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Lecture 4 The Global Environment. Global Trade. Trade. An Individual Cannot Produce All Goods Necessary for Survival of Self Food, Clothing, and Shelter Specific Geographic Areas Have an Abundance of Natural Resources

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Lecture 4





  • An Individual Cannot Produce All Goods Necessary for Survival of Self

  • Food, Clothing, and Shelter

  • Specific Geographic Areas Have an Abundance of Natural Resources

  • Exchange with Others in Areas Lacking Such Natural Resources to Acquire Those Natural Resources which Are Wanting

Early Civilizations

Stone Age

Era with No Recorded History (Prehistoric Before History or Written Records)

Nomadic People, Hunters-Gathers, Who Followed Food Source; Mostly Near Water Sources

Little Interaction with Other Tribes or Groups of People

Early Civilizations

Bronze Age

From 3,300 BC Until 1,200 BC

Recorded History Begins; Egyptian Hieroglyphics (3,200 BC)

Great Civilizations Rise Near Fertile River Valleys ; Farming and Fishing

Barter System of Trade: Surplus Food and Grain for Lumber and Gold

Early Civilizations

Iron Age

From 1,200 BC Until 500 AD

Great Conquering Civilizations; Tools and Weapons Less Costly to Make

Increases in Wealth and Prosperity

Need for Trade to Support Great Cities

Rome: Over One Million Inhabitants

Coins Introduced to Facilitate Trade

Early Civilizations

Iron Age

Bronze Age

Stone Age

Trade Facts

  • Trade Ensued During the Bronze Age

  • The Phoenicians and Mesopotamians

  • One Cannot Individually Produce All Goods Necessary for Survival

  • Types of Trade

  • Barter

  • Acceptable Trade Unit or Measure

  • Common Acceptable Coinage Influenced the Development of Trade More than Any Other Event

International Marketplace

International Trade Is Vital to Economic Growth of Nations


Foreign Goods and Services for Purchase by Domestic Customers


Domestic Goods and Services for Purchases by Foreign Customers

International Involvement

Import – Export

Fundamental Form for International Business

Few Capital Outlays

Expands Market of Products


Arrangement Between Companies in Different Countries

Use of Brand Name, Trademarks, Patents, or Technology

International Involvement

Strategic Alliance

International Cooperation Between Two Companies for Mutual Gain

Joint Venture

Partnership Between International Companies to Create New Company

Direct Investment

Physical Investment in a Foreign Company

Build Plant, Acquire Company

International Presence


Presence Limited to National Country


Presence in One Foreign Country


Presence in Multiple Foreign Countries


Ubiquitous Global Presence

Measuring International Trade

Balance of Trade

Variance Between Imports and Exports

Surplus – Exports Greater than Imports

Deficit – Imports Greater than Exports

Balance of Payments

Overall Flow of Money Into or Out of a Country

Exchange Rate

Value of a Country’s Currency Against Other Currencies

Balance of Trade







Competitive Advantage

Advantage of One Firm Over Another Firm in the Same Industry

Comparative Advantage

Advantage of One Country to Convert Natural Resources into End Products Based Upon Cost or Technology

Absolute Advantage

Monopolistic Advantage of a Country in Producing End Products

Barriers to Trade

  • Social and Cultural Differences in Language, Values, and Religious Attitudes

  • Economic Differences in a Country’s Size, Per-Capita-Income, and Stage of Economic Development

  • Political and Legal Differences in the Legal Environment of Countries

  • Trade Restrictions Imposed Via Tariffs, Import Quota, and Currency Controls

Lecture 4