Reviewer – International Business and Trade

Chapter 1 – We Live in a Global - China, India, and Japan 15,000

Economy years ago.
- Africa and South America
The Foundation of International Business
thousands of years ago
International Business – all business - Eleventh Century
activities needed to create, ship, and sell - Fifteenth and Sixteenth Centuries
goods and services across national borders. - Colonization

May also be called: Selected Countries and Their Colonial

Heritage
- Global Business
- International Trade
- Foreign Trade
Why is International Business Important?
- It allows you to purchase popular
items made in other countries.
Without global business, life would
be different. People around the world
would not have the opportunity to
enjoy goods and services made in
other countries.
- It provides a source of raw materials
and parts and demand for foreign
products. Global business allows for
new market and investment
opportunities. Global E-Commerce Opportunities

A global dependency exists when items that Technology allows firm to buy, sell, and
consumers need and want are created in exchange information around the world. The
other countries. internet, automated production methods, and
video conferencing are changing the way
Global Opportunities – many people invest people do business.
in businesses to earn money for themselves.
As companies expand into other countries,  Companies sell goods and services to
they create new investment opportunities. anyone with internet access.
 Businesses buy online from suppliers
Improved Political Relations
in other countries.
International business activities can help to  Firms meet customers’ geographic
improve mutual understanding, and cultural needs.
communication, and the level of respect  People process information and
among people in different nations. distribute data world-wide.
International Business Started in:  Marketers research global customers
and markets online.
Reviewer – International Business and Trade

has a strong influence on business activities.

The main culture and social factors that
International Business Basics
affect international business are:
Fundamentals of International Trade
- language
Imports – a good or service bought in one - education
country that was produced in another. - religion
- values
Exports – goods and services produced in - customs
home country for sale to other markets. - social relationships.
Trade Barriers – restrictions that reduce Political and Legal Factors
free trade among countries.
Government restricts the activities of
- Import taxes increase the cost of consumers and business operators. The most
foreign products. common political and legal factors that
- Quotas restrict the number of affect international business activities
imports. includes:
- Laws prevent certain products from
coming into a country. - the type of government
- the stability of the government
The International Business Environment - government policies toward business
Buying and selling goods and services is Economic Conditions
similar in most parts of the world.
Consumers try to satisfy their needs and Everyone faces the problem of limited
wants at a fair price. resources to satisfy numerous needs and
wants.
International Business Environment
Factors - Type of economic system
- The availability of natural resources
Geographic Conditions – the climate, - The general education level of the
terrain, seaports, and natural resources of a country’s population
country will influence its business activities.
It also will restrict what type of businesses The Global Business World
that can operate in a certain type of climate.
International Business Skills – certain
A nation with many seaports and rivers is skills are needed in every type of job. These
able to easily ship products for foreign trade. skills or abilities will continue to be
important as business activities among
- Climate countries increase.
- Terrain, seaways
- Natural Resources  History – your awareness of the past
- Agricultural Products can help you better understand
today’s international business
Cultural and Social Factors
relations.
Culture is the accepted behaviors, customs,  Geography – it is more than names
and values of a society. A society’s culture on a map. Knowledge of geography
Reviewer – International Business and Trade

will help you understand how the Step 2. Identify the Alternatives
climate and terrain of a country can
Step 3. Evaluate the Alternatives
affect transportation, housing, and
other business activities. Step 4. Make a choice.
 Foreign Language – as countries
Opportunity Cost is the most attractive
increasingly participate in foreign
alternative given up when a choice is made.
trade activities, your ability to
communicate effectively with people Step 5. Take action on the choice.
from other societies increases in
importance. Step 6. Review the decision.
 Cultural Awareness – The decision-making process helps
understanding the cultures vary from individuals, companies, and nations make
nation to nation allows people to be wiser economic decisions.
more sensitive to customs and
traditions of all societies. Basics of Economics
 Study Skills – asking questions, Determining prices involves two main
taking notes, and doing research are elements – supply and demand.
the tools necessary to keep up to date
on changes in international business. Supply – is the relationship between the
amount of a good or service that businesses
are willing and able to make available and
the price.
Chapter 2 – Our Global Economy
Demand – is the relationship between the
Economics and Decision Making
amount of good or service that consumers
The Basic Economic Problem are willing and able to purchase and the
price.
1. Scarcity refers to the limited
resources available to satisfy the Market Price – the point at which supply
unlimited needs and wants of people. and demand cross.
2. Economics is the study of how
Changing Prices
people choose to use limited
resources to satisfy their unlimited Prices constantly change.
needs and wants.
Inflation – an increase in the average prices
Making Economic Decisions of goods and services in a country. It is an
indication of the buying power pf a
People and countries cope with scarcity by
country’s monetary unit.
making decisions.
Two basic causes:
 Coping with Scarcity
 Making Choices 1. When demand exceeds supply, prices
go up. This is called demand-pull
Decision-Making Process:
inflation. It can occur when a
Step 1. Define the Problem
Reviewer – International Business and Trade

