ppt

1. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Business in the
Global Economy
3.1 International Business Basics
3.2 The Global Marketplace
3.3 International Business
Organizations
C H A P T E R
3

2. © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 2
C H A P T E R 3
Principles of Business, 9e
3.1 International Business
Basics
Learning Outcomes
3.1.1 Describe importing and exporting
activities.
3.1.2 Compare balance of trade and balance
of payments.
3.1.3 List factors that affect the value of global
currencies.

3. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 3
KEY TERMS
● imports
● exports
● balance of trade
● balance of payments
● exchange rate

4. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 4
TRADE AMONG NATIONS
● Absolute advantage
● Comparative advantage
● Importing
● Exporting

5. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 5
U.S. IMPORT RELIANCE FOR
SELECTED RAW MATERIALS

6. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 6
Checkpoint 
How does importing differ from
exporting?
●Importing is bringing items from other
countries into a country.
●Exporting is selling goods and services
to other countries.

7. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 7
MEASURING TRADE
RELATIONS
● Balance of trade
● Balance of payments

8. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Balance of Trade Explained
SLIDE 8

9. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Balance of Payment
Explained
SLIDE 9

10. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 10
Balance of Trade

11. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 11
Checkpoint 
How does balance of trade differ from
balance of payments?
●Balance of trade is the difference
between a country’s total exports and
total imports.
●Balance of payments is the difference
between the amount of money that
comes into a country and the amount
that goes out of it.

12. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 12
Checkpoint 
How does balance of trade differ from
balance of payments? (continued)
●Trade is not the only thing influencing the
balance of payments. For example,
money can enter or leave a country
through investments, tourism, financial
aid, and bank deposits.

13. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 13
INTERNATIONAL CURRENCY
● Foreign exchange rates
● Factors affecting currency values:
●Balance of payments
●Economic conditions
●Political stability

14. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Foreign Exchange Rates
Explained
SLIDE 14

15. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 15
Checkpoint 
What factors affect the value of a
country’s currency?
The three main factors are:
●Balance of payments
●Economic conditions
●Political stability

16. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Imports, Exports, and Exchange
Rates: Crash Course
SLIDE 16

17. © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 17
C H A P T E R 3
Principles of Business, 9e
3.2 The Global Marketplace
Learning Outcomes
3.2.1 Describe the components of the
international business environment.
3.2.2 Identify examples of formal trade barriers.
3.2.3 Explain actions to encourage international
trade.

18. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 18
KEY TERMS
● infrastructure
● trade barriers
● quota
● tariff
● embargo

19. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 19
INTERNATIONAL BUSINESS
ENVIRONMENT
● Geography
● Cultural influences
● Economic development
●Literacy level
●Technology
●Agricultural dependency
● Political and legal concerns

20. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
ELEMENTS OF INTERNATIONAL
BUSINESS ENVIRONMENT
SLIDE 20
● Geographic Factors
●Location
●Climate
●Terrain
●Waterways
●Natural resources

21. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
ELEMENTS OF INTERNATIONAL
BUSINESS ENVIRONMENT
(continued)
SLIDE 21
● Cultural Factors
●Language
●Family
●Religion
●Customs
●Traditions
●Food

22. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
ELEMENTS OF INTERNATIONAL
BUSINESS ENVIRONMENT
(continued)
SLIDE 22
● Economic Factors
●Technology
●Education
●Inflation
●Exchange rate
●Infrastructure

23. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
ELEMENTS OF INTERNATIONAL
BUSINESS ENVIRONMENT
(continued)
SLIDE 23
● Political and Legal Factors
●Government system
●Political stability
●Trade barriers
●Business regulations

24. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 24
Checkpoint 
List the four main elements of the
international business environment.
●Geography
●Cultural influences
●Economic development
●Political and legal concerns

25. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 25
INTERNATIONAL
TRADE BARRIERS
● Quotas
● Tariffs
● Embargoes

26. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 26
QUOTAS
● Reasons for quotas
● To keep supply low and prices at a certain
level
● To express displeasure at the policies of the
importing country
● To protect one of a country’s industries from
too much competition from abroad

27. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Example of a Quota in Global
Economics
SLIDE 27

28. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 28
TARIFFS
● Some tariffs are
●A set amount per pound, gallon, or other
unit
●Based on the value of a good
● A tariff increases the price of an imported
product.
● A high tariff tends to lower the demand for
the product and reduce the quantity of that
import.

29. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Tariffs Explained
SLIDE 29

30. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 30
EMBARGOES
● Reasons for embargoes
●To offer more protection from international
competition than the quota or tariff will
provide
●To prevent sensitive products from falling
into the hands of unfriendly groups or
nations

31. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 31
Checkpoint 
What are three formal trade barriers?
●Quotas
●Tariffs
●Embargoes

32. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 32
ENCOURAGING
INTERNATIONAL TRADE
● Free-trade zones
● Free-trade agreements
● North American Free Trade Agreement
(NAFTA)
● Common markets

33. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
What is International Trade?
SLIDE 33

34. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 34
FREE-TRADE ZONES
● Used to promote international business in
a selected area where products can be
imported duty-free and then stored,
assembled, and/or used in manufacturing
● Usually located around a seaport or airport

35. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 35
FREE-TRADE AGREEMENTS
● Member countries agree to remove duties
and trade barriers on products traded
among them
● Results in increased trade between
members

36. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Free Trade Zones Explained
SLIDE 36

37. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 37
COMMON MARKETS
● Allow companies to invest freely in each
member’s country
● Allow workers to move freely across
borders
● Examples of common markets:
● European Union (EU)
● Latin American Integration Association (LAIA)

38. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Economic Integration
Explained
SLIDE 38

39. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 39
Checkpoint 
What actions could be taken to
encourage international trade?
●Actions that could be taken to
encourage international trade include
free-trade zones, free-trade
agreements, and common markets.

40. © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 40
C H A P T E R 3
Principles of Business, 9e
3.3 International Business
Organizations
Learning Outcomes
3.3.1 Discuss activities of multinational
organizations.
3.3.2 Explain common international business
entry modes.
3.3.3 Describe activities of international trade
organizations and agencies.

41. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 41
KEY TERMS
● multinational company (MNC)
● joint venture

42. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 42
MULTINATIONAL COMPANIES
(MNC)
● Organizations that do business in several
countries
● Parent company in home country
● Divisions or separate companies in other
countries

43. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 43
MNC STRATEGIES
● Global strategy
● Multinational strategy

44. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 44
MNC BENEFITS
● Large amount of goods available
● Lower prices
● Career opportunities
● Foster understanding, communication, and
respect
● Friendly international relations

45. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 45
DRAWBACKS OF
MULTINATIONAL COMPANIES
● An MNC can become an economic power
● Worker dependence on the MNC for jobs
● Consumer dependence for goods and
services
● Influence or control of political power

46. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 46
Checkpoint 
What are two strategies commonly used
by multinational companies?
●Global strategy (offering the same
product the same way everywhere).
●Multinational strategy (approaching
each country’s market differently).

47. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 47
GLOBAL MARKET
ENTRY MODES
● Licensing
● Franchising
● Joint venture

48. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 48
LICENSING
● Allows foreign companies to use a
procedure.
● Has a low financial investment, so the
potential financial return for the company
is often low.
● The risk for the company is low.

49. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 49
FRANCHISING
● Organizations enter into contracts with
people in other countries to set up a
business that looks and runs like the
parent company.
● Commonly involves selling a product or
service

50. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 50
JOINT VENTURE
● Companies share raw materials, shipping
facilities, management activities, or
production facilities.
● Concerns include the sharing of profits and
not as much control because several
companies are involved.

51. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Global Market Entry Mode
SLIDE 51

52. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 52
Checkpoint 
How does licensing differ from a
franchise?
●Licensing does not require as much
financial investment or risk as franchising.
●Both licensing and franchising involve
royalty payments.
●Licensing usually involves a
manufacturing process, while franchising
involves selling a product or service.

53. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 53
INTERNATIONAL TRADE
ORGANIZATIONS
● World Trade Organization
● International Monetary Fund
● World Bank

54. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 54
WORLD TRADE ORGANIZATION
(WTO)
● 160 member countries
● Settles trade disputes
● Enforces free-trade agreements
● Other goals include:
●Lowering tariffs that discourage free trade
●Eliminating import quotas
●Reducing barriers for financial services
●Assisting poor countries with economic growth

55. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
World Trade Organization
SLIDE 55

56. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 56
INTERNATIONAL MONETARY
FUND (IMF)
● 180 member nations
● Helps to promote economic cooperation
● Maintains an orderly system of world trade
and exchange rates

57. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 57
WORLD BANK
● Created in 1944 to provide loans for
rebuilding after World War II
● 190 member countries
● Key functions today:
●Give economic aid to developing countries
●Build communication systems,
transportation networks, and energy plants

58. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 58
WORLD BANK (continued)
● World Bank’s two main divisions
●International Development Association
(IDA), which makes loans to help
developing countries
●International Finance Corporation (IFC),
which provides technical capital and
technical help to private businesses in
nations with limited resources

59. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
International Monetary Fund
& World Bank
SLIDE 59

60. Principles of Business, 9e
C H A P T E R 3
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
SLIDE 60
Checkpoint 
How does the International Monetary
Fund assist countries?
●Promotes economic cooperation and
maintaining an orderly system of world
trade and exchange rates.
●This cooperation makes harmful trade
wars among IMF nations less likely.