CH. 3 EXPLORING GLOBAL BUSINESS (Methods of Entering International…
CH. 3 EXPLORING GLOBAL BUSINESS
The Basis for International Business
Absolute and Comparative Advantage
To produce more efficiently than any other nation.
(Nation to Nation)
To produce specific product more efficiently than any other product.
(Product to Product)
Exporting and Importing
BALANCE OF PAYMENTS=
Total flow of the money into a country - total flow of money out of the country.
: Negative balance of trade
(More imports than exports)
BALANCE OF TRADE=GDP
Exports - Imports
: Selling and shipping raw materials or products to other nations
Purchasing raw materials or products in other nations
International Trade Agreements
International Economic Organization Working to Foster Trade
ECONOMIC COMMUNITY: an organization of nations formed to promote the free movement of resources and products among its member and to create common economic polices
The General Agreement on Tariffs and Trade and the World Trade Organization
(GATT) An international organization of 160 nation dedicated to reducing or eliminating tariffs and others barriers to word trade
WORLD TRADE ORGANIZATION (WTO) Powerful successor to GATT that incorporates trade in goods, services, and ideas
Methods of Entering International Business
in which one firm permits another to produce and market its product and use its brand name in return for a royalty or other compensations.
(Ship to other countries)
LETTER OF CREDIT
: Issue by the bank on request of importer stating.
BILL OF LADING
: Document issue by a transport carrier to prove the merchandise has been shipped.
: Ordering the importer's bank to pay for merchandise.
Totally Owned Facilities
Production and marketing facilities in one or more foreign nations
Is a partnership formed to archive a specific goal or to operate for specific period of time.
Provides a link between buyers and sellers in different countries.
International barter transaction.
Firm that operates on a world wide scale without ties to any specific nation or region.
Partnership formed to created competitive advantage on worldwide basis
Restrictions to International Business
Types of Trade Restrictions
($1 USA= 20 peso MXN)
Foreign-Exchange Control: Limit on how much money a country accepts from another country
Embargo: Stops trade
(Cuba, North Korea, Iran)
Import Quota: Limits import
Tax on a particular foreign product entering a country.
Reason Against Trade Restrictions
Equalize a nation's balance of payments
Protect new or weak industries
To protect national security
Protect the health of citizens
Protect domestic jobs
Reasons for Trade Restrictions
Higher Prices for consumers
Restriction of consumers
Misallocation of international
Loss of jobs
The Extent of International Business
The Economic Outlook for Trade
Sources for Export Assistance
Services and programs that help American firms to compete in foreign markets and create new jobs in the US
Financing International Business
The Export-Import Bank of the United States:
An independent agency of the US government whose function is to assist in financing the exports of American firms
Multilateral Development Banks:
(MDB) an internationally supported bank that provides loans to developing countries to help them grow
The International Monetary Fund:
(IMF) an international bank with 188 member nations that makes short-term loans to developing countries experiencing balance-of payment deficits
The Challenges Ahead:
The challenge of the 21st century is to build on common bonds and shared values to help fully integrate the United States, Europe, and other established economies with a new group of rapidly emerging economies.