5.1 - Exploring Global Business

Globalization

  • globalization - the connection made among nations when economics freely move goods, labor, and money across borders

  • globalization can:

    • create new markets

    • create new jobs

    • create political relationships

  • culture - the shared beliefs, customs, practices, and social behavior of a particular group or nation

  • international trade - the buying and selling of goods and services across national borders

    • international business or world trade.

  • Domestic business - all the business activity involved in making, buying and selling product within a nation’s borders

  • exports - goods and services that are produced within a country’s borders then sold in another country. (in to out)

  • imports - goods and services that are brought into a country from outside its borders. (out to in)

  • global dependancy - when countries depend on each other for products

  • absolute advantage - a country can produce goods more efficiently and at a lower cost than another country

  • comparative advantage - a country specialized in producing a product at which it is relatively more efficient.

  • balance of trade - the difference between a nation’s exports and imports

    • trade surplus

    • trade deficit

  • balance of payments - the total amount of money that comes into a country, minus the total amount of money that goes out for a specific period of time

    • positive balance of payments - more exports

    • negative balance of payments - more imports

Currency

  • foreign exchange rate - the cost to convert one currency into another

  • floating currency - it’s exchange rate is set by the market forces of the supply and demand in the foreign exchange market (FOREX)

  • factors influencing exchange rates:

    • political stability

    • changes in laws

    • nations involved in disputes

    • economic conditions

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Trade Policy

  • trade policy - the body of laws related to the exchange of goods and services for international trade

    • governments negotiate trade terms with one another

  • trade restrictions:

    • trade barrier - government action takes to control or limit the amount of imports

    • embargo - government order that prohibits trade with a foreign country

    • trade sanctions - embargoes on certain goods

    • tariff - government tax on imported goods

    • quota - limit on the amount of a product imported into a country during a specific period of time

  • trade agreement - document listing terms and agreements for importing and exporting products between countries

  • trading bloc - a group of countries that has joined together to trade as if they were a single country

    • free-trade zone - a group of countries that reduced or eliminated trade barriers among themselves

  • European Union (EU) is the largest trade bloc in the world; includes 28 countries

  • North American Free Trade Agreements (NAFTA)

    • replaced by USMCA in 2020

    • agreement between united states, mexico, and canada

    • goal of eliminating trade barriers for the three countries