chapter 10 business in a global economy pp. 146-159

Chapter 10Business in a Global Economy pp. 146-159

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 2 of 64

Learning ObjectivesLearning ObjectivesAfter completing this chapter, you’ll be After completing this chapter, you’ll be able to:able to:

1.1. ExplainExplain why nations need to trade with each other.

2.2. DescribeDescribe how currency exchange works.

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 3 of 64

Learning ObjectivesLearning ObjectivesAfter completing this chapter, you’ll be After completing this chapter, you’ll be able to:able to:

3.3. StateState the advantages of protectionism and free trade.

4.4. NameName types of trade barriers.

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 4 of 64

Learning ObjectivesLearning ObjectivesAfter completing this chapter, you’ll be After completing this chapter, you’ll be able to:able to:

5.5. IdentifyIdentify some of the major trade alliances in the world today.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 5 of 64

Why It’s ImportantWhy It’s Important

Global trade doesn’t just influence business, it also affects all the countries and people of the world.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 6 of 64

Key WordsKey Words

multinational companyimportsexportsexchange ratebalance of tradeprotectionism

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 7 of 64

Key WordsKey Words

tariffquotaembargofree trade

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 8 of 64

Technology’s Influence Technology’s Influence on Business on Business

We are all part of the global marketplace.

The global marketplace exists anywhere business crosses national borders.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 9 of 64

Technology’s Influence Technology’s Influence on Business on Business

Countries can satisfy their citizens’ wants and needs by buying them in the global market.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 10 of 64

The Global Marketplace The Global Marketplace A multinational corporation is a company that does business in many countries and has facilities and offices in many countries around the world.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 11 of 64

The Global Marketplace The Global Marketplace The global marketplace works much like a shopping mall or a supermarket.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 12 of 64

The Global Marketplace The Global Marketplace The United States is rich in resources—human, natural, and production—but it still needs things from other countries.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 13 of 64

Figure10.1 MAJOR EXPORTS AND IMPORTS OF THE UNITED STATES

Look at the graph to see what products the United States imports and exports.

Name the product that the United States exports more than it imports.

Source: Standard & Poor’s

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 14 of 64

Specialization Specialization Countries specialize in producing certain goods and services.

By specializing, countries can sell what they produce best so they can buy the products they need from other countries.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 15 of 64

Specialization Specialization The kinds of resources available to a country often influence what it specializes in producing.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 16 of 64

Specialization Specialization A country with little money or advanced technology but a large population might specialize in manual labor.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 17 of 64

Making an Ethical Decision

1. What are the benefits and drawbacks of a global economy for the United States?

2. What are the benefits and drawbacks of globalization for people living in underdeveloped countries?

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 18 of 64

Making an Ethical Decision

3. How can underdeveloped countries break into world markets?

4. Should prosperous, industrialized nations monitor labor issues in other countries? If so, how? If not, who should monitor these issues?

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 19 of 64

Types of Trade Types of Trade Imports are goods and services that one country buys from another country.

Exports are goods and services that one country sells to another country.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 20 of 64

Types of Trade Types of Trade Other types of trade include:

• Investment• Exchange of human resources• Tourism• Military aid• Loans

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 21 of 64

Currency Currency Countries have to pay for each other’s products with currency. Currency is another name for money.

Just as countries use different lan-guages, they use different currencies, such as dollars, pesos, and yen.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 22 of 64

Currency Currency The foreign exchange market is made up of banks where different currencies are exchanged.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 23 of 64

Exchange Rates Exchange Rates The exchange rate is the price at which one currency can buy another currency.

Exchange rates change from day to day and from country to country.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 24 of 64

Exchange Rates Exchange Rates How much the currency of a country is worth depends on how many other countries want to buy its products.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 25 of 64

Prices Prices A company follows the change in exchange rates to find the best prices for products.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 26 of 64

Prices Prices When the value of a country’s currency goes up compared to another country’s, it has a favorable exchange rate.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 27 of 64

Prices Prices When the value of a country’s currency goes down compared to another country’s, it has an unfavorable exchange rate.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 28 of 64

Prices Prices Some countries choose to lower the value of their currency to bring in more business.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 29 of 64

Balance of Trade Balance of Trade Balance of trade is the difference in the value between how much a country imports and how much it exports.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 30 of 64

Balance of Trade Balance of Trade When a country exports more than it imports, it has a trade surplus.

