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CHAPTER 3Business in a Borderless World
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Role of International Business
• Most of the world’s population and two-thirds of its total purchasing power are outside the U.S.
• Global marketing requires balancing global brands with the needs of local consumers
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Role of International Business
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Role of International Business
Exporting – the sale of goods and services to foreign markets
Importing – the purchase of goods and services from foreign markets
2011 U.S. exports = $2.1 trillion+
2011 U.S. imports = $2.6 trillion+
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Role of International Business
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International Trade Barriers
Completely free trade seldom exists, due to:
• Economic barriers
• Ethical, legal and political barriers
• Social and cultural barriers
• Technological barriers
AT&T has made inroads with consumers who don’t want their cell phones to stop working when they go abroad
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Economic Barriers
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Economic Barriers
Level of development is determined in part by a country’s
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Economic Barriers
• Exchange rates vary daily and affect the cost of imports and exports
• A government may intentionally alter the value of its currency through fiscal policy
Another economic trade barrier is the
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International Trade Barriers
When entering the international marketplace, companies must contend with potentially complex relationships
Different laws of its own nation, international laws and the laws of the nation with which its trading
Various trade restrictions
Changing political climates
Different ethical values
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Legal Barriers
A firm doing business abroad must understand and obey the laws of the host country
Some countries have restrictions on how much local currency can be taken out of its borders
Other countries may forbid foreigners from owning property
Some countries fail to honor U.S. laws and/or fail to enforce their own laws
In some parts of the world, copyright and patent laws are less strict than in the U.S.
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Tariffs and Trade Restrictions
• Fixed tariff is a specific amount of money levied on each unit of product brought into the country
• Ad valorem tariff is based on the value of the item
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Tariff and Trade Restrictions
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Tariff and Trade Restrictions
Dumping can spark trade wars
The Obama administration imposed stiff tariffs on Chinese-made tires, allegedly
dumped on the U.S. market
China retaliated by slapping tariffs on U.S. chicken
products exported to China
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Political Barriers
Seldom in writing & change rapidly
Political unrest may create a hostile or even dangerous environment for foreign business
OPEC is an example of a cartel
Political considerations affect international business daily
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Social and Cultural Barriers
Research can help minimize the problems associated with social and cultural differences
Differences in the spoken and written language
Appropriate body language, posture, facial expressions and personal space may vary by nation
Family roles may differ in different societies
Other nations often have a different perception of time
National customs and holidays must be respected
Most nations use the metric system
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Technological Barriers
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Trade Agreements and Organizations
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Trade Agreements and Organizations
CANADA
MEXICO
USA
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Trade Agreements and Organizations
While controversial, NAFTA has become a positive factor for U.S. firms
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Trade Agreements and Alliances
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Trade Alliances and Organizations
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Getting InvolvedExporting and Importing
Countertrade agreement is a foreign trade agreement that involves bartering products for other products instead of currency
Export agents are middlemen that help companies by handling their international transactions
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Getting Involved
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Getting Involved
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Getting Involved
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Getting Involved
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Getting Involved
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International Business Strategies
A plan used by international companies that involves customizing products,
promotion and distribution according to cultural
technological, regional and national differences
A strategy that involves standardizing products
(promotion and distribution) for the whole world as if it
were a single entity
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