Factors and Regulations for the Global Economy BF10 - Principals of Business and Finance

1. UNDERSTANDING
BusinessIn a Global Economy
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2. Part3:
Factors&Regulations
Forbusinessintheglobal
marketplace
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3. DomesticBusinessThe making, buying, and selling of goods and service within a country.
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4. InternationalBusinessBusiness activities needed for creating, shipping, and selling goods and services
across national borders.
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5. AbsoluteAdvantageA country can produce a good or service at a lower cost than other countries.
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6. ComparativeAdvantageA situation in which a country specializes in the production of a good or service at
which it is relatively more efficient.
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Exports-ImportsGoods and services sold between countries.

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ForeignDebtThe amount of money a country owes to other countries.

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BalanceofTradeThe difference between a country’s total exports and total imports.

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ForeignExchangeMarketWhere banks buy and sell different currencies.

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ExchangeRateThe value of a currency in one country when compared with the value in another.

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International
Business
Environment
Factors

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Geography
Includes a country’s location, climate, terrain, seaports, natural resources

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CulturalInfluence
Includes language, religion, family, food, values, customs, social relationships

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EconomicDevelopment
Includes education and literacy level, inflation, technology, exchange rate, agricultural,
dependency, infrastructure, transportation

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Political&LegalConcerns
Includes type of government, stability of government, government policies for
businesses relevant to trade barriers

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Trade
Barrier
Factors

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Embargo
when a government bans the import or export of specified goods.

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Quota
A limit on the quantity of good that may be imported or exported within a given period to
regulate international trade.

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Tariffs
Taxes on certain imported products which increases prices.

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Encouragementof
International
Trade

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Common Market
When countries that are members freely invest in one another.
Such as: European Union (EU) or Latin American Integration Association (LAIA)

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FreeTradeAgreementWhen countries that are members remove duties and trade barriers on products traded
among them to increase trade between members.
Such as: NAFTA (North American Free Trade Agreement)

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FreeTradeZonesInclude selected areas that allow duty-free products to be imported, and then stored,
assembled, and/or used in manufacturing. The activities usually occur around a seaport or
airport.

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EntryModetothe
GlobalMarketplace

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FranchisingAllowing a business the rights to use another company’s name or process in a specific way.

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LicensingSelling the right to a company to use some intangible property (production process,
trademark, or brand name) for a fee or royalty.

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JointVentureWhen two or more companies agree to share a business project.

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Maininternational
tradeorganizations

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InternationalMonetaryFundHelps promote economic cooperation and maintain an orderly system of world trade and
exchange rates.

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World BankProvides economic aid to developing countries to fund building communications
systems, transportation networks, and energy plans.

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World TradeOrganizationSettles trade disputes and enforces free-trade agreements among its members.