2nd Semester
Chapter 1
Global Business Chapter 1
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Name products that you use that are
produced in other countries.
Global Business Chapter 1
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Distinguish between domestic business and
international business
Discuss the reasons why international
business is important
Understand that international trade is not just
a recent event
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In the early days of the United States, most
families grew the food they ate and made the
clothes they wore.
Then the population increased.
Production and distribution methods
improved. People began to depend on others
for goods and services.
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That dependence grew as more people
specialized in the work they did.
Today, the United States has a complex
business system.
The system is based on specialization and
makes a wide variety of goods and services
available.
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In the same way that people within a country are
dependent on each other to produce goods and
services, countries also are dependent on each
other.
Nations that have extensive production and
distribution facilities—such as the United States,
Canada, Japan, and the western European
nations—have some level of economic
independence.
However, they are still dependent on other
countries. For example, most of the coffee used
in the United States comes from Brazil, and Japan
depends on other countries for almost all of its
oil.
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Most business activities take place inside a
country's own borders.
Making, buying, and selling goods and
services within a country is called domestic
business.
If you purchase a soft drink made in your own
country, you are participating in domestic
business.
An example of domestic business is when
local companies only sell in your community.
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On the other hand, if you buy a shirt made in
Thailand while shopping at your favorite store,
you are involved in the global economy.
The purchase was made in the United States and
the garment was made halfway around the globe.
International business includes all business
activities needed to create, ship, and sell goods
and services across national borders.
International business may also be called global
business, international trade, and foreign trade.
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International business allows you to purchase
popular items made in other countries, such
as televisions, shoes, and clothing.
Without global business, life would probably
be different.
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People around the world would not the
opportunity to enjoy goods and services
made in other countries
An example of international business is when
products are used by students but produced
in other countries.
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Domestic involves one
country
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International involves
several countries
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International business is important for many
reasons.
◦ It provides a source of raw materials and parts and
demand for foreign products.
◦ Global business allows for new market and
investment opportunities.
◦ It can even help improve political relations.
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Products made in the United States often
include materials around the world.
Each year, American companies buy oil and
steel from other nations to use in factories.
Nearly every U.S. built car has parts that were
manufactured in Japan, Mexico, France,
Korea, England, and many other countries.
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Global dependency exists when items that
consumers need and want are created in
other countries.
For example, drought and other weather
conditions in an African country might cause
crop failures.
As a result, the African country must obtain
food from other countries.
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Companies such as Kellogg sell to customers
in other countries to expand business
opportunities.
Many businesses, large and small, increase
sales and profits with foreign trade.
These companies are involved in the global
economy.
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Many people invest in businesses to earn
money for themselves.
As companies expand into countries, they
create new investment opportunities.
Investors also provide funds to foreign
companies that are either just getting started
or are growing enterprises.
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 Obtains
raw materials and
products
 Provides new business and
career opportunities.
 Improves business relations
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An old saying suggests "countries that trade
with one another are less likely to have wars
with each other."
International business activities can help to
improve mutual understanding,
communication, and the level of respect
among people in different nations.
Every business competes against companies
that are either foreign-owned or that sell
foreign-made products.
As a result, even when you may not realize it,
international business is affecting your life.
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International business is not a new idea.
Evidence suggests that countries such as China,
India, and Japan were trading products
throughout the world 15,000 years ago.
There is also evidence that Africans traded with
South Americans several thousand years ago.
The Phoenicians developed trade in the
Mediterranean in ancient times.
The conquests of Alexander the Great opened up
trade with India and China.
Later, the Roman Empire dominated trade along
the Mediterranean Sea.
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The next few centuries had limited foreign trade
activity.
Following the fall of the Roman Empire, the
Vikings traveled as far as Iceland, Greenland, and
Russia to trade.
Islamic empires of the early Middle Ages
connected the Iberian Peninsula, North Africa, the
Arabian Peninsula, and what is now called Iran.
Charlemagne created the Holy Roman Empire out
of most of Europe.
Viking explorers reached Iceland and Greenland.
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The eleventh century saw renewed interest in
global commerce.
European countries such as England, France,
Spain, and Portugal were shipping products
by water.
By the fifteenth and sixteenth centuries,
explorers such as Columbus and Magellan
sought a shorter water route to India.
Instead of sailing east around Africa, they
ventured west.
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From about 1500 to 1900, many European
countries established colonies in Africa, Asia,
and North and South America.
These colonies provided European
businesses with low-cost raw materials and
new markets for selling products.
