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Exploring Global Business (Methods of entering International Business…
Exploring Global Business
The extent of International Business.
The economic outlook for trade.
Canada and Western Europe- US/Canada economic relationship is the most efficient, most integrated, and most dynamic in the world.
Mexico and Latin America- according to International Monetary Fund(IMF), Latin America exports are growing by a steady 3 to 4 percent annually
Japan- world's largest economy and the USA largest trading partner.
Other Asian Countries- economic growth in asia remained strong in 2013 and 2014 despite global recession.
Africa- Sub-Saharan Africa is home to 7 of the top 10 fastest growing economies in the world.
Exports and the us economy- in 2013 US experts supported more than 11.3 million full and part time jobs during a historic time when exports as a % of GDP reached the highest levels since 1916
International Trade Agreements
The General Agreement on Tariffs and Trade and the World Trade Organization - an international organization of 160 nations dedicated to reducing or eliminating tariffs and other barriers to world trade.
The Tokyo Round (1973-1979)
The Uruguay Round (1986-1993)
The Kennedy Round (1964-1967)
International Economic Organizations Working to Foster Trade
Economic Community- organization for nations formed to promote the free movement of resources and products among its members and to create common economic policies
The association of Southeast Asian nations
The commonwealth of independent states
The Central American free trade agreement
Trans-Pacific partnership (TPP)
The North American free trade agreement
The European Union
The common market of the southern cone (MERCOSUR)
The organization of petroleum exporting countries
Methods of entering International Business
Licensing- contractual agreement in which one firm permits another to produce and market its product and use its brand name in return for loyalty/other compensation
Exporting
letter of credit- issued by a bank on request of an importer stating that the bank will pay an amount of money to a stated beneficiary
bill of landing- document issued by a transport carrier to an exporter to prove that merchandise has been shipped
Draft- ordering the importer's bank to pay for the merchandise
Totally Owned Facilities
Strategic Alliances- partnership formed to create competitive advantage on a worldwide basis
Trading Company- provides a link between buyers and sellers in different countries
Countertrade- international barter transaction
Multinational Firms(enterprise) - a firm that operates on a worldwide scale without ties to any specific nation or region
Joint Ventures
The Basis of International Business
Exporting and Importing
Exporting- selling and shipping raw materials or products to other nations
importing- purchasing raw materials or products in other nations and bringing them into one's own country
Balance of trade- total value of nation's exports minus the total value of its imports over some period of time
Trade deficit- a negative balance of trade
Balance of payments- total flow of money into the country (-) total flow of money out of the country over some period of time
Absolute and Comparative Advantage
Absolute- ability to produce a specific product more efficiently than any other nation.
Comparative- the ability to produce a specific product more efficiently than any other product
Restrictions to International Business
Types of trade restrictions
Tariffs
Import duty(tariff)- a tax levied on a particular foreign product entering a country
Nontariff Brriers
Import quota - a limit on the amount of a particular good that may be imported into a country during a given period of time
Embargo- a complete halt to trading with a particular nation or in a particular product.
Foreign-exchange control- a restriction on the amount of a particular currency that can be purchased or sold
Currency devaluation- the reduction of the value of a nation's currency relative to the currencies of other countries
Cultural Barriers
Reasons for Trade Restrictions
To equalize a nation's balance of payments.
To protect new or weak industries.
To protect national security.
To protect the health of citizens.
To protect domestic jobs.
Reasons against trade restrictions.
Higher price for consumers.
Restriction of consumers' choices.
Missalocation of international resources.
Loss of jobs.
Sources of Export Assistance
Financing International Business
The Export-Import Bank of the United States
independent agency of the us government whose function is to assist in financing the exports of american films
Multilateral Development Bank
Internationally supported bank that provides loans to developing countries to help them grow
The International Monetary Fund
international bank with 188 member nations that makes short-term loans to developing countries experiencing balance of payment deficit