business in action 6e bovée/thill the global marketplace chapter 3
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Business in Business in Action 6e Action 6e Bovée/ThillBovée/Thill
The Global The Global MarketplaceMarketplace
Chapter 3Chapter 3
Learning Objectives
1. Explain why nations trade and describe how international trade is measured
2. Discuss the nature of conflicts in global business, including free trade and government interventions in international trade
3. Identify the major organizations that facilitate international trade and the major trading blocs around the world
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Learning Objectives (cont.)
4. Discuss the importance of understanding cultural and legal differences in the global business environment
5. Define the major forms of international business activity
6. Discuss the strategic choices that must be considered before entering international markets
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The World’s Most Competitive Countries
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Why Nations Trade
Economic globalization The increasing integration and
interdependence of national economies around the world
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Why Nations Trade
Focusing on relative strengthsExpanding marketsPursuing economies of scaleAcquiring materials, goods, and servicesKeeping up with customersKeeping up with competitors
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How International Trade is Measured
Balance of trade Total value of the products a nation exports
minus the total value of the products it imports, calculated over a period of time
Trade surplus A favorable trade balance created when a
country exports more than it imports
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How International Trade is Measured
Trade deficit An unfavorable trade balance created when a
country imports more than it exports
Balance of payments The sum of all payments a country receives
from other countries minus the sum of all payments it makes to the other countries, over some specified period of time
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Foreign Exchange Rates and Currency Valuations
Exchange rate The rate at which the money of one country is
traded for the money of another
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Strong and Weak Currencies: Who Gains and Who Loses?
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Free Trade
Free trade International trade unencumbered by
restrictive measures
Supporters of free trade generally acknowledge that it produces winners and losers but that the winners gain more than the losers lose, so the net effect is positive
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Government Intervention in International Trade
Protectionism Government policies aimed at shielding a
country’s industries from foreign competition
Tariffs Taxes levied on imports
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Government Intervention in International Trade
Import quotas Limits placed on the quantity of imports a
nation will allow for a specific product
Embargo A total ban on trade with a particular nation (a
sanction) or of a particular product
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Government Intervention in International Trade
Export subsidies A form of financial assistance, in which
producers receive enough money from the government to allow them to lower their prices, in order to compete more effectively in the global market
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Government Intervention in International Trade
Dumping Charging less than the actual cost or less
than the home-country price for goods sold in other countries
Sanctions politically motivated embargoes that revoke a
country’s normal trade relations status often used as forceful alternatives short of
war
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International Trade Organizations
World Trade Organization (WTO) Permanent forum for negotiating,
implementing, and monitoring international trade procedures and for mediating trade disputes among the150 member countries
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International Trade Organizations
The International Monetary Fund (IMF) The IMF was formed to monitor global
financial developments, provide technical advice and training, provide short-term loans to countries that are unable to meet their financial obligations, and work to alleviate poverty in developing economies.
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International Trade Organizations
The World Bank Founded to finance reconstruction after
World War II and is now involved in hundreds of projects around the world aimed at addressing poverty, health, education, and other concerns in developing countries
Is a United Nations agency owned by its 187 member nations
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Trading Blocs
Trading blocs Organizations of nations that remove trade
barriers among their member countries and establish uniform barriers to trade with non-member nations
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Trading Blocs
North American Free Trade Agreement (NAFTA) Formed by the United States, Canada, and
Mexico to pave the way for the free flow of goods, services, and capital within the bloc through the phased elimination of tariffs and quotas
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Trading Blocs
The European Union (EU) constitutes more than two dozen countries
and a half billion people. now accounts for the world’s largest economy
EU nations have eliminated hundreds of local regulations, variations in product standards, and protectionist measures that once limited trade among member countries
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Trading Blocs
The Asia-Pacific Economic Cooperation (APEC) an organization of 21 countries working to
liberalize trade in the Pacific Rim has a long-term goal of liberalizing and
simplifying trade and investment among member countries and helping the region as a whole achieve sustainable economic growth.
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Members of Major Trading Blocs
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Members of Major Trading Blocs
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The Global Business Environment
Culture A shared system of symbols, beliefs,
attitudes, values, expectations, and norms for behavior
Ethnocentrism Judging all other groups according to the
standards, behaviors, and customs of one’s own group
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The Global Business Environment
Successful global business leaders recognize and respect differences in language, social values, ideas of status, decision-making habits, attitudes toward time, use of space, body language, manners, religions, and ethical standards
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The Global Business Environment
Stereotyping Assigning a wide range of generalized
attributes, which are often superficial or even false, to an individual based on his or her membership to a particular culture or social group
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Improving Communication with a Person from Another Culture
Be alert to the other person’s customsDeal with the individualClarify your intent and meaningAdapt your style to that the other person’sShow respect
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Forms of International Business Activity
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Forms of International Business Activity
Importing Purchasing goods
or services from another country and bringing them into one’s own country
Exporting Selling and
shipping goods or services to another country
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Forms of International Business Activity
Licensing Agreement to produce and market another
company’s product in exchange for a royalty or fee
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Forms of International Business Activity
Foreign Direct Investment (FDI) Investment of money by foreign companies in
domestic business enterprises
Multinational Corporations (MNCs) Companies with operations in more than one
country
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Strategic Approaches to International Markets
Multidomestic strategy A decentralized approach to international
expansion in which a company creates highly independent operating units in each new country
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Strategic Approaches to International Markets
Global strategy A highly centralized
approach to international expansion, with headquarters in the home country making all major decisions
Transnational strategy A hybrid approach
that attempts to reap the benefits of international scale while being responsive to local market dynamics
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Product Strategies for International Strategies
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Applying What You’ve Learned
1. Explain why nations trade and describe how international trade is measured
2. Discuss the nature of conflicts in global business, including free trade and government interventions into international trade
3. Identify the major organizations that facilitate international trade and the major trading blocs around the world
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3-36
Applying What You’ve Learned
4. Discuss the importance of understanding cultural and legal differences in the global business environment
5. Define the major forms of international business activity
6. Discuss the strategic choices that must be considered before entering international markets
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3-37
383-38Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
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