Chapter 3 - Intro to Business
International Trade Barriers
is the restrictions to free trade
Importing:
items BOUGHT from other countries
Exporting:
items of goods/ services SOLD to other countries
Two Main Divisions International Development Association (IDA): International Finance Corporation (IFC):
makes loans to help developing countries. provides capital and technical help to private businesses in nations with limited resources
Free-trade agreements:
member countries agree to remove duties (import taxes) and trade barriers on products traded among them. ~ Results in increased trade between members.
Common Market:
members do away with duties and other trade barriers ~European Union (EU) ~Latin American Integration Association (LAIA)
Franchising:
right to use a company name or business proceeds in a specific way. The company adapts a range of business elements Ex: Marketing element
Licensing:
selling the right to use some intangible property for a fee or royalty (production process, trademark, or brand name) low financial investment, low potential financial return, also low risk.
Global Strategy:
uses the same product and marketing strategy worldwide.
Home Country - Host Country -
where the parent company is located. country in which the MNC places business activities.
Goals of the World Trade Organization (WTO)
~ Lowering tariffs (Taxe) that discourage free trade ~ Eliminating import quotas ~ Reducing barriers for banks, insurance companies, and other financial services. (Can I get help with financial problems) ~ Assisting poor countries with economic growth
What is the Four International Business Environments?
1. Geography 2. Cultural Influences 3. Economic Developement of a Country 4. Political and Legal Concerns
What are the Three Global Market Entry Modes?
1. Licensing 2. Franchising 3. Joint venture
Three main factors affect currency values
1. Balance of Payment 2. Economic Conditions 3. Political Stability
MNC Drawbacks
Economic power Worker dependence on the MNC Consumer dependence Political Power
MNC Benefits
Large amounts of good available and lower prices Career opportunities Foster understanding, communication, and respect Friendly international relations
Economic Development of a Country... What is an Infrastructure?
Literacy Level Technology Status Agricultural Dependency Infrastructure 1. a nation's transportation, communications, and utility systems.
Three International Trade Organizations Two Divisions
1. World Trade Organization (WTO) 2. International Monetary Fund (IMF) 3. World Bank ~ International Development Association (IDA) ~ International Finance Corporation (IFC)
Negotiate a better deal
1. a better deal of what we are providing them 2. Sales Pitch - Why? w/out gifts
Use the gift, by looking at the material
1. not keeping the gift 2. Give them/donating the gift to other organizations
World Bank (Two Divisons)
Created in 1944 to provide loans for rebuilding after World War 2 180+ member countries
International Monetary Fund (IMF)
Created in 1946 - economic interdependence among nations was growing at a greater pace than ever before in history 150 + member nations Helps to promote economic cooperation Maintains an orderly system of world trade and exchange rates
World Trade Organization (WTO)
Created in 1995 to promote trade around the world 150+ member countries Settles trade disputes and enforces free-trade agreement
Cultural Influences:
Culture: the accepted behaviors, customs, and values of a society Certain Language, Religion, Family corporations/union
Multinational Companies (MNC)
Organization that do business in several countries.
Three Common "Formal" trade barriers Three Common "Informal" trade barriers
Quotas, Tariffs, and Embargoes Culture, Traditions, and Religion of country
Surplus = Expenses > Imports Deficit = Imports > Expenses
Trade Surplus vs. Trade Deficit
Embargoes -
a gov't stops the import or export of a product COMPLETELY.
Free-trade zones:
a selected area where products can be imported duty-free and then stored, assembled and/or used in manufacturing. ~ Usually located around a seaport or airport
Quotas -
a set limit on the quantity of a product that may be imported or exported within a given period.
Comparative advantage:
a situation in which a country specializes in the production of a good/service at which it is relatively more EFFICIENT.
Tariffs -
a tax that gov't places on certain imported products
Joint ventures:
an agreement between two or more companies to share a business. Benefits: Sharing of raw materials, shipping facilities, management activities or production facilities. Concerns: Sharing of profits and not as much control
Absolute advantages:
exists when a country can produce a good/service at a LOWER COST than other countries.
Foreign debt:
the amount a county owed to another country
International business:
the business activities needed for creating, shipping, and selling goods/services ACROSS national borders.
Balance of Trade:
the difference between International Development Association's total imports.
Balance of payment:
the difference between the amount of money that comes into a country and the amount that goes out of it. 1. Possible trade positions 2. Favorable Balance of Trade vs Unfavorable... 3. Exports Greater vs Imports greater
Domestic business:
the making, buying and selling of goods/services WITHIN a country.
Foreign exchange rates:
the value of a currency in one country compared with the value in another 1. Currency Converters 2. The US $1 - stays the same value
Multinational Strategy:
treats each country market differently ~ Adapt to the customs, tastes, and buying habits of a distinct national market.
