the global business essentials context 9e of business...
TRANSCRIPT
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Business Essentials 9e
Ebert/Griffin
The Global Context
of Business
chapter four
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After reading this chapter, you should be able to:
1. Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances.
2. Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment.
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After reading this chapter, you should be able to:
3. Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure.
4. Describe some of the ways in which social, cultural, economic, legal, and political differences among nations affect international business.
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The Contemporary Global Economy
Globalization
└ process by which the world economy is becoming a single interdependent system
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The Contemporary Global Economy
Import
└product made or grown abroad but sold domestically
Export
└ product made or grown domestically but shipped and sold abroad
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The Contemporary Global Economy
Governments and businesses are more aware of the benefits of globalization to businesses and shareholders
New technologies have made international travel, communication, and commerce faster and cheaper than ever
Sometimes a firm must expand into foreign markets simply to keep up with competitors
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Distinctions Based on Wealth
1. High-income countries
2. Upper-middle-income countries
3. Lower-middle-income countries
4. Low-income countries
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Geographic Clusters
North America
Europe
Pacific Asia
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Trade Agreements and Alliances
North American Free Trade Agreement (NAFTA)
└ agreement to gradually eliminate tariffs and other trade barriers among the United States, Canada, and Mexico
European Union (EU)
└ agreement among major European nations to eliminate or make uniform most trade barriers affecting group members
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European Union
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Trade Agreements and Alliances
Association of Southeast Asian Nations (ASEAN)
└ organization for economic, political, social, and cultural cooperation among Southeast Asian nations
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Association of Southeast Asian Nations
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Trade Agreements and Alliances
General Agreement on Tariffs and Trade (GATT)
└ international trade agreement to encourage the multilateral reduction or elimination of trade barriers
World Trade Organization (WTO)
└ organization through which member nations negotiate trade agreements and resolve disputes about trade policies and practices
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Goals of the WTO
1. Promote trade by encouraging members to adopt fair trade practices
2. Reduce trade barriers by promoting multilateral negotiations
3. Establish fair procedures for resolving disputes among members
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International Trade
Balance of Trade
└ economic value of all products a country exports minus the economic value of all products it imports
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Major Trading Partners of the U.S.
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International Trade
Trade Deficit
└ situation in which a country’s imports exceed its exports, creating a negative balance of trade
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International Trade
Trade Surplus
└ situation in which a country’s exports exceed its imports, creating a positive balance of trade
Balance of Payments
└ flow of all money into or out of a country
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Exchange Rates
Exchange Rate
└ rate at which the currency of one nation can be exchanged for the currency of another nation
Euro
└ a common currency shared among most of the members of the European Union (excluding Denmark, Sweden, and the United Kingdom)
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Forms of Competitive Advantage
Absolute Advantage
└ the ability to produce something more efficiently than any other country can
Comparative Advantage
└ the ability to produce some products more efficiently than others
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Forms of Competitive Advantage
National Competitive Advantage
└ International competitive advantage stemming from a combination of factor conditions, demand conditions, related and supporting industries, and firm strategies, structures, and rivalries
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Going International
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Levels of International Involvement
Exporter
└ firm that distributes and sells products to one or more foreign countries
Importer
└ firm that buys products in foreign markets and then imports them for resale in its home country
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Levels of International Involvement
International Firm
└ firm that conducts a significant portion of its business in foreign countries
Multinational Firm
└ firm that designs, produces, and markets products in many nations
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International Organization Structures
Independent Agent
└ foreign individual or organization that agrees to represent an exporter’s interests
Licensing Arrangement
└ arrangement in which firms choose foreign individuals or organizations to manufacture or market their products in another country
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International Organization Structures
Strategic Alliance
└ arrangement in which a company finds a foreign partner to contribute approximately half of the resources needed to establish and operate a new business in the partner’s country
└ also called joint venture
Foreign Direct Investment (FDI)
└ Arrangement in which a firm buys or establishes tangible assets in another country
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Barriers to International Trade
Social and Cultural Differences
Economic Differences
Legal and Political Differences
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Quotas, Tariffs, and Subsidies
Quota
└ restriction on the number of products of a certain type that can be imported into a country
Embargo
└ government order banning exportation and/or importation of a particular product or all products from a particular country
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Quotas, Tariffs, and Subsidies
Tariff
└ tax levied on imported products
Subsidy
└ government payment to help a domestic business compete with foreign firms
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The Protectionism Debate
Protectionism
└ the practice of protecting domestic business at the expense of free market competition
Critics charge that protectionism drives up prices by reducing competition
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Legal and Political Differences
Local Content Law
└ law requiring that products sold in a particular country be at least partly made there
Business Practice Law
└ law or regulation governing business practices in given countries
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Legal and Political Differences
Cartel
└ association of producers whose purpose is to control supply and prices
Dumping
└ practice of selling a product abroad for less than the cost of production
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Applying What You’ve Learned
1. Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances.
2. Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment.
4-33 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
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Applying What You’ve Learned
3. Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure.
4. Describe some of the ways in which social, cultural, economic, legal, and political differences among nations affect international business.
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