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However, these colonies were often created at
the expense of the native inhabitants.
The space trade, the silk road, trading gold,
silver, gems, salt, coffee and tea are
examples of international business activities
before 1800.
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Most European countries maintained strong
economic and political control over their
colonies for years.
However, these colonies eventually achieved
independence.
The United States declared independence
from the United Kingdom in 1776.
Almost two hundred years later, Mozambique
gained independence from Portugal in 1975.
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Various inventions created between 1769 and
1915 expanded interest in and opportunities
for international business.
These discoveries included the cotton gin, the
steam engine, and the telephone.
The inventions from this period improved
communication, distribution, and production.
They also helped create new global
industries.
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Recent world events continue to highlight the
importance of international business.
Expanded trade among companies in different
countries increases independence.
A number of wars in the twentieth century
demonstrated the need for political cooperation.
These military conflicts limited global business
activities.
World peace is important if countries want to
achieve economic benefits from international
trade.
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The creation of the European Union, started
in the 1950s, is changing the way most
countries do business with one another.
Political freedom among former communist
countries has created new global business
opportunities in these emerging economies.
The international business marketplace is
expanding daily.
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The need for additional raw
materials and new products
throughout history has created
trade among nations.
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Global Business Chapter 1
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Create a list of items that come form other
countries and a list of items we sell to other
countries
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3.
Describe basic international business activities
Explain the components of international business
environment
Name important skills for international business
and describe the importance of international
business for workers, consumers and citizens
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What happens when a country has too much
of a good thing? Perhaps the country
produces more grain than it can consume,
mines for coal than it needs, or produces
more furniture than it can use.
When a country has an abundance or goods
or services, businesses look for trade
opportunities. That's what happens when
companies in different countries trade goods
or services.
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These foreign trades usually are not an
exchange of items for items. Instead, cash
payments are usually made for the items
bought or sold.
For example, a manufacturing company in
Korea can sell radios to an electronics Store
in the United States.
Also, a computer company in the United
Suites might sell its products to a retailer in
Russia.
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These trade activities can be viewed from two
sides—the buyer and the seller. For the
buyer, products bought from businesses in
other countries are called imports.
For example, the United States imports
radios. Russia is imports computers.
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For the seller, exports are products sold in
other countries. Using the same example,
Korea is exporting radios. The United States
is exporting computer.
Although the process sounds simple,
obstacles can arise. These obstacles are
called trade barriers.
The difference is imports are products
bought from companies in other countries.
Exports are products sold to businesses and
consumers in other countries.
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Trade barriers are restrictions that reduce
free trade among countries. These barriers
could appear in several forms.
◦ Import taxes increase the cost of foreign products.
◦ Quotas restrict the number of imports.
◦ Laws prevent certain products from coming into a
country.
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Buying and selling goods and services is
similar in most parts of the world. Consumers
try to satisfy their needs and wants at a fair
price.
Businesses try to sell products at a price that
covers costs and provides a fair profit. So,
why is international business any different
from local business?
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In many parts of Iran, the exchange of goods
and services takes place in an open-air
market.
Consumers in Japan buy meals that nonAsians might not enjoy.
In Cuba, office workers have been required to
work several weeks in the fields to increase
the country's food supply.
These are some examples of factors that
make up the international business operating
environment.
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There are four major categories of the
international business environment. Global
business is influenced by:
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geographic conditions
cultural and social factors
political and legal factors
and economic conditions.
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Geographic Conditions - The climate, terrain,
seaports, and natural resources of a country influence
business activities.
Very hot weather limits the types of crops that can be
grown. It also restricts the types of businesses that
can operate in that climate.
A hot, sunny climate is critical for growing tropical
fruit, but not suitable for a ski resort.
Mountainous terrain offers opportunities for mining
but limits the amount of land available for crops.
A nation with many rivers or seaports is able to easily
ship products for foreign trade.
Countries with few natural resources must depend on
imports.
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Cultural and Social - In some societies, hugging is an
appropriate business greeting. In other societies, a
handshake is the custom. These differences
represent different cultures.
Culture is the accepted behaviors, customs, and
values of a society. A society's culture has a strong
influence on business activities. For example, in Spain
and parts of Latin America, businesses traditionally
were closed for several hours in the middle of the day
for a long lunch or a period of rest.
The main cultural and social factors that affect
international business are language, education,
religion, values, customs, and social relationships.
These relationships include interactions among
families, labor unions, and other organizations.
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Political and Legal Factors Each day, we encounter
examples of government influence on business.
