1. 1
Objective 1.03
Understand business in the global
marketplace.

2. 2
Factors and regulations companies have to
consider when doing business in the global
market place

3. 3
Domestic vs. International Businesses
• What activities are included in domestic business
transactions? Where do they take place?
– the making, buying, and selling of goods and service within
a country.
• What activities are included international business
transactions? Where do they take place?
– business activities needed for creating, shipping, and
selling goods and services across national borders.

4. 4
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?

5. International Trade
• From where do imports come?.
- Items brought from other countries
• From where do exports come?
- Goods & services sold to other countries
• What are some examples of imports?
– furniture, tax preparation services, bananas, or automobile
parts, minerals, etc
• What are some examples of exports?
– silver, automobile parts, medicines, plastics, media (ESPN or
CNN), software, etc.

6. 6
Importing
Advantages 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.
• Disadvantages
– Some goods would cost more without competition of
imported goods.
– Possibly goods may be unavailable.

7. 7
Exporting
Advantages and Disadvantage(s)
• Advantages
– Exporting creates jobs.
– Exporting provides access to goods usually
unavailable.
• Disadvantage(s)
– Jobs may depend on global business.

8. Measuring of Trade
Relations

9. 9
Measuring of Trade Relations
• Ways to measure trade relations
– Balance of Trade & 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.

10. 10
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.
Measuring of Trade Relations
continued

11. 11
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.
Measuring of Trade Relations
continued

12. 12
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.

13. 13
International Currency Exchange Rate
Main Factors Continued
Main factors affecting currency exchange rates are:
– Balance of payments- influenced by demand for a nations
goods and services. If the balance of payment is favorable,
then usually currency is steady and rising in value. If
unfavorable, then usually the currency is declining in
value.
– Economic conditions
• Inflation decreases buying power of currency
• Interest rates that are high decreases demand to borrow money.
– Political stability- could be impacted by changes in
government or laws

14. 14
International Business Environment
Factors
What are the main environmental issues that could make a
difference when conducting business in the global marketplace?
– Cultural influences, economic development, geography, and political-legal
issues
• How could these issues impact businesses?
– Cultural influences-In a country company executives may prefer to meet
with people of the same culture.
– Geography-A country with a lot of natural resources may have to rely on
exports more.
– Economic development-A country may have limited transportation
methods that may limit travel distances to purchase imported goods.
– Political-legal concerns-A country’s government only collects about ¼ of
his housing property taxes. This could be a sign of weak government that
is ignored by the its citizens.

15. 15
International Business Environment
Factors continued
Four main factors:
– Geography
– Cultural Influences
– Economic Development
– Political and Legal
Concerns

16. 16
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.

17. 17
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.

18. 18
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.

19. 19
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.

20. International Trade Barriers

21. Trade Barriers are restrictions to free trade.
Obj. 1.03 What are Trade Barriers?

22. 22
Main International Trade
Barrier Factors• Embargo
– Government bans the import or export of specified goods.
Why would a government place an embargo?
Examples: Cuba puts a complete ban on US products to maintain their competitive
advantage in marketplace.
• 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?
Example: India limits the amount of imported wheat products to protect their own
industry.
• Tariffs
– Taxes on certain imported products which increases prices.
– Why would a government use a tariff?
Example: U.S. provides $20 tax on their the computer products to other countries

23. 23
Encouragement of International
Trade Factors
Main factors are:
– Common Market: Countries that are members
freely invest in one another.
• Examples:
–European Union (EU)
–Latin American Integration Association
(LAIA)

24. 24
Encouragement of International
Trade Factors continued
–Free-Trade Agreement: Countries that are
members remove duties and trade barriers on
products traded among them to increase trade
between members.
• Example
–NAFTA (the North American Free Trade
Agreement) between the United States,
Canada, and Mexico.

25. 25
Encouragement of International
Trade Factors continued
–Free-trade zones: Include selected areas that
allow duty-free products to be imported, and then
stored, assembled, and/or used in manufacturing.
The activities usually occur around a seaport or
airport.

26. 26
Main entry modes for companies to enter the
global marketplace

27. 27
Main Entry Modes to the Global
Marketplace
– Franchising is allowing a business the rights to use
another company’s name or process in a specific
way.
• What are some examples?
– Licensing is selling the right to a company to use
some intangible property (production process,
trademark, or brand name) for a fee or royalty.
• What are some examples?

28. 28
Main Entry Modes to the Global
Marketplace continued
• Joint venture happens when two or more
companies agree to share a business project.
– What are some examples?

29. 29
Main international trade organizations

30. 30
Main International Trade Organizations
• International Monetary
Fund (IMF)
• World Bank
• World Trade
Organization (WTO)

31. 31
Main International Trade Organizations
continued
• International Monetary Fund (IMF)
– Helps promote economic cooperation and
maintain an orderly system of world trade and
exchange rates.
• World Bank
– Provides economic aid to developing countries to
fund building communications systems,
transportation networks, and energy plans.

32. 32
Main International Trade Organizations
continued
• World Trade Organization (WTO)
– Settles trade disputes and enforces free-trade
agreements among its members.