POB 1.03 Part 2 Understand business in the global marketplace.

What Factors Impact the International Business Environment?

GeographyCultureEconomyPolitical & legal Concerns

Geographic FactorsLocationClimateTerrainSeaportsNatural Resources

Cultural FactorsCulture – accepted behaviors,

customs and values of a societyFactors include …

◦Language◦Religion◦Values◦Customs◦Social relationships

Economic FactorsWhat are the differences in the living and work

environments?3 Key Effects:

◦Literacy Level – better ed = more & better products for citizens

◦Technology – automated production, distribution and communication = ability to create and deliver products quickly

◦Agricultural Dependency – usually either heavy ag focus or manufacturing

Infrastructure: nation’s transportation, communication, and utility systems

Political and Legal FactorsRegulations on advertising and the

enforcement of contractsSafety inspectionsType of government, stability of

government and policies towards businesses

What are trade barriers?Trade barrier – a restriction to free tradeFormal barriers

◦Embargo◦Quota◦Tariff

Informal barriers◦Culture◦Tradition◦Religion

EmbargoEmbargo – an action imposed by a

government to stop the export or import of a product completely

Why?◦To protect its own industries from

international competition◦Prevent products from getting to other

countries (ex: defense weapons)◦Express disapproval of actions/policies

QuotaQuota – limit on the quantity of a

product that may be imported or exported within a given time period

Why?◦To keep prices stable (high)◦Express displeasure toward a country◦Protect its own country’s industry

TariffTariff – tax the government places on

certain imported goods and servicesWhy?

◦Increase the price of a good◦High tariff lowers demand and reduces

the amount imported

Encouraging International Trade

A few things that encourage international trade◦Common Markets◦Free-Trade Agreements◦Free-Trade Zones

Common MarketsIn a common market, the member

countries do away with the duties and other trade barriers

AKA “economic community”Examples: European Union (EU),

Latin American Integration Association (LAIA)

Free-Trade AgreementsIn a Free-Trade Agreement, member

countries agree to remove the duties and trade barriers on products traded among them

Example: North American Free Trade Agreement (NAFTA) 1993

Free Trade ZoneA Free Trade Zone is a selected are

where products can be imported duty free and then stored, assembled, and/or used in manufacturing

Usually near a seaport or airportImporter pays duties when items

leave the zone