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Next >>. International trade organizations facilitate and regulate international trade. To explain why companies and countries trade To discuss the importance of having balance of trade for countries To describe the roles played by international trade organizations.

cynthia-preston
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  2. International trade organizations facilitate and regulate international trade.

  3. To explain why companies and countries trade • To discuss the importance of having balance of trade for countries • To describe the roles played by international trade organizations

  4. Success in international business depends on knowing the benefits and costs of importing and exporting. It also depends on help from various international groups and trade associations.

  5. the practice of relying too much on one trading partner dependency The difference between how much a country imports and how much it exports balanceof trade

  6. restrictions that reduce free trade and limit competition from imported goods tradebarriers a system of imposing extra costs on imports to protect the interests of local businesses protectionism

  7. the practice of selling goods in another country for less than the cost of manufacturing them, or for less than their market price dumping

  8. Understanding Trade Relationships • Politics, economics, and social factors are all part of trading with another country. • The benefits of international trade outweigh the potential problems.

  9. Why Companies Export Reasons why companies export include: • Expansion into unsaturated markets • “Smoothing out” sales • A product that is old at home may be new in other countries

  10. Why Companies Import Reasons why companies import include: • Fulfilling unmet needs • Taking advantage of a new opportunity

  11. Why Countries Import Reasons why countries import include: • Fulfilling unmet needs • Insufficient supplies such as natural resources • Fulfilling people’s needs for luxury goods or variety

  12. Why Countries Export Reasons why countries export include: • Increasing sales and economic growth, which leads to new jobs • Increasing political and economic ties

  13. Why Countries Export Question Why do nations export goods and services?

  14. Direct Exporting • A company that exports its own products uses direct exporting. • A larger company may have an export department. • Smaller companies use freight forwarders.

  15. Benefits of Direct Exporting A company that uses direct exporting has control over: • Negotiations • Prices • Distribution • Marketing

  16. Costs of Direct Exporting The costs of direct exporting include: • Shipping • Maintaining an inventory • Maintaining payment records • Payroll for a sales force • Product price increases

  17. Can You Hear Me Now, China? By 2005, more than 200 million people in mainland China were using cell phones. Motorola was the first U.S. company to enter the Chinese Market, selling 17 million cell phones by 2004. China is a prime target for other cell phone producers.

  18. Indirect Exporting With indirect exporting, a company hires another company located in the importing country, or the companies may have an agreement.

  19. Indirect Exporting To export through indirect exporting, a business must find and select one of four types of independent exporters. Manufacturer's Export Agents Export Merchants Export Commission Agents International Firms

  20. Indirect Exporting Represents a company’s goods without buying them Manufacturer's Export Agents Export Merchants Export Commission Agents International Firms

  21. Indirect Exporting Manufacturer's Export Agents Based in their own home country and do the work of buying for their overseas customers Export Merchants Export Commission Agents International Firms

  22. Indirect Exporting Manufacturer's Export Agents Export Merchants Purchase and sell the company’s products for their own profit Export Commission Agents International Firms

  23. Indirect Exporting Manufacturer's Export Agents Export Merchants Can become independent exporters of goods they procure from other exporting companies in their home countries Export Commission Agents International Firms

  24. Benefits of Indirect Exporting Benefits of indirect exporting include: • Simplicity • Volume • Lower costs than direct exporting • Lower retail price

  25. Disadvantages of Indirect Exporting Disadvantages of indirect exporting include: • Less control over the process • Representative agencies may underachieve. • Representative agencies may also carry competitors’ products.

  26. Direct versus Indirect Exporting • Businesses must carefully weigh the benefits and costs of each exporting option. • Companies often start with indirect exporting, and then transition to direct exporting as sales increase.

  27. Exporting and Risk Four Types of Risk Associated with Exporting Time Risk Product Risk Economic Risk Country Risk

  28. Time Risk The longer it takes to “get your money back” on an investment, the greater the risk.

  29. Economic Risk Economic risk results from the possibility that downturns in economic conditions can affect business locally, nationally, or globally.

  30. Product Risk • Product risk results from the fact that some products are more risky to sell than others. • For example, a product might go out of fashion before it reaches retail stores.

  31. Country Risk • Country risk is the possibility that an investment will be lost due to political changes in a country. • A new government may close or take over a plant.

  32. Country Risk • A government may raise taxes on a company’s products or services. • Wars can change business practices quickly.

  33. Importing and Risk The biggest risk in importing is dependency. dependency the practice of relying too much on one trading partner With dependency, any price increase and supply reduction can cause major problems.

  34. The Role of Trade Balances A positive balance of trade is called a trade surplus. balance of trade the difference between how much a country imports and how much it exports A negative balance of trade is called a trade deficit.

  35. The Role of Trade Balances When a country has a trade deficit, a nation loses jobs, and its companies are less likely to succeed if international competition wins.

  36. The Role of Trade Balances Analyze Why is a trade deficit not beneficial for a nation’s economy?

  37. Increasing Exports GovernmentSubsidies GovernmentGrants Methods ofIncreasing Exports TradeJunkets Low- or No-Interest Loans

  38. Decreasing Imports A government may establish trade barriers to decrease imports. trade barriers restrictions that reduce free trade and limit competition from imported goods

  39. Decreasing Imports Tariffs Quotas Types of TradeBarriers Embargoes Boycotts

  40. Decreasing Imports • A tariff is a tax on imported goods. • A quota is a regulation that limits the number of items that can be sold in a country.

  41. Decreasing Imports • An embargo is a complete ban on the import or export of products to a particular country. • A boycott is a decision to simply not buy products from another country.

  42. Decreasing Imports Other trade barriers include: • Licensing requirements • Exchange rate controls

  43. Protectionism Trade barriers are part of a program called protectionism. protectionism a system of imposing extra costs on imports

  44. Protectionism Reasons for protectionism include: • Protecting jobs for local workers • Defending against unfair competition

  45. International Trade Agreements • After World War II, national leaders recognized that protectionism and trade wars were not in their countries’ interests. • Economic integration and globalization became important terms in international trade.

  46. Economic Integration Economic integration is the practice of removing trade barriers and establishing cooperation to connect businesses and businesspeople across national borders.

  47. Globalization Benefits of globalization include: • Easier to make investments in new areas • More people can share in technological innovations. • Everyone has access to more and better goods and services.

  48. Formation of Alliances Peace-time negotiations after World War II made the formation of trade alliances possible. General Agreement on Tariffs and Trade (GATT) World Trade Organization (WTO) European Union(EU) North American Free Trade Agreement(NAFTA)

  49. General Agreement on Tariffs and Trade (GATT) • The first round of GATT negotiations were in 1947 and included 23 nations. • The goal of GATT was to reduce tariffs between member organizations. • GATT established procedures for trade disputes and protection for intellectual property.

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