The document discusses key concepts in international business. It defines domestic and international business, and explains why countries engage in international trade through concepts like absolute and comparative advantage. It then covers major topics like imports, exports, trade partners, trade balances, foreign exchange, and barriers to trade. Finally, it examines international business organizations like multinational companies and their strategies.
The document discusses key concepts in international business. It defines domestic and international business, and explains why countries engage in international trade through concepts like absolute and comparative advantage. It then covers major topics like imports, exports, trade partners, trade balances, foreign exchange, and barriers to trade. Finally, it examines international business organizations like multinational companies and their strategies.
Original Description:
This project describes about the various aspects of business growth in the global world.
The document discusses key concepts in international business. It defines domestic and international business, and explains why countries engage in international trade through concepts like absolute and comparative advantage. It then covers major topics like imports, exports, trade partners, trade balances, foreign exchange, and barriers to trade. Finally, it examines international business organizations like multinational companies and their strategies.
The document discusses key concepts in international business. It defines domestic and international business, and explains why countries engage in international trade through concepts like absolute and comparative advantage. It then covers major topics like imports, exports, trade partners, trade balances, foreign exchange, and barriers to trade. Finally, it examines international business organizations like multinational companies and their strategies.
Economy Chapter 3 Section 3.1 International Business Basics Absolute advantage: Domestic business: when a country can produce a good or service at a lower cost than other countries International business: (based on available resources) Comparative advantage: a situation in which a Also called: country specializes in the production of a good or Foreign trade service at which it is World trade relatively more efficient Why would the US (make decisions based choose to engage in on demand of market) international business? Section 3.1 International Business Basics Imports: Exports:
US Imports (total supply): US Exports:
Bananas Farm machinery Spices Factory machinery Coffee TV channels US Imports (partial supply): Medicines Sugar Publications Carpet Chemicals Leather gloves 1 in 6 jobs depends on Import materials to international business manufacture items Section 3.1 International Business Basics
US 2015 Trade Partners
Photo credit: US Census Bureau Section 3.1 International Business Basics Countries must find Balance of payment: balance between income difference between the and spending amount of money that comes into a country and Foreign debt: when one the amount that goes out country owes money to another country Occurs through investments and tourism Balance of trade: difference between Some countries control imports and exports for a how much their citizens country can take when they travel
Trade surplus: export Positive BoP: country
more than import receives more money than pays out Trade deficit: import more than export Negative BoP: country pays out more than it receives Section 3.1 International Business Basics Challenge in trade: Use of different currencies Currencies have different values Examples: Russia: ruble European Union: euro Brazil: real India: rupee Saudi Arabia: riyal Photo credit: OCBC Business Banking Section 3.1 International Business Basics Foreign exchange market: Factors that affect currency exchange rates: Balance of payments Exchange rate: value of a currency in one country Economic conditions compared with the value in Political stability another Conversion website: http://www.xe.com/currencyco nverter/ Supply and demand affect value Required for all international travelers Section 3.1 International Business Basics Balance of payments: Political stability: Favorable: allows Sudden change in currency to be stable or government creates rise in value undesirable environment for international business Increase in demand for country’s products and Development of new laws currency could restrict foreign business Economic condition: Uncertainty reduces Inflation and buying confidence power decreases, less desirable Interest rates can create lower consumer demand, thereby creating lower demand for currency End of Section 3.1 Section 3.2: The Global Marketplace Environment continued: International business Cultural (accepted environment: behaviors, customs, and values of society) Geography: Influences: Location Body Language
Climate Language