When a country imports more than it exports, it has a trade deficit.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 31 of 64

Balance of Trade Balance of Trade A country can have an unfavorable balance of trade with one country and a favorable balance with another.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 32 of 64

Graphic OrganizerHow Exchange Rates Affect theHow Exchange Rates Affect theBalance of TradeBalance of Trade

Graphic OrganizerGraphic Organizer

WeakCurrency

FAVORABLEBALANCE

OFTRADE

Moreexports

thanimports

StrongCurrency

Moreimports

thanexports

NEGATIVEBALANCE

OFTRADE

Tradesurplus(leftovermoney)

Tradedeficit(debt)

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 33 of 64

Fast Review

1. Give examples of how countries specialize based on the types of resources they have.

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 34 of 64

Fast Review

2. Name types of trade between countries other than imports and exports.

3. Why would a country want to devalue its currency?

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 35 of 64

Global Competition Global Competition Global competition often leads to trade disputes between countries.

At the heart of most trade disputes is whether there should be limits on trade.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 36 of 64

Protectionism Protectionism Protectionism is the practice of putting limits on foreign trade to protect businesses at home.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 37 of 64

Protectionism Protectionism Some of the reasons in favor of protectionism are:

• Foreign competition can lower the demand for products made at home.

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 38 of 64

Protectionism Protectionism • Companies at home need to be

protected from unfair foreign competition.

• Industries that make products related to national defense need to be protected.

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 39 of 64

Protectionism Protectionism • The use of cheap labor in other

countries can lower wages or threaten jobs at home.

• A country can become too dependent on another country for important products like oil, steel, or grain. continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 40 of 64

Protectionism Protectionism • Other countries might not have the

same environmental or human rights standards.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 41 of 64

Trade Barriers Trade Barriers To limit competition from other countries, governments put up trade barriers to keep foreign products out.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 42 of 64

Trade Barriers Trade Barriers A tariff is a tax placed on imports to increase their price in the domestic market.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 43 of 64

Trade Barriers Trade Barriers A quota is a limit placed on the quantities of a product that can be imported.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 44 of 64

Trade Barriers Trade Barriers An embargo is when the government decides to stop an import or export of a product.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 45 of 64

Many Asian markets are friendlier to smaller American companies. Consultant Robert Azar works with U.S. businesses that want to plant roots in Asia.

continued

The Friendly Asian Markets

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 46 of 64

According to Azar, Asian businesses may perceive a large company as a threat. In contrast, they often see smaller ones as someone they can join up with.

continued

The Friendly Asian Markets

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 47 of 64

This is good news for what type of business ownership?

Analyze

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 48 of 64

Free Trade Free Trade Supporters of free trade believe there should be no limits on trade.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 49 of 64

Free Trade Free Trade The benefits of free trade are:

• It opens up new markets in other countries.

• It creates new jobs, especially in areas related to global trade.

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 50 of 64

Free Trade Free Trade

• Competition forces businesses to be more efficient and productive.

• Consumers have more choice in the variety, price, and quality of products.

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 51 of 64

Free Trade Free Trade

• It promotes cultural understanding and cooperation between countries.

• It helps all countries raise their standard of living.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 52 of 64

Trade Alliances Trade Alliances To reduce limits on trade more countries are forming trade alliances with each other.

In a trade alliance, several countries merge their economies into one huge market.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 53 of 64

Trade Alliances Trade Alliances NAFTA (North American Free Trade Agreement) was controversial because some workers would be displaced when trade barriers were lowered.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 54 of 64

Trade Alliances Trade Alliances Some of the major trade alliances in the world today are:

• NAFTA • European Union (EU) • Association of Southeast Asian

Nations (ASEAN)

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 55 of 64

Figure10.2 MAP OF TRADE ALLIANCES IN THE WORLD

The European Union (EU) is the oldest and best-known economic community formed to promote free trade among the members of the community and to foster common economic policies.

What nations make up the European Union?

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 56 of 64

International Business and International Business and Finance Affects EveryoneFinance Affects Everyone

Understanding international business and finance has become increasingly important for the consumer, wage earner, investor, citizen, and business leader.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 57 of 64

International Business and International Business and Finance Affects EveryoneFinance Affects Everyone

An understanding of international business helps you understand why goods and services are at particular prices.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 58 of 64

International Business and International Business and Finance Affects EveryoneFinance Affects Everyone

The business leader of tomorrow will have a good grasp of international business and finance.

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 59 of 64

Fast Review

1. What is a trade war?

2. What are some of the major trade alliances in the world today?

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 60 of 64

Why do small companies seek to do business globally?

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 61 of 64

How does the cost of natural resources affect the average family?

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 62 of 64

How do affordable, energy efficient homes protect the environment?

continued

ChapteChapterr

1010

Introduction to Business, Business in a Global Economy Slide 63 of 64

How can a small company influence the economy of another country?

End of ChapterBusiness in a Global Economy

10