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Global Marketplace Business Strategies

Chapter 3 of the lecture notes focuses on competing in the global marketplace, covering topics such as global trade's impact on the U.S. economy, the benefits of international trade, barriers to trade, and ways to foster global trade. It discusses concepts like trade surplus and deficit, tariffs, and international agreements, as well as the role of multinational corporations and current trends in global competition. The chapter emphasizes the importance of understanding global trade dynamics for effective business management.

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10 views6 pages

Global Marketplace Business Strategies

Chapter 3 of the lecture notes focuses on competing in the global marketplace, covering topics such as global trade's impact on the U.S. economy, the benefits of international trade, barriers to trade, and ways to foster global trade. It discusses concepts like trade surplus and deficit, tariffs, and international agreements, as well as the role of multinational corporations and current trends in global competition. The chapter emphasizes the importance of understanding global trade dynamics for effective business management.

Uploaded by

ayleenx.galindo2
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Introduction to Business

Lecture notes/study guide

Chapter 3 - Competing in the Global Marketplace


3.1 Global Trade in the United States
● What does it mean to have a global vision?
○ What does a global vision enable managers to do?
● How does international business impact the U.S. economy?
● Why should global trade be concerned with terrorism?
● Key measures of international trade.
○ What is the difference between exports and imports?
○ Why is it important to know these differences?
○ What is it called when there is a difference between the value of a country’s
exports and imports during a specific time?
■ Explain the difference between trade surplus and trade deficit.
● What does a country have to take into consideration when determining their balance of
payments?
○ Significance of a country’s balance of payments?
● Why is it important to know the exchange rate of one country’s currency in relation to
another country’s currency?
○ How do appreciation and depreciation affect the prices of a country’s goods?
○ What is a floating exchange rate?
■ How do countries benefit from this?
○ What is devaluation?
■ Why would a country use devaluation?
● What happens when a country’s currency is undervalued?

3.2 Why Nations Trade


● Why is trade between nations beneficial?
○ Specialization in trade is called ______________________
● Define absolute advantage ________________________________________________
● Principle of comparative advantage, how does it benefit countries?
○ What is the difference between free trade and protectionism?
● Why do people fear trade?
○ What can result from too much trade?
○ What is outsourcing and how does it relate to trade?
● What are some ways globalization is considered beneficial?

3.3 Barriers to Trade


● Purpose of the barriers to trade.
○ What types of barriers to international trade are there?
● Natural barriers to trade,
● Define tariff
______________________________________________________________
● Why do countries impose tariffs?
○ Purpose of a protective tariff.
○ What are the arguments for and against tariffs?
● Are there other tools the government can use besides tariffs to restrict trade?
○ Define import quota _______________________________________
■ Why would the government impose an import quota?
○ What is a complete ban against importing or exporting a product called?
■ Why would the government impose a ban?
○ Define buy-national regulations ______________________________
■ When does the government typically implement buy-national regulations?
○ Purpose of the exchange control laws.
■ How does limiting imports and encouraging exports help the government?

3.4 Fostering Global Trade


● What do U.S. firms do to ensure they are able to compete on an equal basis with foreign
firms in international trade?
● Define dumping
__________________________________________________________
○ What type of dumping most concerns industrialized countries?
● What is Uruguay Round?
○ When was it adopted and how many nations participate?
○ What does it cover?
● What does WTO stand for?
○ What did it replace and why?
● Two international financial organizations that help foster global trade.
○ How are the lending practices of the World Bank different then the International
Monetary Fund (IMF)?

3.5 International Economic Communities


● Define bilateral trade agreement____________________________________________
● What types of agreements might be considered, between two countries, to lower trade
barriers?
○ Purpose of the preferential tariff.
○ What do free-trade associations allow in the free-trade zone?
● What is the world’s largest free-trade zone?
○ Three countries make up NAFTA.
○ Name the largest new trade agreement.
■ What countries comprise Mercosur?
● Name the newest free trade agreement.
○ Who are its members?
● What does the EU represent?
○ How many members does the European Union have?
○ What is the pooling of sovereignty called?
■ Why is this beneficial to the EU members?

For more free, peer-reviewed, openly licensed resources visit [Link].


■ What major event happened in 2016 in relation to the EU?

3.6 Participating in the Global Marketplace.


● How can companies participate in the global marketplace?
○ What is the least complicated and least risky alternative available to enter the
global marketplace?
○ Define exporting _________________________________________________
○ What is licensing?
■ What is a form of licensing that has grown rapidly in recent years?
● What is it called when a foreign firm manufactures private-label goods under a domestic
firm’s brand?
○ Why is contract manufacturing beneficial?
● What is a joint venture?
○ Advantages and disadvantages of a joint venture.
● Direct foreign investment has the greatest potential for reward, but also for risk. Why?
○ Why would a firm choose to direct foreign investment?
● Form of international trade does not involve cash.