government tries to solve economic of the economy and a single party

problems by printing more money. controls the government is called
2. When the expenses of a business communism.
increase. This is known as cost-push 2. Market Economies – based on the
inflation. This was a result of higher forces of supply and demand. Market
price charged by a company. economies are those in which
individual companies and consumers
Economic Resources Satisfy Needs
make the decisions about what, how,
Factors of Production and for whom items will be
produced. The economic and
 Natural Resources – also known as political environment where a market
land, these resources are the raw economy exists is called capitalism.
materials that come from the earth, - Private Property – individuals
from the water, and from the air. have the right to buy and sell
 Human Resources – also known as productive resources and to own
labor, these resources are the people business enterprises.
who work to create goods and - Profit Motive – individuals are
services. inspired by the opportunity to be
 Capital Resources – also called rewarded for taking business
capital, these resources include risks and for working hard.
buildings, money, and factories used - Free, Competitive Marketplace
in the production process. – consumers have the power to
Economic Systems use their choices to determine
what is to be produced and to
Every nation decides how to use its factors influence the prices to be
of production to create goods and services charged.
for its people. 3. Mixed Economies – blend between
government involvement in business
An economic system is the method a
and private ownership. The income
country uses to answer the basic economic
from these enterprises is used to hep
questions. Economic systems can be
fund government activities.
categorized based on ownership of resources
Socialism refers to a political and
and government involvement in business
economic system with most basic
activities.
industries owned and operated by
Types of Economic Systems government with the government
controlled by the people as a whole.
1. Command Economies – the
government or central-planning Achieving Economic Development
committee regulates the amount,
Development Factors
distribution, and price of everything
produced.  Literacy Level – countries with
The political and economic better education systems usually
environment where the government provide more goods and services that
owns all of the productive resources
Reviewer – International Business and Trade

are of higher quality for their  Absolute Advantage – exists when

citizens. a country can produce a good or
 Technology – automated production, service at a lower cost than other
distribution, and communications countries.
systems allow companies to create  Comparative Advantage – exists
and deliver goods, services, and when a country can produce a good
ideas quickly. or service with more efficiency than
 Agricultural Technology – an other countries.
economy that is largely involved in
agriculture does not have the
manufacturing base to provide
citizens with a large number of high-
quality products. Measuring Economic Progress

Types of Development  Measure of Production

- Gross Domestic Product –
 Industrialized Countries – a measures the output of goods that
country with strong business activity a country produces within its
that is usually the result of advanced borders. It includes items
technology and a highly educated produced with foreign resources.
population. - Gross National Product –
Infrastructure – refers to a measures the total value of all
nation’s transportation, goods and services produced by
communication, and utility systems. the resources of a country.
Industrialized countries are actively  International Trade Activity
involved in international business - Balance of Trade – is the
and foreign trade. difference between a country’s
 Less-developed Countries – is a exports and imports.
country with little economic wealth - Foreign Exchange Rate – is the
and an emphasis on agriculture and value of one country’s money in
mining. Sometimes these countries relation to the value of the money
have abundant resources but no of another country.
technology to make use of them. - Foreign Debt – is the amount a
 Developing Countries – are country owes to other countries.
evolving from less developed to  Other Economic Measurements
industrialized. These nations are - Consumer Price Index - it is
characterized by improving a federal government report
educational systems, increasing published by the Bureau of
technology, and expanding Labor Statistics. This
industries. information can help
consumers and business
Resources Satisfy Needs
managers make buying
The Economics of Foreign Trade decisions.
Reviewer – International Business and Trade

- Unemployment Rate – when

people are not earning an
income, they cannot purchase
needed goods and services.
This cause other people to
lose their jobs. The result is a
weaker economy.