Essential Standard1.00

1. Essential Standard1.00 Understand the role of business in the global economy.

2. Objective 1.03 Understand business in the global marketplace.

3. Topics • 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

4. Factors and regulations companies have to consider when doing business in the global market place

5. Domestic vs. InternationalBusinesses • What are domestic business transactions? Where do they take place? • What are international business transactions? Where do they take place?

6. Domestic vs. InternationalBusinesses • Domestic business is the making, buying, and selling of goods and services within a country. • International business, aka foreign or world trade refers to business activities needed for creating, shipping, and selling goods and services across national borders.

7. Business Advantage Factors • 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?

8. International Trade • From where do imports come? • Bought from other countries • What are some examples of imports? • Furniture, bananas, tax prep services

9. ImportingAdvantages and Disadvantages • 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.

10. ImportingAdvantages and Disadvantages • Disadvantages • Some goods would cost more without competition of imported goods. • Possibly goods may be unavailable.

11. International Trade • From where do exports come? • Goods and Services sold to other countries • What are some examples of exports? • Silver, automobile parts, software

12. ExportingAdvantages and Disadvantage(s) • Advantages • Exporting creates jobs. • Exporting provides access to goods usually unavailable.

13. ExportingAdvantages and Disadvantage(s) • Disadvantage(s) • Jobs may depend on global business.

14. Business in Global Economy Activity • Worksheet

15. What are trade relations?? Relationships between countries

16. Measuring Trade Relations • What is a way to measure trade relations? • Why are measures of trade relations completed?

17. Measuring Trade Relations • What is a way to measure trade relations? • Balance of trade or balance of payments • Why are measures of trade relations completed?

18. Measuring Trade Relations • 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.

19. Measuring Trade Relations • 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 • Everyone has to balance their budget !!

20. Measuring Trade Relations • Foreign debt is the amount of money a country owes to other countries.

21. Measuring of Trade Relations continued Balance of trade is the difference between a country’s total exports and total imports.

22. Measuring of Trade Relations continued 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.

23. Measuring of Trade Relations continued 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.

24. Measuring of Trade Relationscontinued Balance of payments is the difference between the amount of money that comes into a country and the amount that goes out of it.

25. Measuring of Trade Relationscontinued 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 receivesmore money in a year than it pays out, it has favorable balance.

26. Measuring of Trade Relationscontinued 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.

27. Balance of Trade and payments Activity • Worksheet

28. International Currency Exchange Rate - Main Factors • 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.

29. International Currency Exchange Rate - Main Factors Continued Main factors affecting currency exchange rates are: • Balance of payments • Economic conditions • Political stability

30. International Currency Exchange Rate Main Factors Continued • Balance of payments is influenced by demand for a nation’s goods and services. • If the balance is favorable, then usually currency is steady and rising in value • If unfavorable, then usually the currency is declining in value.

31. International Currency Exchange Rate - Main Factors Continued • Economic conditions • Inflation decreases buying power of currency • Interest rates that are high decreases demand to borrow money.

32. International Currency Exchange Rate - Main Factors Continued • Political Stability • Could be impacted by changes in government or laws

33. International Business Environment Factors • What are the main environmental issues that could make a difference when conducting business in the global marketplace? • How could these issues impact businesses?

34. International Business Environment Factors continued Four main factors: Geography Cultural Influences Economic Development Political and Legal Concerns

35. International Business Environment Factors • Geography • Countries with natural resources may have to rely on exports

36. International Business Environment Factors continued What is included in a country’s geography? ------------------------------------- The geography of a country could impact its natural resources and export and import of resources.

37. International Business Environment Factors continued What is included in a country’s geography? -------------------------------- Location Climate Terrain Seaports Natural Resources

38. International Business Environment Factors • Cultural influences • In a country – executives may prefer to meet with people of the same culture

39. International Business Environment Factors continued 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.

40. International Business Environment Factors continued What main cultural factors may Influence how business is conducted in the global marketplace? ------------------------------------- Language Religion Family Food Values Customs Social Relationships

41. International Business Environment Factors • Economic Development • May have limited transportation methods that may limit travel distance to imported goods

42. International Business Environment Factors Continued 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.

43. International Business Environment Factors Continued 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.

44. International Business Environment Factors Continued What key effects of a country’s economics that may influence conducting business in a global marketplace? ------------------------------------- Education & literacy level Inflation Technology Exchange rate Agricultural dependency Infrastructure (Transportation, communications, utilities systems)

45. International Business Environment Factors • Political-legal concerns • Are taxes paid by citizens or do they ignore laws?

46. International Business Environment Factors continued What political and legal concerns may influence business activities in a global marketplace? -------------------------------- Political and legal concerns influence business activities in the global marketplace.

47. International Business Environment Factors continued What political and legal concerns may influence business activities in a global marketplace? -------------------------------- Type of government Stability of Government Gov’t policies for businesses relevant to trade barriers

48. Main International Trade Barrier Factors Embargo Quotas Tariffs

49. Main International Trade Barrier Factors Embargo Government bans the import or export of specified goods. Why would a government place an embargo? To protect a good or service from too much competition in a global market place more than what a quota or tariff could To protect sensitive goods

50. Main International Trade Barrier Factors 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? To regulate the supply and prices To protect a good or service from too much competition in a global market place.