Global Opportunities and International Trade Strategies
Global Opportunities
Advancement in technology and reduction of barriers to trade have made the world’s individual economies interdependent. This has resulted in better communication, with increased competition, and shifting opportunities.
Reasons for International Trade
- Access to factors of production
- International trade helps even out some of the resource imbalances among nations
- Reduced risk
- Global trade reduces dependence on one economy, lowering the risk for multinational firms
- Inflow of innovation
- International trade offers companies sources of new ideas
Reasons for International Trade Con’t
- Reduced Opportunity Cost
- The opportunity of giving up the second-best choice when making a decision
- Utilizing Advantages
- Comparative advantage: Benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries
- A country has an absolute advantage when it can produce more of a good than other nations, using the same amount of resources.
Strategies for Reaching Global Markets
- Foreign Outsourcing
- Importing
- Exporting
Strategies for Reaching Global Markets Con’t
- Foreign licensing
- Foreign franchising
- Direct investment
- Joint ventures
- Partnership
- Strategic alliance
Business Definitions and Concepts
- What’s the definition of a BUSINESS? Organization activity that provides goods/services to earn a profit
- How do you calculate PROFIT?
- What’s the Goal of a Business? To value to the customers Generate long-term profits by delivering unsurpassed value to the customers
- Explain the VALUE and PRICES relationship. Value relations between the price of a good or a service and the benefits that it offers its customers
- Who are ENTREPRENEURS and what do they do? People who risk their resources to start and manage a business
- What are a NONPROFIT BUSINESS and its GOAL? That employ people and produce goods to contribute to the community.
- List and describe the business eras. Industrial revolution, Entrepreneurship era, Production era, Market era, Relationship Era
- Define the business environment The setting in which the business operates
- List and describe the 5 key components of the business environment Economic Environment, Government Environment, Competitive Environment, Technological Environment, Social Environment, Global Environment
Business Terminology
- Goods: tangible products such as computers, food, clothing, cars and appliances.
- Services: intangible products such as education, health care, insurance, recreation, and travel and tourism.
- Non-physical
- Can’t stockpile
- Business: any activity that seeks to provide goods and services to others while generating a profit.
- Entrepreneur: a person who invests time, effort, and money to start and manage a business.
- Assumes a risk.
- Revenue: total amount of money received during a given period for goods sold and services rendered, and from other financial resources.
- Sales over a period of time
- Profit: the amount a business earns above and beyond what it spends for salaries and other expenses.
- Revenue – expenses
- Loss: when a business’s expenses are more than its revenues.
- Risk: the chance of loss, the degree of probability of loss, and the amount of possible loss (i.e., time and money)
- Standard of living: the amount of goods and services people can buy with the money they have.
- Quality of life: the general well-being of a society in terms of its political freedom, natural environment, education, health care, safety, amount of leisure, and rewards that add to the satisfaction and joy that other goods and services provide.
- Highest quality: Scandinavian countries
- More of an abstract concept
- Stakeholders
- All of the people who stand to gain or lose by the policies and activities of a business.
- People connected and affected by the activities of a business
- Customers: consume products, targeted by marketing.
- Businesses should respond to their needs
- Employees: work; needed by employers