3.7 Threats and Opportunities in the Global Marketplace


● Three global marketplace threats and opportunities.
○ Why might the political structure of a country be considered a threat?
■ What is nationalism and how does it influence foreign producers?
○ What aspects of cultural differences impact the global marketplace?

For more free, peer-reviewed, openly licensed resources visit [Link].


● Economic variables that impact the global marketplace.
○ What is infrastructure and why is it important?

For more free, peer-reviewed, openly licensed resources visit [Link].


3.8 The Impact of Multinational Corporations
● Why do multinational corporations have so many advantages over other companies?
○ What are the advantages?
■ How are they able to overcome trade problems?
■ What is one way to sidestep regulatory problems?
■ Why would a multinational company shift production from one plant to
another?
■ How does being a multinational corporation benefit from new technology?
■ How can being a multinational corporation decrease labor costs?
● Largest multinational corporations.

For more free, peer-reviewed, openly licensed resources visit [Link].


3.9 Trends in Global Competition
● Why is it important to know the underlying trends that will affect world trade growth?
● What current underlying trends are propelling the dramatic growth in world trade?
○ Why is it important for managers to understand their markets growth potential?
○ How important is resource acquisition in the global marketplace and why?
○ Two countries that are impacting the global marketplace.
■ How are these two countries impacting the global marketplace?

For more free, peer-reviewed, openly licensed resources visit [Link].

Common questions

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The principle of comparative advantage suggests that countries should specialize in the production of goods for which they have a lower opportunity cost compared to others. This promotes efficient utilization of resources at a global scale, leading to increased total production and potentially higher global economic welfare. It allows countries to benefit from trade even if they do not have an absolute advantage, encouraging diversification and technological exchange .

Companies can minimize risks by using licensing as it allows them to enter foreign markets with comparatively reduced investment and exposure. Licensing involves granting permissions to a foreign company to use intellectual property, reducing the need for direct investment in foreign infrastructure. This approach mitigates risks related to market volatility, regulatory changes, and cultural differences while allowing companies to generate revenue from royalties without substantial operational commitments .

Understanding the difference between trade surplus and trade deficit is crucial as it reflects the economic strength and trade relations of a country. A trade surplus occurs when a country's exports exceed its imports, suggesting a competitive economy with strong production capabilities. Conversely, a trade deficit indicates the opposite, implying reliance on foreign goods which may lead to increased foreign debt. These measures impact both domestic and global economic policies, affecting currency valuation, foreign exchange stability, and national investment strategies .

A country might deliberately undervalue its currency to make its exports cheaper and more competitive on the global market, thereby increasing its export volume and boosting economic growth. This strategy can also attract foreign investment by offering lower cost structures. However, it may lead to trade tensions, specifically accusations of currency manipulation, and could cause inflation if import costs rise. Long-term undervaluation might also deter structural economic improvements .

Multinational corporations (MNCs) can leverage new technology to optimize their operations, reduce costs, and enhance product offerings, thereby gaining a competitive edge. Technologies such as advanced data analytics, automation, and Internet of Things enable MNCs to improve efficiency, reduce waste, and innovate faster than their competitors. These technologies support better supply chain management, customer insights, and product localization strategies, enhancing global competitiveness and boosting market penetration .

Tariffs, as a form of trade barrier, protect domestic industries by increasing the cost of imported goods, thus making local products more competitive by comparison. They can support local employment and allow nascent industries to grow without being overwhelmed by international competition. However, these protective measures can retaliate with similar barriers, ultimately leading to trade wars, increased consumer prices, and inefficiencies in resource allocation .

A joint venture provides benefits such as shared resources, local market knowledge, and risk distribution, which can facilitate easier and faster market entry. It enables companies to leverage the strengths of the local partner while sharing the potential risks associated with economic and market fluctuations. However, joint ventures pose challenges such as conflicts in management style, profit-sharing complications, cultural mismatches, and reliance on the partner's strengths that could undermine long-term strategy alignment .

Floating exchange rates allow a country's currency value to fluctuate based on market conditions, ensuring that the currency reflects the true market sentiments and economic conditions. This flexibility helps absorb external economic shocks, allows for autonomous monetary policy, and adjusts to trade balance shifts without requiring government interventions. Additionally, it enhances competitiveness by allowing currency depreciation when needed to boost exports .

The political structure influences laws, regulations, and the overall business climate, which are crucial determinants of a country's attractiveness to foreign investment. Political stability, transparent regulatory frameworks, and reliable legal systems enhance investor confidence, while corruption, unpredictability, or restrictive policies can deter investment. Moreover, nationalist movements might promote policies that are unfavorable to foreign ownership, directly impacting investment inflows .

The WTO plays a crucial role in facilitating global trade by providing a platform for negotiating trade agreements, resolving trade disputes, and enforcing global trade rules to ensure fair competition. It was established to replace the General Agreement on Tariffs and Trade (GATT) in response to the need for a more powerful enforcement mechanism to aid in the expansion of trade and economic cooperation among its member countries .

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