Terrain Religion Values Seaports Customs Natural resources Relationship Section 3.2: The Global Marketplace Environment continued: Environment continued: Economic Development: Political and Legal Concerns: Literacy level Type of system Technological opportunities Stability of government Agricultural Business policies/laws dependency Infrastructure: transportation, communication, and utility systems Section 3.2: The Global Marketplace Trade barriers: Quotas: Restrict free trade Limit as to quantity of goods that can be Formal and informal traded exist Reasons for limits: Formal: Safety (physical and Quotas industrial) Tariffs Regulate supply/prices Embargoes Express dissatisfaction Informal: Culture Traditions Religion Section 3.2: The Global Marketplace Tariffs: Embargoes: Elimination of trade with Taxes placed on another country imported goods Ex: Cuba Set to encourage domestic business Reasons: How set: Dissatisfaction of policies/laws Weight (pound, gallon, etc.) Safety (physical and industrial) Value of product Prevent sensitive goods Many believe this should from being sent to be used in the US on wrong people imported items. Why? Section 3.2: The Global Marketplace
Encouraging International Trade: Creates jobs Fosters economic stability Develops allies Ways to encourage: Free-trade zones Free-trade agreements Common markets Section 3.2: The Global Marketplace Free-Trade Zones: Selected area where products can be imported duty-free and then stored, assembled, and/or used in manufacturing Usually in seaports/airports Free-Trade Agreements: Member countries agree to remove duties, also called import taxes, and trade barriers on products traded among them Example: NAFTA http://www.cbp.gov/trade/nafta Section 3.2: The Global Marketplace Common Markets: Examples of common markets: Members do away with duties and other trade EU: European Union barriers LAIA: Latin American Allow companies to Integration Association invest freely in each Goals: member’s country Expand trade AKA: economic community Promote regional economic integration Have a common, external duty on products imported from non-member countries End of Section 3.2 Section 3.3: International Business Organizations MNC Strategies: Global strategy: use the Multinational company same product and (MNC): marketing strategy world-wide Multinational strategy: treat each market Home country: contains differently and appeal to the parent company their individual needs Adapt to: Host country: contains a Customs branch of the company Tastes Buying habits Section 3.3: International Business Organizations
Drawbacks of MNC: MNC Benefits: Become dependent on Variety of products MNC for jobs in host available for consumers country Competitive prices MNC dominates in host Career opportunities country Foster positive Consumer dependency relationships between Influence/control over countries political power Section 3.3: International Business Organizations Entering the global market: Licensing: Selling the right to use some intangible property (production process, trademark, brand name) for fee or royalty Low financial investment, financial return, and risk Ex: Gerber selling baby food in Japan, characters/emblems on different products
Franchising: The right to use a company name or business process in a specific way (for a fee) Branch company (franchisee) adopts many attributes of parent company (franchisor) such as: Name Colors Advertising (meet legal requirements and cultural sensitivity) Packaging Section 3.3: International Business Organizations Joint Venture: Agreement between two or more companies to share a business project Share: Raw materials Shipping facilities Management activities Production facilities
Popular in manufacturing Ex: Ford and Mazda Section 3.3: International Business Organizations World Trade Organization (WTO): https://www.wto.org/ Created in 1995 to promote global trade Settles disputes and enforces free trade between members (over 150) Goals: Lower tariffs that discourage free trade Eliminate import quotas Reduce barriers for banks, insurance, and other financial companies Assist poor countries with Photo credit:ww2.cfo.com economic growth Section 3.3: International Business Organizations International Monetary Fund (IMF): www.imf.org Established in 1946 due to growing economic interdependence between nations Over 150 members Promotes economic cooperation and maintains system of world trade and exchange rates Before IMF: Photo credit: IMF Org. Country could change currency value to attract foreign customers Impose trade restrictions or lower value of currency Possible trade wars Section 3.3: International Business Organizations World Bank: http://www.worldbank.org/ AKA: The International Bank for Reconstruction and Development (over 180 members) Established in 1944 to provide loans for rebuilding after WWII Today: provide economic aid to less-developed countries Used to build: communication systems, transportation networks, and energy plants Two divisions: International Development Association—loans for developing countries International Finance Corporation—promotes joint ventures and provides capital/technical help to private companies in nations with limited resources
