You may not know it but you’re a part of the
global marketplace. You might buy clothes made
in Taiwan. Turnover your alarm clock and you
may see a sticker that reads, “Made in
Indonesia”. In the future, you might work for a
French company in the United States or for an
American company in Paris. During the last 20
years, the US and other nations have greatly
relied on one another’s goods and services to
stay prosperous.
The global marketplace exists anywhere business
crosses national borders. Most countries don’t
produce everything their citizens want. A country
might not have the necessary resources, it might
not have the technology, or perhaps it’s not
interested in making the product. However,
countries can satisfy their citizens’ wants and needs
by buying goods in the global market. A consumer,
citizen, employee, and business leader of the
twenty-first century must have an understanding
of international trade and business in order to be an
informed decision maker.
Multinational corporation:
company that does business in
many countries and has facilities
and offices in many countries
around the world.
Countries specialize in producing certain
goods and services.
By specializing, countries can sell what they
produce best so they can buy the products
they need from other countries.
The resources available to a country often
influence what it specializes in producing.
Example: a country with little money or
technology but a large population might
specialize in manual labor.
Trade: sale and exchange of goods and
services between a buyer and a seller.
Can be individuals or countries.
Imports: goods and services that one
country buys from another country.
Exports: goods and services that a
country sells to another country.
Other types of trade include:
 Investment
 Exchange of human resources
 Tourism
 Military aid
 Loans
Currency is another name for money.
Just as countries use different
languages, they use different currencies.
 Americans use dollars
 Mexicans use pesos
 Japanese use yen
Foreign exchange market – made up of
banks where different currencies are
Different currencies have different values
compared to each other.
Exchange Rate: price at which one currency
can buy another currency.
Exchange rates change from day to day and
from country to country. How much the
currency of a country is worth depends on
how many other countries want to buy its
Favorable exchange rate: when the value of
a country’s currency goes up compared to
another country’s
Unfavorable exchange rate: when the value
of a country’s currency goes down
compared to another country’s
A country with a favorable exchange rate
can buy more of the other country’s
Balance of trade: difference in the value
between how much a country imports and
how much it exports.
Trade surplus: when a country exports
more than it imports
Trade deficit: when a country imports more
than it exports
WTO is the only global international
organization that deals with the
rules of trade between nations.
World Trade Organization
Each student should find something they
have with them that was made in another
Place an x on the Smartboard map of where
that item is from.
Why did you purchase this item made in
another country rather than one made in the
United States?
Do you agree or disagree with this
statement: Americans depend too much on
other countries.
Students plan a vacation with stops in five
countries. While on the trip, you will purchase
five items in each country. Start by setting a
reasonable estimate of the cost of each item.
Next, search for an internet site that will
provide the exchange rates for the countries
you plan to visit. The Universal Currency
Converter or World Currency Exchange can
help. Calculate the cost of the items in the
currency of each of the countries you plan to
Day 2 of Chapter 10
Global competition often leads to trade
disputes between countries.
At the heart of most trade disputes is
whether there should be limits on trade.
There are two opposing points of view: free
trade and protectionism.
Protectionism: practice of putting
limits on foreign trade to protect
businesses at home.
Most countries sell what they produce
at home so they often want to keep out
foreign competitors.
To limit competition from other countries,
governments put up trade barriers to keep
foreign products out.
3 ways:
 Tariff: tax placed on imports to increase
their price in the domestic market
 Quota: limit placed on the quantities of a
product that can be imported.
 Embargo: when the government decides
to stop an import or export of a product.
Supporters of free trade believe
there should be no limits on
To reduce limits on trade more countries are
forming trade alliances with each other.
Trade alliance: several countries merge their
economies into one huge market.
North American Free Trade Agreement (NAFTA)
includes the United States, Canada, and Mexico
 European Union (EU) includes Austria, Belgium,
Denmark, Finland, France, Germany, Great Britain,
Greece, Ireland, Italy, Luxembourg, the Netherlands,
Portugal, Spain, and Sweden
 Association of Southeast Asian Nations (ASEAN)
includes Indonesia, Malaysia, Philippines, Singapore,
Thailand, Brunei, Vietnam, Laos, Myanmar, and
Imports_Exports Project