INTERNATIONAL BUSINESSGOALS:

•State the basic reason for nations doing business with each other.

•Understand the concepts of currency exchange rates, balance of trade, and balance of payments.

•Explain what is meant by a multinational corporation.

Unit 5Unit 5

INTERNATIONAL BUSINESS Business activities necessary for creating, shipping and

selling goods and services across national borders Also called foreign or world trade.

TRADING AMONG NATIONS

Importing – things we buy from other countries Exporting – things we sell to other countries

WHY IMPORT? Lower cost Perception of better quality Personal enjoyment in

owning foreign made goods

IMPORTED RAW MATERIALS USED IN PRODUCTION IN THE U.S.

Bauxite Aluminum Ore 97%Bauxite Aluminum Ore 97%

Mica 100%Mica 100%

Manganese 100%Manganese 100%

Industrial Diamonds 100%Industrial Diamonds 100%

Silver 64%Silver 64%

Nickel 68%Nickel 68%

Tin 72%Tin 72%

Chromium 73%Chromium 73%

Cobalt 95%Cobalt 95%

ImportImport U.S. ProductionU.S. Production

U.S. TRADE, 2011

All CountriesAll Countries $1,480 $2,207 - $727

Selected Nations and RegionsSelected Nations and RegionsCanada 280 315 -34Mexico 198 262 - 64 Japan 66 129 - 63Netherlands 42 23 + 19Australia 28 10 + 17Brazil 43 32 + 11Taiwan 26 41 - 16China 104 400 - 295European Union 268 368 - 99

Goods ExportedGoods Exported Goods ImportedGoods Imported U.S.U.S.(in Billions)(in Billions) (in Billions) (in Billions) BalanceBalance

Predict:

What do you think are some of the main US Exports?

MAIN US EXPORTS

MachineryIndustrial SuppliesMotor vehicles and partsAircrafts

Challenges of International BusinessINTERNATIONAL CURRENCY

Exchange rate - The value of a currency in one country compared with the value of a currency in another.

Each country uses its own form of currency - with its own unique value. The value of the currency is effected by supply and demand.

Currency Exchange Rates

When goods/services are quoted in one currency (i.e. Euros), but paid for in another (i.e. US Dollar), the amount must be converted from dollars to euros using the current currency exchange rate.

BARRIERS TO INTERNATIONAL TRADE

Quotas – limit on quantity of certain goods by the government

Tariffs – tax placed on certain goods by the government

Embargoes – stopping export/import all together of a product or from a country

WHY BARRIERS?

Increase demand for US productsExpress disapproval for actions of another country

MEASURING TRADE BETWEEN NATIONS Balance of trade – difference between countries total exports

and total imports

Balance of payments – difference between the amount of money that comes into a country and the amount of money that goes out of a country

BALANCE OF TRADE

FavorableFavorable UnfavorableUnfavorable

ExportsExports ImportsImports ExportsExports ImportsImports

Trade Surplus Trade Deficit

GLOBAL BUSINESS ORGANIZATIONSA multinational companymultinational company or corporation (MNC)corporation (MNC) is an organization that conducts business in several countries and has management capable of doing business worldwide.

GLOBAL STRATEGY Using a standardized product and marketing strategy

worldwide

MULTINATIONAL STRATEGY Treating each national market differently, developing

products and marketing strategies that appeal to the customs, tastes and buying habits of a particular national market

Advantages of International Business Lower prices More choices Career opportunities Increased sales and profits Promotes mutual understanding and respect between

nations Increased competition so US products are better quality and

companies are more productive

Predict:

Try to identify one potential advantage and on potential

disadvantage of International Trade.

Disadvantages of International Business Lowers the demand for US made products Decreased demand for some US products causes lost jobs