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McGraw- © 2003 The McGraw-Hill Companies, Inc., All

Chapter ThreeBusiness in a

Borderless World


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International Business

The buying, selling,

and trading of goods

and services acrossnational boundaries.

FAST FACT:McDonald’s serves 45 millioncustomers a day at 29,000restaurants in 120 countries.


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Absolute Advantage

Absolute advantage exists when a country

is the only source of an item,

the only producer of an item, or the most

efficient producer of an item.

xample! "eBeers Consolidated #ines,

$td. %virtually controls the world&s

diamond trade'.


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Comparative Advantage

Comparative advantage occurs when a

country speciali(es in products that it

can supply more efficiently or at alower cost than it can produce other

items.

xample! ).*. agriculturalcommodities, such as corn and wheat.


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Importing + xporting

Selling to

foreign markets

Buying from

foreign markets


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The ). *. Trade "eficit

-/0122/ %pro3ected'

Source: Exports and Imports of Goods and Services, 1978!""8, In#opleas #ttp:$$%%%&infop'ease&com$ipa$A"8(("7)tm' *accessed +a !, !""1-

In 4 Billions

http://www.infoplease.com/ipa/A0855074.htmlhttp://www.infoplease.com/ipa/A0855074.html


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Top 2 Countries #aintaining Trade

"eficits + *urpluses with the )*

Trade Deficit

. China

1. 5apan

6. Canada

7. #exico

8. 9ederal :epublic of ;ermany

etherlands

1. )nited =ingdom

6. Bra(il

7. ?ong =ong

8. Australia



International Barriers@ conomic

@ $egalpolitical

@ *ocialcultural

@ Technological



conomic Barriers

@ The level of a country&s economicdevelopment

Industriali(ed nations ).*., 5apan, ;reatBritain

$ess0developed countries Costa :ica

@The level of existing infrastructure@ Currency exchange rates



olitical + $egal Barriers

@ $aws and regulations

@ Tariffs and trade restrictions

Import tariffs, exchange controls, Duotas,

embargos, anti0dumping regulations

@ olitical barriers

olitical instability, cartels



*ocial + Cultural Barriers

@ The overall culture of

a country

@ The culture of the

marketplace

@ The culture of “how

business is practiced”

Think globally, but act locally



#exican WorEers are #ost

*atisfied with their 5obsF

. #exico

1. *wit(erland6. Austria

7. Canada

8. Australia +

Bra(il

*ource! G)*A TH"A *napshots,J )*A TH"A, Hctober 16, 122, p. B.

FBased on base pay, merit pay, 3ob challenge, treatment, leadership, sense of

achievement and sense of direction, in a survey of . million employees in 12

different countries.


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Trade Agreements, Alliances +

Hrgani(ations

@ GATT

@ T!@ "A#TA

@ $%

@ &$'(!S%'

@ A)$(

@ orld Bank

@ *

@ GATT

@ T!@ "A#TA

@ $%

@ &$'(!S%'

@ A)$(

@ orld Bank

@ *



;ATT and >A9TA

;eneral Agreement on Tariffs and Trade%;ATT'!

Trade agreement that provided a forum for tariffnegotiations and a place where international trade

problems could be discussedsolved.

>orth American 9ree Trade Agreement

%>A9TA'!liminates most tariffs and trade restrictions onagricultural and manufactured products betweenCanada, #exico, and ).*. %--70122-'.

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$evels of Involvement in

International Trade

*mport+$,port

Trading (ompanies

-icensing . #ranchising

(ontract &anufacturing

/oint 0entures . Alliances

Direct *nvestment

The &"(

-evel

of

'isk

-evel of *nvolvement



"eveloping International

Business *trategies@ &ultinational

Strategy1

Customi(ing andadapting products,

promotion and

distribution to the local

marEet condition

@ Global Strategy

2Globali3ation41

*tandardi(ing products, promotion,

and distribution to one

world marEet



Hpportunities + Challenges of

;lobal Business

@ 9ewer political barriers

@ #ovement toward marEet economies

@ ;rowing opportunities for small as well as

large businesses



*olve the "ilemma

. What are the Eey issues that need to be

considered in determining global

expansionL

1. What are some of the uniDue problems that

a small business might face in global

expansion that larger firms would notL

6. *hould Audiotech consider a 3oint ventureL*hould it hire a sales force of people native

to the countries it entersL



xplore our Career HptionsWhat are some of the skills

required to be a successful

businessperson in the borderlessworld of the 21st century?



Additional "iscussion

Muestions and xercises. $ooE at the G9oreign xchangeJ section of

the business section of a newspaper. Whatnation&s currency or exchange rate is listedL?ow much of that nation&s currency wouldeDual one dollarL

1. Assume your firm wishes to do business byselling manufactured products in other

countries but does not wish to do actualmanufacturing in the )nited *tates othercountry. What options are availableL



Additional "iscussion

Muestions and xercises

6. Consider the world situation in general. What

are the political hot spots or areas of unrest in

which doing business would be risEyL Whatwould be the possible advantage for a

company setting up a business venture in

these areas of unrest at the first sign of

political stabilityL7. What are some of the reasons for the )nited

*tates trade deficitL


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Chapter 6 Mui(.A negative balance of trade occurs when

a. a country imports more than it exports. b. a company has a monopoly on the production of a

specific resource.c. a country exports more than it imports.

d. a country&s currency can be exchanged for another&scurrency or gold.

1. A partnership between a foreign company and a local partner is called!a.a trading company.

b. an export agency company.c.a direct investment.d. a 3oint venture.


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Chapter 6 Mui(6. When the )nited *tates established a policy forbidding

trade with Cuba, this was an example of what type of traderestrictionLa.a Duota

b. an embargo

c.a countertrade agreementd. an import tariff

7. A comparative advantage exists whena.a firm supplies a product at lower costs.

b. a firm is the only supplier of a product.c.a country supplies a product at lower costs.d. a country is the most efficient supplier of an item.


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#ultiple Choice Muestions

about the Kideo.Which of the following is not a consideration in selecting atransportation mode for international distributionL

a.cost b.speed

c.flexibilityd.diversity

1.NNNNNNNN is the practice of consolidating many items into a singlelarge container that is sealed at its point of origin and opened at itsdestination.

a.Consolidation b.Containeri(ationc."ouble0stacE technologyd.The *tacEtrain process

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