Regulation of fair advertising, enforcement of
contracts, and safety inspections of foods and
medications are a few examples.
In general, however, people in the United States have
a great deal of freedom when it comes to business
activities.
However, not all countries are like the United States.
In many places, government restricts the activities of
consumers and business operators.
The most common political and legal factors that
affect international business activities include the
type of government, the stability of the government,
and government policies toward business.
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Economic Conditions Everyone faces the
problem of limited resources to satisfy
numerous needs and wants.
This basic economic problem is present for
all of us. We continually make decisions
about the use of our time, money, and
energy.
Similarly, every country plans the use of its
land, natural resources, workers, and wealth
to best serve the needs of its people.
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Factors that influence the economic situation
of a country include the type of economic
system, the availability of natural resources,
and the general education level of the
country's population.
Other economic factors include the types of
industries and jobs in the country and the
stability of the country s money supply.
Available technology for producing and
distributing goods and services also
influences a nation's economic situation.
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Knowledge of history, geography, and foreign
languages; cultural awareness; and study
skills.
International business affects you as a
consumer and worker because:
◦ consumers have more buying choices.
◦ workers are likely to have different types of career
opportunities
International business is an important field of
study. Certain basic skills and knowledge are
needed in our global economy.
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Some skills are needed in every type of job.
For example, you must be able to read work
manuals, do calculations, and write reports.
These skills will continue to be important as
business activities among countries increase.
In addition, knowledge of specific subjects is
important for success in global business.
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History - Your awareness of the past can help
you better understand today’s international
business relations.
Geography is more than names on a map.
Knowledge of geography will help you
understand how the climate and terrain of a
country can affect transportation, housing, and
other business activities.
Language - As countries increasingly participate
in foreign trade activities, your ability to
communicate effectively with people from other
societies increases in importance,
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Cultural Awareness - Understanding that
cultures vary from nation to nation allows
people to be more sensitive to customs and
traditions of all societies.
Study Skills - Asking questions, taking notes,
and doing research are the necessary to keep
up to date on changes in international
business.
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As a country becomes more involved in
international business, the lives of its change.
Consumers have more choices because the
selection of goods and services is no longer
limited to items produced in their own
country. There might be more products,
different products, or products that cost less.
Career opportunities expand for workers as
international business creates for additional
workers and different kinds of jobs.
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Some business owners benefit from
international trade by expanding an existing
business or starting a new one. Other
business owners might see new or stronger
competition.
As a consumer and worker involved in
international business you have an obligation
to act responsibly.
For example you might want to make sure
that companies you buy from and work for
follow ethical business practices. The
decisions you make are likely to have an
impact locally and around the world.
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List examples of domestic business and
international business.
List ways that international business is
important to companies and countries.
What factors have driven the development
of international business throughout
history
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2.
3.
Domestic Business
International Business
Global Dependency
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3.
How does domestic business differ from
international business?
Why is International Business Important?
What are some examples of International
business activities that occurred before
1800?
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McDonald’s has 30,000 restaurants in 120
countries, adapting its menu to various
tastes.
In Hong Kong burgers are served between
two rice patties, while in Norway the McLakes
is a grilled salmon sandwich.
Started in 1955, the company opened its first
restaurants outside the United States in 1967.
Today in some countries, such as Brazil and
Egypt, McDonald’s offers delivery.
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What factors may have influenced McDonald’s
to open restaurants outside the United States?
How have the social and cultural factors
affected the company’s international business
activities?
What risks might a company encounter when
doing business in other countries?
Go to McDonald’s website or other websites to
prepare a map showing the location of the
company’s international business operations.
1. Obtain complete information
2. Be creative in your map making
3. Include photos and other graphics
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4.
How do imports differ from exports
What are the four components of the international
business environment?
Other than business skills, what knowledge is important
for working in international business?
How does international business affect you as a
consumer and worker?
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2.
3.
4.
Imports
Exports
Trade barriers
Culture
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4.
5.
What are the four parts of the international
business environment?
What cultural factors affect international
business activities?
Name four factors that influence a country’s
economic conditions.
What skills are important for success in an
international business?
How does international business effect you as
a. A consumer
b. A worker
c. A citizen
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A US Company plans to sell farm equipment in
a country in Asia. This country traditionally has
not conducted business with companies outside
its own geographic region. Answer the
Following questions or the US company.
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4.
What geographic factors might influence the
company’s international business activities?
How might economic conditions affect
business decisions?
What social and cultural influences could
affect this business?
How could politics and laws affect the
company’s exporting activity?
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