Unit 3.02 The Global Marketplace

1. Unit 3.02 The Global Marketplace Unit 3 – Business in the global economy

2. INTERNATIONAL BUSINESS ENVIRONMENT • Geography • Cultural influences • Economic development • Political and legal concerns

3. INTERNATIONAL BUSINESS ENVIRONMENT • Geography • Location, climate, terrain, seaports, natural resources… • How does this influence international business?: • Very hot – limits the types of crops that can be grown • Many rivers/seaports – easily ship products for foreign trade • Limited natural resources – must depend on imports

4. INTERNATIONAL BUSINESS ENVIRONMENT • Cultural influences • Culture – the accepted behaviors, customs, and values of a society • How does this influence international business?: • Language – communication • Religion – what is sacred to one may not be to another • Values – is bribery considered wrong in different cultures? • Customs – is it offensive to give a gift? • Social Relationships – how men and women interact in business

5. INTERNATIONAL BUSINESS ENVIRONMENT • Cultural influences • Most Common world language? • Mandarin Chinese • Hindi • English • Spanish • Bengali • Most Common world religion? • Christianity • Islam • None • Hinduism • Buddhism

6. INTERNATIONAL BUSINESS ENVIRONMENT • Cultural influences • Most Common US language? • English 82.1% • Spanish 10.7% • Indo-European 3.8% • Asian 2.7% • Most Common US religion? • Christianity 73% • None 20% • Other 4% • Judaism, Buddhism, Islam, Hinduism • US education levels • High School 88% • Some College 57% • Bachelors 30% • Masters 8% • Doctorate 3%

7. INTERNATIONAL BUSINESS ENVIRONMENT • Economic development • Going to work on a high-speed bullet train to manage a computer network in a high-rise building versus riding an oxcart to a grass hut to operate a hand loom to make cloth for people in their village • How does this influence international business?: • Literacy Level – high levels literacy > better education > more and better goods & services • Technology – high automation > create and deliver goods quickly • Agricultural Dependency – highly dependent > weaker manufacturing base > fewer quantity/quality of products • Infrastructure – nations’ transportation, communication, and utility systems • Stronger infrastructure > better prepared for international business

8. INTERNATIONAL BUSINESS ENVIRONMENT • Economic development • Developed Countries • High Human Development Index (HDI) • Approx. 50 countries • Norway, Australia, Netherlands, USA, New Zealand, Canada, Japan, Hong Kong, Chile, Croatia • Developing Countries • Newly industrialized countries • Approx. 150 countries • Afghanistan, Argentina, China, Mexico, Peru, Poland, Russia • Less Developed Countries • Low standard of living, low industrial base, low HDI • Approx. 50 countries • Africa – 33 countries • Asia Pacific – 14 countries • Americas – 1 country (Haiti)

9. INTERNATIONAL BUSINESS ENVIRONMENT • Political and legal concerns • Type of government, stability of government, and the government’s policies toward business • How does this influence international business?: • Regulations on fair trade • Require safety inspections • Enforce contracts

10. ELEMENTS OF INTERNATIONAL BUSINESS ENVIRONMENT

11. INTERNATIONAL TRADE BARRIERS • Trade Barriers – restriction to free trade • Quotas • Tariffs • Embargoes

12. QUOTAS A limit on the quantity of a product that may be imported or exported within a given period • Reasons for quotas • To keep supply low and prices the same • Protects domestic producers from international competition • To express displeasure at the policies of the importing country • To protect one of a country’s industries from too much competition from abroad • Critics of import quotas • Corruption (bribes to get a quota allocation) • Smuggling (circumventing a quota)

13. TARIFFS A tax that a government places on certain imported products • Reasons for tariffs • To set amount per pound, gallon, or other unit • To set the value of a good • In 2010, the US collected over $25 Trillion in import tariffs • Example of tariffed goods: • Chickens $0.90 each • Rice $0.018/kg

14. EMBARGOES Government stops the export or import of a product completely • Reasons for embargoes • To protect a country’s industries from international competition more than the quota or tariff will achieve • Sanctions related to • Terrorism • Diamond Trading • Narcotics • Nuclear proliferation • Human rights violations • The US currently has trade embargos with approx. 30 countries

15. ENCOURAGING INTERNATIONAL TRADE • Free-trade zones • Free-trade agreements • Common markets

16. 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 • Importer pays duty only when the product leaves the zone

17. FREE-TRADE AGREEMENTS Member countries agree to remove duties (import taxes) and trade barriers on products traded among them • US has 12 Free-Trade Agreements in place with 18 countries • Results in increased trade between members • NAFTA (North American Free Trade Agreement) • Began on January 1, 1994 • Canada & Mexico are US #1 and #3 trading partners, respectively

18. COMMON MARKETS Members do away with duties and other trade barriers • Allow companies to invest freely in each member’s country • Allow workers to move freely across borders • Examples • European Union (EU) • 27 member states • Single market with common standardized laws • Common currency • Highest GDP in world • Latin American Integration Association (LAIA)

19. assignment • NAFTA Pros & Cons