OVERVIEW OF INTERNATIONAL TRADE

• International business

  The exchange of goods and services among individuals and business in multiple countries
• International Business


  Encompasses all commercial activities that take place to promote the transfer of goods, services, resources, people, ideas and technologies across national boundaries
• Globalization

  Refers to the shift toward a more integrated and interdependent world economy
• Facets of Globalization


  • Globalization of markets
  • Globalization of Production
• Globalization of markets


  Refers to the merging of historically distinct and separate national markets into one huge global marketplace
• Globalization of Production


  Refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production
• The Emergence of Global Institutions


  • General Agreement on Tariffs and Trade (GAAT)
  • World Trade Organization (WTO)
  • International Monetary Fund
  • World Bank
  • United Nations
  • Group of Twenty (G20)
• Drivers of Globalization


  • Declining trade and investment barriers
  • Technological Change
• International Trade


  Occurs when a firm exports goods or services to consumers in another country
• Foreign Direct Investment (FDI)


  Occurs when a firm invests resources in business activities outside its home country
• Implications of Technological Change for Globalization


  • Globalization of Production
  • Globalization of Markets
• Trends in the Changing Demographics of the Global Economy


  • The changing world output and world trade picture
  • The changing foreign direct investment picture
  • The changing nature of the multinational enterprise
  • The changing world order
• Advantages of Globalization


  • Increases economic growth
  • Makes production more affordable
  • Promotes Working Together
  • Brings opportunities to poorer countries
• Disadvantages of Globalization


  • Unequal economic growth
  • Lack of local businesses
  • Increases potential global recessions
  • Exploits cheaper labor markets
  • Causes job displacement
• National Differences in Political Economy


  • Political Differences in International Business
  • Economic Systems
  • Legal Systems
  • Differences in Culture
• Political System


  The system of government in a nation
• Two Dimensions of Political System


  • Collectivism and Individualism
  • Democratic or Totalitarian
• Collectivism


  Refers to a political system that stresses the primacy of collective goals over individual goals
• Two broad camps of Socialism


  • Communist
  • Social Democrats
• Individualism


  Refers to a philosophy that an individual should have freedom in his or her economic and political pursuits
• The Two Main Principle of Individualism


  • Emphasis on the importance of guaranteeing individual freedom and self-expression
  • The welfare of society is best served by letting people pursue their own economic self-interest, as opposed to some collective body dictating what is in society's best interest
• Democracy


  Refers to a political system in which government is by the people, exercised either directly or through elected representatives
• Totalitarianism


  A form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties
• Four Major Forms of Totalitarianism


  • Communist Totalitarianism
  • Theocratic Totalitarianism
  • Tribal Totalitarianism
  • Tight-Wing Totalitarianism
• Market Economy


  All productive activities are privately owned, as opposed to being owned by the state. The goods and services that a country produces are not planned by anyone. Production is determined by the interaction of supply and demand and signaled to producers through the price system
• Command Economy


  All productive activities are owned by the state. The goods and services that a country produces are planned by the state rather than determined by the interaction of supply and demand
• Mixed Economy


  Certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning
• Three Main Types of Legal Systems

  • Common Law
  • Civil Law System
  • Theocratic Law System
• Cross-Cultural Literacy


  An understanding of how cultural differences across and within nations can affect the way business is practiced
• Culture


  A system of values and norms that are shared among a group of people and that when taken together constitute a design for living
• Values


  Abstract ideas about what a group believes to be good, right, and desirable
• Norms


  The social rules and guidelines that prescribe appropriate behavior in particular situations
• Two Major Categories of Norms


  • Folkways
  • Mores
• Society


  A group of people who share a common set of values and norms
• Determinants of Culture


  • Social Structure
  • Religious and Ethical Systems
  • Language
  • Education
• Social Structure


  Refers to the basic social organization of a society, including the degree to which the basic unit is the individual vs the group, and the degree of social stratification
• Religion


  A system of shared beliefs and rituals that are concerned with the realm of the sacred
• Ethical Systems


  Refer to a set of moral principles, or values, that are used to guide and shape behavior
• Types of Language


  • Spoken Language
  • Unspoken Language
• Formal Education


  Plays a key role in socializing individuals into the values and norms of a society, both directly and indirectly