CHAPTER 4

Competing in the Global Marketplace

THE FUTURE OF BUSINESS

Gitman & McDaniel
6th Edition

Prepared
Preparedby
by
Deborah Baker
Deborah Baker
Chapter 4
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ChristianUniversity
University
 Learning Goals

Why do nations trade?

1

What are the barriers to international trade?

2
How do governments and institutions foster
3 world trade?

4 Why are international economic communities?

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 Learning Goals

5 How do companies enter the global

marketplace?

What threats and opportunities exist in the

6 global marketplace?

What are the advantages of multinational

7 corporations?

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 Learning Goals

What are the trends in the global

8 marketplace?

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 Global Trade in the United States

Why is global trade important to the

United States and how is it measured?

1 Chapter 4
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 Global Vision

Recognizing and reacting to

international business
opportunities

Being aware of threats from

foreign competitors

Effectively using international

distribution networks

1 Chapter 4
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Measuring Trade Between Nations
Exports
Exports
Imports
Imports

Balance
Balance of
of
Trade
Trade

Balance
Balance of
of
Payments
Payments
Exchange
Exchange
Rates
Rates
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 Balance of Trade

The difference between the value of a

Balance
country’s exports and the value of its
of Trade imports during a certain time.

A summary of a country’s international

Balance financial transactions showing the difference
of Payments between the country’s payments to and its
receipts from other countries

Floating A system in which prices of currencies move

Exchange up and down based upon the demand for and
Rate supply of the various currencies.

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 Why Nations Trade

Why do nations trade?

2 Chapter 4
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Why Nations Trade
A country can produce and sell products
Absolute
Absolute at a lower cost and is the only provider of a
Advantage product
Advantage

A country should specialize in the products

Comparative that it can produce most readily and cheaply,
Comparative and trade these for goods that foreign
Advantage
Advantage countries can produce most readily
and cheaply

2
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 The Fear of Trade and
Globalization

 Millions fear losing their jobs

 Employers threaten to export jobs if workers

do not accept pay cuts

 Service and white-collar jobs are vulnerable

to operations move

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 The Fear of Trade
and Globalization

Outsourcing Sending work functions to another

country resulting in domestic workers
losing their jobs.

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 Benefits of
Globalization

 Productivity grows more quickly when countries produce

goods and services in which they have a comparative
advantage.
 Global competition and cheap imports keep prices down
 An open economy spurs innovation
 The U.S. buys $2 trillion a year from other countries
 Prices for many heavily traded goods have fallen

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 Barriers to Trade

What are the barriers to

international trade?

3 Chapter 4
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 Barriers to Trade

Natural
Natural Barriers
Barriers
Major
Major Obstacles
Obstacles
to
to
International Tariff
Tariff Barriers
Barriers
International
Trade
Trade
Nontariff
Nontariff Barriers
Barriers

3 Chapter 4
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 For and Against Tariffs

For
For Tariffs
Tariffs Against
Against Tariffs
Tariffs

 Protect infant  Discourage free trade

industries
 Raise prices

 Aid in military
preparedness

3 Chapter 4
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 Nontariff Barriers

Import
Import Quotas
Quotas

Embargos
Embargos

Buy-National
Buy-National Regulations
Regulations

Exchange
Exchange Controls
Controls

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 Fostering Global Trade

How do governments and institutions

foster world trade?

4 Chapter 4
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 Fostering Global Trade

Antidumping
Antidumping Laws
Laws

The
The Uruguay
Uruguay Round
Round and
and the
the WTO
WTO

The
The World
World Bank
Bank and
and International
International Monetary
Monetary Fund
Fund

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