Chapter 3

Chapter 3 - Chapter Three Business in a Borderless World...

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Chapter Three Business in a Borderless World Objectives o Explore some of the factors within the international trade environment that influence business. o Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. o Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. o Summarize the different levels of organizational involvement in international trade. o Contrast two basic strategies used in international business. o Assess the opportunities and problems facing a small business considering expanding into international markets. The Role of International Business o To buy, sell and trade goods and services across national boundaries Why Nations Trade o To obtain raw materials and goods that are: Otherwise unavailable Available elsewhere at a lower price Absolute Advantage o A monopoly that exists when a country is the: Only source of an item Only producer of an item Most efficient producer of an item o Example: DeBeers Consolidated Mines, Ltd. Virtually controls the world’s diamond trade Comparative Advantage o A country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items o Example: U.S. agricultural commodities, such as corn and wheat Trade between Countries o Importing The purchase of goods and services from foreign sources o Exporting The sale of goods and services to foreign markets U.S. International Trade in Goods and Services 1
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Balance of Payments o Balance of payments: surplus or deficit flow of money into or out of a country Components of the Balance of Payments International Trade Barriers
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Chapter 3 - Chapter Three Business in a Borderless World...

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