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BUSN 3 The World Marketplace: Business without Borders ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Page 1: The World Marketplace: Business without Borders - … · 3 The World Marketplace: Business without Borders ... 3. The World Marketplace: Business without Borders ... // ...

BUSN

3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The World Marketplace: Business without Borders

• What opportunities exist in the world economy for businesses?

• Why do nations trade?

• How do we measure trade?

• How do companies reach global markets?

• What are the barriers to international trade?

• What are the benefits and criticisms of the free trade movement?

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

An Unprecedented Opportunity….

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*CIA World Factbook, 2008 Population Estimates, updated January 22, 2009.**CIA World Factbook, 2008 GDP Estimates, updated January 22, 2009.***CIA World Factbook, 2008 GDP Growth Estimates, updated January 22, 2009.

(Sources: Rank Order Estimates, CIA – The World Factbook website: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2119rank.html, accessed January 22, 2009, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html, accessed January 22, 2009, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html, accessed January 22, 2009. )

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Key Reasons for International Trade

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Access to Factors of Production

Reduced Economic Risk

Inflow of Innovation

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Key Reasons for International Trade: Competitive Advantage

• A country has an absolute advantage when it can produce more of a good than other nations, using the same amount of resources.

• Comparative advantage – the benefit a country has in a given industry if it can make products at lower opportunity cost

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Opportunity cost – cost of giving up the second-best choice when making a decision

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Global Trade: Taking Measure

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• Balance of Trade

Trade Deficit

Trade Surplus

• Balance of Payments

Balance of Payments Deficit

Balance of Payments Surplus

• Exchange Rates

• Countertrade

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Global Trade: Exchange Rates

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STRONG DOLLAR VS EURO:(Example: $1.00 = 1.20 euros)

WEAK DOLLAR VS. EURO:(Example: $1.00 = .60 euros)

U.S. travelers to Europe European travelers to U.S.American firms with European operations

European firms with American operations

European exporters American exporters

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Seizing the Opportunity: Strategies for Reaching Global Markets

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BUSN

3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Seizing the Opportunity: Strategies for Reaching Global Markets

• Foreign Outsourcing/Contract Manufacturing – contracting with foreign suppliers to produce products, usually at a fraction of the domestic cost

• Importing – buying products that have been produced or grown in foreign nations

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Seizing the Opportunity: Strategies for Reaching Global Markets

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ExportingLicensingFranchisingDirect InvestmentJoint Ventures

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Barriers to International Trade

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Sociocultural Differences

Economic Differences

Political & Legal Differences

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Barriers to International Trade: Sociocultural Differences

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Nonverbal Communication

Forms of Address

Attitudes toward punctuality

Religious Celebrations

Business Practice/Gifts

Social/cultural differences can rapidly undermine business relationships.

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Barriers to International Trade: Economic Differences

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• Exchange Rates• Population• Per Capita Income• Infrastructure

TransportationCommunicationEnergy Finance

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BUSN

3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Barriers to International Trade: Political and Legal Differences

• Political regimes differ around the world

• Legal DifferencesLack of Enforcement

Bribery

• Political ClimateStability

Violence

• Piracy and intellectual property is a problem in several foreign nations.

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Protectionism

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Reasons to Create Trade Restrictions

Reasons to Eliminate Trade Restrictions

Protect domestic industry Reduce prices and increase choices for consumers

Protect domestic jobs in key industries

Increase domestic jobs

Retaliate against countries who have engaged in unfair trade

practices

Build exporting opportunities

Pressure other countries Use world resources more efficiently

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

International Trade Restrictions

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• Tariffs

• Quotas

• Voluntary Export Restrictions

• Embargo

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Free Trade: The Movement Gains Momentum

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There has been a global move

toward free trade– the unrestricted

movement of good and services

across borders.

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

GATT and the World Trade Organization (WTO)

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• General Agreement on Tariffs & Trade (GATT)⎯ Established in 1948⎯ Now encompasses 125 nations⎯ Slashed tariffs by about 30%

• World Trade Organization (WTO)⎯ Promote International Trade⎯ Settle Trade Disputes

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The World Bank and International Monetary Fund

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• The World Bank⎯ 185 Member Countries⎯ Reduce World Poverty in Developing World⎯ Influence Global Economy⎯ Provide Financial Assistance

Low interest loans

• The International Monetary Fund⎯ Support Stable Exchange Rates⎯ Facilitate International Payments⎯ Adopt Economic Policies⎯ Promote Trade⎯ Lends money to member nations

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3 The World Marketplace: Business without Borders

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Trading Blocs and Common Markets

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• The North American Free Trade Agreement (NAFTA)

The largest trading blocU.S., Canada, MexicoCritics for job loss

• European Union (EU)The largest common market27 nations; combined GDP of $15 TrillionGoal is to bolster Europe’s trade position

Groups of countries promoting the free flow of goods and services

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Looking Back

• What opportunities exist in the world economy for businesses?

• Why do nations trade?

• How do we measure trade?

• How do companies reach global markets?

• What are the barriers to international trade?

• What are the benefits and criticisms of the free trade movement?

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