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Wild World:ild World:Competing in the Globalompeting in the GlobalEconomyconomy

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Why Nations Tradehy Nations Trade Scarce resources

Limited capabilities

Global ambitions

Economies of scale

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Theories of Productionheories of Productionand Tradingnd Trading

Absolute advantage

Comparative advantage

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Measuring Internationaleasuring InternationalTraderade

Balance of trade

Surplus Deficit

Balance of payments

Cash inflow

Cash outflow

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Prentice Hall, 2007 Excellence in Business, 3e Chapter 3 - 5

US Imports and ExportsGoodsS Imports and ExportsGoods Foods, feeds, and beverages

Industrial supplies and materials Machinery and transport equipment

Automotive vehicles, engines, and parts

Consumer goods

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US Imports and ExportsServicesS Imports and ExportsServices Business, technical, and professional

Educational, financial, telecommunications,and insurance

Royalties and license fees

Travel and passenger fares

Freight and port services

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Global Trade Issueslobal Trade Issues Free trade

Fair trade

Trade restrictions

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Protectionism and Traderotectionism and TradeRestrictionsestrictions

Tariffs

Quotas

Embargoes

Sanctions

Restricting imports Subsidies

Dumping

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Promoting Free Traderomoting Free Trade World Trade Organization (WTO)

International Monetary Fund (IMF)

The World Bank

General Agreement on Tariffs and Trade (GATT)

Asia Pacific Economic Cooperation Council

(APECC)

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Prentice Hall, 2007 Excellence in Business, 3e Chapter 3 - 10

Trading BlocsAdvantagesdvantages

Help smaller countries

Promote competition

Widen markets

Foster economic growth

Disadvantagesisadvantages Economic isolation

Trade restrictions

Decline in world trade

Fewer choices

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North American Free Tradeorth American Free TradeAgreement (NAFTA)greement (NAFTA)

United States

Canada

Mexico

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The European Union

Minimizinginimizing EstablishingstablishingLocal RegulationsLocal Regulations

Variations inVariations in

Product StandardsProduct Standards

Trade ProtectionismTrade Protectionism

GlobalGlobalProduct StandardsProduct Standards

Consumer ProtectionConsumer Protection

EnvironmentalEnvironmental

ProtectionProtection

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Prentice Hall, 2007 Excellence in Business, 3e Chapter 3 - 13

The Economic and Monetaryhe Economic and MonetaryUnion (EMU)nion (EMU)

The Euro

Economic impact

Currency exchange

Currency unification

Centralized banking

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Foreign Exchange Rates andoreign Exchange Rates andCurrency Valuationsurrency Valuations

Floating exchange rate system

Government intervention

Devaluation

Fixed value system

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The Globalhe GlobalBusiness Environmentusiness Environment

Opportunities Challenges

Growth Potential

Increased Sales

Operating Efficiencies

New Technologies

More Consumer Choices

Laws and Customs

Consumer Preferences

Ethical Standards

Labor Skills

Politics and Economics

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Prentice Hall, 2007 Excellence in Business, 3e Chapter 3 - 16

Cultural Differences In Globalultural Differences In GlobalBusinessusiness

Consider the other persons customs

Deal with the individual Clarify your intent and meaning

Adapt your style to the other persons

Show respect

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Legal Differences In Globalegal Differences In GlobalBusinessusiness

Common law

Civil law

Theocratic law

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International Business Activitynternational Business Activity

Importing and ExportingImporting and Exporting

Licensing and FranchisingLicensing and Franchising

Strategic AlliancesStrategic Alliancesand Joint Venturesand Joint Ventures

Direct Foreign InvestmentDirect Foreign Investment

OwnershipOwnership FinancialFinancial RiskRisk

LowLow LowLow LowLow

LowLow LowLow LowLow

ModerateModerate ModerateModerate ModerateModerate

HighHigh HighHigh HighHigh

Common FormsCommon Forms

Levels of CommitmentLevels of Commitment

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Strategic Approaches totrategic Approaches toInternational Businessnternational Business

Products

Support Promotion

Pricing

Staffing

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The Impact of Terrorism onhe Impact of Terrorism onGlobal Businesslobal Business

Government expenditures

Business expenditures

Transportation

Banking