Chapter 2 Global Business
Chapter 2 Global Business
International ■ International trade balanceS. GATT WTO International business International marketing International finance Exchange rate, capital movements International investment FDI mncs
International ◼ International Trade ◼ balances, GATT, WTO ◼ International Business ◼ International Marketing ◼ International Finance ◼ Exchange rate, capital movements ◼ International investment, FDI, MNCs
The Basis for International Business International business All business activities that involve exchanges across national boundaries Some countries are better equipped than others to produce particular goods or services ■ Absolute advantage The ability to produce a specific product more efficiently than any other nation Comparative advantage The ability to produce a specific product more efficiently than any other product Goods and services are produced more efficiently when each country specializes in the products for which it has a comparative advantage
The Basis for International Business ◼ International business ◼ All business activities that involve exchanges across national boundaries ◼ Some countries are better equipped than others to produce particular goods or services ◼ Absolute advantage ◼ The ability to produce a specific product more efficiently than any other nation ◼ Comparative advantage ◼ The ability to produce a specific product more efficiently than any other product ◼ Goods and services are produced more efficiently when each country specializes in the products for which it has a comparative advantage
The Basis for International Business(cont'd a Countries trade when they each have a surplus of the product they specialize in and want a product the other country specializes in Exporting Selling and shipping raw materials or products to other nations Importing Purchasing raw materials or products in other nations and bringing them into ones own country
The Basis for International Business (cont’d) ◼ Countries trade when they each have a surplus of the product they specialize in and want a product the other country specializes in ◼ 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
Top Ten Merchandise-Exporting States Billions of dollars, 2005 merchandise exports Texas $128.8 California $116.8 New York $50.5 shington $380 Michigan $376 Illinois $360 Ohio $350 Florida $334 Total 2005 U.S. exports Pennsylvania $223 $904. 4 billion Massachusetts $220 Source http://www.ita.docgov/td/industrylotealstate/2005year_enddollar_value_05.html, accessed september 15, 2008
Top Ten Merchandise-Exporting States Source: http://www.ita.doc.gov/td/industry/otea/state/2005_year_end_dollar_value_05.html, accessed September 15, 2008
The Basis for International Business(cont'd Balance of trade a The total value of a nation's exports minus the total value of its imports over some period of time Trade deficit A negative (unfavorable)balance of trade-imports exceed exports in value ■ Balance of payments The total flow of money into a country minus the total flow of money out of that country over a period of time
The Basis for International Business (cont’d) ◼ Balance of trade ◼ The total value of a nation’s exports minus the total value of its imports over some period of time ◼ Trade deficit ◼ A negative (unfavorable) balance of trade—imports exceed exports in value ◼ Balance of payments ◼ The total flow of money into a country minus the total flow of money out of that country over a period of time
U.S. International Trade in Goods 2200 2,000 1.800 1.600 800 ports Exports 测」 Balance of trade 800 1987 992001 Source: U.S. Department of Commerce, International Trade Administration, U.S. Bureau of Economic Analysis http://bea.govlinternational/bpweb/simple.cfm?anon=78260&table_id=1&areaid=3,accessedSeptember 18.2008
U.S. International Trade in Goods Source: U.S. Department of Commerce, International Trade Administration, U.S. Bureau of Economic Analysis, http://bea.gov/international/bp_web/simple.cfm?anon=78260&table_id=1&area_id=3, accessed September 18, 2008
Restrictions to international Business The reasons for restricting trade range from internal political and economic pressures to mistrust of other nations u Nations are generally eager to export their products to provide markets for their industries and develop a favorable balance of trade Most trade restrictions are applied to imports from other nations
Restrictions to International Business ◼ The reasons for restricting trade range from internal political and economic pressures to mistrust of other nations. ◼ Nations are generally eager to export their products to provide markets for their industries and develop a favorable balance of trade. ◼ Most trade restrictions are applied to imports from other nations
Types of Trade restrictions Import duty(tariff) A tax levied on a particular foreign product entering a countrv Revenue tariffs are imposed to generate income for the government Protective tariffs are imposed to protect a domestic industry by keeping the prices of imports at or above the price of domestic products ■ umping The exportation of large quantities of a product at a price lower than that of the same product in the home market
Types of Trade Restrictions ◼ Import duty (tariff) ◼ A tax levied on a particular foreign product entering a country ◼ Revenue tariffs are imposed to generate income for the government ◼ Protective tariffs are imposed to protect a domestic industry by keeping the prices of imports at or above the price of domestic products ◼ Dumping ◼ The exportation of large quantities of a product at a price lower than that of the same product in the home market
Types of Trade restrictions(cont'd Nontariff barriers Non-tax measures imposed by a government to favor domestic over foreign suppliers a Import quota limit on the amount of a particular good that may be imported during a given time Embargo--a complete halt to trading with a particular nation or in a particular product a Foreign exchange controkrestriction on amount of foreign currency that can be purchased or sold
Types of Trade Restrictions (cont’d) ◼ Nontariff barriers Non-tax measures imposed by a government to favor domestic over foreign suppliers ◼ Import quota—a limit on the amount of a particular good that may be imported during a given time ◼ Embargo—a complete halt to trading with a particular nation or in a particular product ◼ Foreign exchange control—restriction on amount of foreign currency that can be purchased or sold