International Business Basics. Goals Describe importing and exporting Describe importing and...

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International Business Basics

Transcript of International Business Basics. Goals Describe importing and exporting Describe importing and...

Page 1: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

International Business Basics

Page 2: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Goals

Describe importing and exporting

Compare balance of trade and balance of payments

List factors that affect the value of global currency

Page 3: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Domestic Business Defined

The making, buying, and selling of goods and services within a country.• “Made for the U.S. by the U.S.”• Buy American……

Page 4: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

International Business Defined

Business activities needed for creating, shipping, and selling goods and services across national borders.

For example: You go to Meijers and purchase a tool that was

manufactured in China.

Page 5: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Advantages

What might be some of the advantages of taking your business international vs. staying domestic?

Page 6: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Benefits To Businesses Participating in International Business

1. Access to many more markets2. Access to cheaper labor3. Increased quality or quantity of

goods4. Access to resources that may not be

available at home.

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Access To MarketsU.S. Population: Roughly 320,119,930

• As of January 6, 2015 at 9 a.m.

World Population: Roughly 7,216,140,340 (as of same time above)

Conclusion: The Global market can reach

roughly 22 times more consumers than simply just U.S. consumers.

Page 8: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Types of Advantages

Absolute Advantage• This exists when a country can produce a good

or service at a lower cost than other countries Could be due to an abundance of nat. resources

(South Amer. = coffee, Saudi Arabia = oil)

Comparative Advantage• Where a country specializes in the production

of a G&S at which it is relatively more efficient

Page 9: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Flow of Goods And Services

Imports Goods and services flowing/coming into

Canada

Exports Goods and services flowing/going out of

Canada

Imports may include: Raw materials Processed materials Simi-finished goods, Manufactured goods ready for sale.

Page 10: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

U.S. Imports & Exports 2010Rank Country Exports Imports %

1 Canada 248.8 276.5 16.5%

2 China 91.9 364.9 14.3%

3 Mexico 163.3 229.7 12.3%

4 Japan 60.5 120.3 5.7%

5 Germany 48.2 82.7 4.1%

6 United Kingdom

48.5 49.8 3.1%

7 South Korea 38.8 48.9 2.7%

8 France 27.0 38.6 2.1%

9 Taiwan 26.0 35.9 1.9%

10 Brazil 35.4 23.9 1.9%Source = http://trade.gov/publications/pdfs/tm_091208.pdf

Page 11: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Canada and US Trade Relationship

Why does it make sense to establish a solid trading relationship with the US?

1. Shipping costs are cheaper (proximity factor)2. Similar culture and interests so same types of

products and services will appeal to citizens3. Speak the same language, watch same TV

programs, movies, sports and similar fashion styles

4. Population of the states is 10x that of Canada’s

Page 12: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Balance of Trade

Balance of Trade Relationship between a country’s total imports and total

exports.

Trade Surplus = E > I Export$ are greater than Import$. Americans are selling more products to other countries than

they are importing. If surplus is made up of primarily manufactured goods, then

more jobs are created for Canadians.

Trade Deficit = E < I Americans are spending more money on importing goods

from other countries than selling/exporting goods to other countries.

Usually means that fewer Canadian jobs are being provided

Page 13: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.
Page 14: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Export Business

Two ways a business may export goods:

1. Through direct exporting 2. Through indirect exporting

Page 15: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Exporting Business

Direct Exporting The exporting company deals directly with the

company that will wishes to import the goods into his/her country.

Conducted usually by established companies who have the experience and resources to set up offices and sales staff in foreign countries.

More risky as the exporting company assumes all risk.

U.S. Company

China Company

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Exporting Business

Indirect Exporting Goods move from the exporter to an

intermediary, who is often from the foreign country, and then on to the importing business.

Intermediary Someone or another company who helps the

exporter find a company who wants to purchase and import your goods)

U.S. Company

China Company

Intermediary Business or Individual

(middle man)

Page 17: International Business Basics. Goals Describe importing and exporting Describe importing and exporting Compare balance of trade and balance of payments.

Exporting Business

Indirect Exporting Usually conducted by new businesses which don’t

have the resources, or global reputation

Business share financial risks with the intermediary

Some countries prohibit direct exporting, likely to create jobs for local intermediaries. (i.e. in the Middle East, Central America and Asia)

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₤ € Currency ℓ ₣

A very large challenge for businesses involved in international trade.

Exchange Rate – value of a currency in one country compared with the value in another.• http://finance.yahoo.com/?u

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Currency

3 things that affect exchange rates:• The country’s balance of payments

The difference between $$ that goes into and out of the country

• An increase in demand for that country’s products makes the exchange rate increase

• The country’s economic conditions High inflation & interest rates = Low

exchange rate• The country’s political stability

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