The Global
Marketplace
Chapter 3
Business in
Action 6e
Bovée/Thill
Learning Objectives
1. Explain why nations trade and describe how
2.
3.
international trade is measured
Discuss the nature of conflicts in global
business, including free trade and
government interventions in international
trade
Identify the major organizations that facilitate
international trade and the major trading
blocs around the world
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Learning Objectives (cont.)
4. Discuss the importance of understanding
cultural and legal differences in the global
business environment
5. Define the major forms of international
business activity
6. Discuss the strategic choices that must
be considered before entering
international markets
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The World’s Most
Competitive Countries
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Why Nations Trade
 Economic globalization
 The increasing integration and
interdependence of national economies
around the world
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Why Nations Trade
 Focusing on relative strengths
 Expanding markets
 Pursuing economies of scale
 Acquiring materials, goods, and services
 Keeping up with customers
 Keeping up with competitors
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How International Trade is Measured
 Balance of trade
 Total value of the products a nation exports
minus the total value of the products it
imports, calculated over a period of time
 Trade surplus
 A favorable trade balance created when a
country exports more than it imports
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How International Trade is Measured
 Trade deficit
 An unfavorable trade balance created when a
country imports more than it exports
 Balance of payments
 The sum of all payments a country receives
from other countries minus the sum of all
payments it makes to the other countries,
over some specified period of time
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Foreign Exchange Rates and
Currency Valuations
 Exchange rate
 The rate at which the money of one country is
traded for the money of another
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Strong and Weak Currencies: Who
Gains and Who Loses?
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Free Trade
 Free trade
 International trade unencumbered by
restrictive measures
 Supporters of free trade generally
acknowledge that it produces winners and
losers but that the winners gain more than
the losers lose, so the net effect is positive
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3-11
Government Intervention in
International Trade
 Protectionism
 Government policies aimed at shielding a
country’s industries from foreign competition
 Tariffs
 Taxes levied on imports
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Government Intervention in
International Trade
 Import quotas
 Limits placed on the quantity of imports a
nation will allow for a specific product
 Embargo
 A total ban on trade with a particular nation (a
sanction) or of a particular product
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Government Intervention in
International Trade
 Export subsidies
 A form of financial assistance, in which
producers receive enough money from the
government to allow them to lower their
prices, in order to compete more effectively in
the global market
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Government Intervention in
International Trade
 Dumping
 Charging less than the actual cost or less
than the home-country price for goods sold in
other countries
 Sanctions
 politically motivated embargoes that revoke a
country’s normal trade relations status
 often used as forceful alternatives short of
war
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International Trade Organizations
 World Trade Organization (WTO)
 Permanent forum for negotiating,
implementing, and monitoring international
trade procedures and for mediating trade
disputes among the150 member countries
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International Trade Organizations
 The International Monetary Fund (IMF)
 The IMF was formed to monitor global
financial developments, provide technical
advice and training, provide short-term loans
to countries that are unable to meet their
financial obligations, and work to alleviate
poverty in developing economies.
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International Trade Organizations
 The World Bank
 Founded to finance reconstruction after
World War II and is now involved in hundreds
of projects around the world aimed at
addressing poverty, health, education, and
other concerns in developing countries
 Is a United Nations agency owned by its 187
member nations
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Trading Blocs
 Trading blocs
 Organizations of nations that remove trade
barriers among their member countries and
establish uniform barriers to trade with nonmember nations
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Trading Blocs
 North American Free Trade Agreement
(NAFTA)
 Formed by the United States, Canada, and
Mexico to pave the way for the free flow of
goods, services, and capital within the bloc
through the phased elimination of tariffs and
quotas
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Trading Blocs
 The European Union (EU)
 constitutes more than two dozen countries
and a half billion people.
 now accounts for the world’s largest economy
 EU nations have eliminated hundreds of local
regulations, variations in product standards,
and protectionist measures that once limited
trade among member countries
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Trading Blocs
 The Asia-Pacific Economic
Cooperation (APEC)
 an organization of 21 countries working to
liberalize trade in the Pacific Rim
 has a long-term goal of liberalizing and
simplifying trade and investment among
member countries and helping the region as
a whole achieve sustainable economic
growth.
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Members of Major Trading Blocs
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Members of Major Trading Blocs
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The Global Business Environment
 Culture
 A shared system of symbols, beliefs,
attitudes, values, expectations, and norms for
behavior
 Ethnocentrism
 Judging all other groups according to the
standards, behaviors, and customs of one’s
own group
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The Global Business Environment
 Successful global business leaders
recognize and respect differences in
language, social values, ideas of status,
decision-making habits, attitudes toward
time, use of space, body language,
manners, religions, and ethical standards
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The Global Business Environment
 Stereotyping
 Assigning a wide range of generalized
attributes, which are often superficial or even
false, to an individual based on his or her
membership to a particular culture or social
group
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Improving Communication with a
Person from Another Culture
 Be alert to the other person’s customs
 Deal with the individual
 Clarify your intent and meaning
 Adapt your style to that the other person’s
 Show respect
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Forms of International
Business Activity
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Forms of International
Business Activity
 Importing
 Purchasing goods
or services from
another country and
bringing them into
one’s own country
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 Exporting
 Selling and
shipping goods or
services to another
country
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Forms of International
Business Activity
 Licensing
 Agreement to produce and market another
company’s product in exchange for a royalty
or fee
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Forms of International
Business Activity
 Foreign Direct Investment (FDI)
 Investment of money by foreign companies in
domestic business enterprises
 Multinational Corporations (MNCs)
 Companies with operations in more than one
country
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Strategic Approaches to
International Markets
 Multidomestic strategy
 A decentralized approach to international
expansion in which a company creates highly
independent operating units in each new
country
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Strategic Approaches to
International Markets
 Global strategy
 A highly centralized
approach to
international
expansion, with
headquarters in the
home country
making all major
decisions
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 Transnational
strategy
 A hybrid approach
that attempts to
reap the benefits of
international scale
while being
responsive to local
market dynamics
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Product Strategies for
International Strategies
Products
Customer support
Promotion
Pricing
Staffing
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3-35
Applying What You’ve Learned
1. Explain why nations trade and describe how
2.
3.
international trade is measured
Discuss the nature of conflicts in global
business, including free trade and
government interventions into international
trade
Identify the major organizations that facilitate
international trade and the major trading
blocs around the world
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
3-36
Applying What You’ve Learned
4. Discuss the importance of understanding
cultural and legal differences in the global
business environment
5. Define the major forms of international
business activity
6. Discuss the strategic choices that must
be considered before entering
international markets
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
3-37
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3-38
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