introduction to business 1 bus-101 instructor: erlan bakiev, ph.d

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Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D.

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Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D. Competing in the Global Economy. Scarce Recourses. Limited Capabilities. Global Ambitions. Economies of Scale. Why Nations Trade. Theories of Production and Trading. Absolute Advantage. Comparative Advantage. - PowerPoint PPT Presentation

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Page 1: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Introduction to Business 1BUS-101

Instructor: Erlan Bakiev, Ph.D.

Page 2: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Competing in the Global Competing in the Global EconomyEconomy

© Prentice Hall, 2005 Business In Action 3eChapter 3 - 2

Page 3: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Why Nations TradeWhy Nations TradeWhy Nations TradeWhy Nations Trade

© Prentice Hall, 2005 Business In Action 3eChapter 3 - 3

Scarce Scarce RecoursesRecoursesScarce Scarce

RecoursesRecourses

GlobalGlobalAmbitionsAmbitions

GlobalGlobalAmbitionsAmbitions

Limited Limited CapabilitiesCapabilities

Limited Limited CapabilitiesCapabilities

Economies Economies of Scaleof Scale

Economies Economies of Scaleof Scale

Page 4: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Theories of Theories of Production and TradingProduction and Trading

© Prentice Hall, 2005 Business In Action 3eChapter 3 - 4

AbsoluteAbsoluteAdvantageAdvantageAbsoluteAbsolute

AdvantageAdvantageComparativeComparativeAdvantageAdvantage

ComparativeComparativeAdvantageAdvantage

Page 5: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

MeasuringMeasuringInternational TradeInternational Trade

© Prentice Hall, 2005 Business In Action 3eChapter 3 - 5

Balance Balance of Tradeof TradeBalance Balance of Tradeof Trade

SurplusSurplusSurplusSurplus

DeficitDeficitDeficitDeficit

BalanceBalanceof Paymentsof Payments

BalanceBalanceof Paymentsof Payments

Cash InflowCash InflowCash InflowCash Inflow

Cash OutflowCash OutflowCash OutflowCash Outflow

Page 6: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

US Exports and Imports – GoodsUS Exports and Imports – Goods(in $ billions, 2002 data)(in $ billions, 2002 data)

© Prentice Hall, 2005 Business In Action 3eChapter 3 - 6

Foods, Feeds andBeverages

IndustrialSupplies &Materials(including

Petroleum)

Machinery &TransportEquipment(not autos)

AutomotiveVehicles,Engines &

Parts

ConsumerGoods

(non-food)

OtherGoods

Exports

Imports

49,616

49,687

156,837

267,681

290,496

283,323

78,942

203,743

84,359

307,854

32,854

49,078

Page 7: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

US Exports and Imports – ServicesUS Exports and Imports – Services(in $ billions, 2002 data)(in $ billions, 2002 data)

© Prentice Hall, 2005 Business In Action 3eChapter 3 - 7

Travel andPassenger

Fares

OtherTransport

Royaltiesand License

Fees

OtherPrivate

Services

Military,DefenseServices

Misc.Government

Services

Exports

Imports

83,593

78,013

29,166

38,527

44,142

19,258

122,594

69,436

11,943

19,245

795

2,920

Page 8: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Trade Deficit on the RiseTrade Deficit on the Rise

© Prentice Hall, 2005 Business In Action 3eChapter 3 - 8

Trade deficit (in $ billions)

Page 9: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Global Trade IssuesGlobal Trade Issues

© Prentice Hall, 2005 Business In Action 3eChapter 3 - 9

Free TradeFree TradeFree TradeFree Trade

Fair TradeFair TradeFair TradeFair Trade

Trade RestrictionsTrade RestrictionsTrade RestrictionsTrade Restrictions

Page 10: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Protectionism Protectionism and Trade Restrictionsand Trade Restrictions

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 10

SanctionsSanctionsSanctionsSanctions RestrictiveRestrictiveImportsImports

RestrictiveRestrictiveImportsImports SubsidiesSubsidiesSubsidiesSubsidies DumpingDumpingDumpingDumping

TariffsTariffsTariffsTariffs QuotasQuotasQuotasQuotas EmbargoesEmbargoesEmbargoesEmbargoes

Page 11: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Promoting Free TradePromoting Free Trade

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 11

World Trade Organization

(WTO)

World Trade Organization

(WTO)

InternationalMonetary Fund

(IMF)

InternationalMonetary Fund

(IMF)The World BankThe World Bank

General Agreementon Tariffs and Trade

(GATT)

General Agreementon Tariffs and Trade

(GATT)

Asia Pacific Econ CooperationCouncil (APECC)

Asia Pacific Econ CooperationCouncil (APECC)

Page 12: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 12

Trading BlocsTrading Blocs

AdvantagesAdvantages

Help smaller countries

Promote competition

Widen markets

Foster economic growth

DisadvantagesDisadvantages

Economic isolation

Trade restrictions

Decline in world trade

Fewer choices

Page 13: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

North American Free Trade North American Free Trade Agreement (NAFTA)Agreement (NAFTA)

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 13

United StatesUnited States

CanadaCanada

MexicoMexico

Page 14: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 14

The European UnionThe European Union

MinimizingMinimizing EstablishingEstablishing

Local RegulationsLocal Regulations

Variations in Variations in Product StandardsProduct Standards

Trade ProtectionismTrade Protectionism

GlobalGlobalProduct StandardsProduct Standards

Consumer ProtectionConsumer Protection

Environmental Environmental ProtectionProtection

Page 15: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

The Economic and The Economic and Monetary Union (EMU)Monetary Union (EMU)

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 15

EconomicEconomicImpactImpact

EconomicEconomicImpactImpact

CurrencyCurrencyExchangeExchange

CurrencyCurrencyExchangeExchange

CentralizedCentralizedBankingBanking

CentralizedCentralizedBankingBanking

CurrencyCurrencyUnificationUnification

CurrencyCurrencyUnificationUnificationThe EURO

Page 16: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Foreign Exchange Rates and Foreign Exchange Rates and Currency ValuationsCurrency Valuations

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 16

Floating Rates

Government Action

Currency Devaluation

Fixed Value System

Page 17: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

The GlobalThe GlobalBusiness EnvironmentBusiness Environment

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 17

Opportunities

Growth Potential

Increased Sales

Operating Efficiencies

New Technologies

More Consumer Choices

Challenges

Laws and Customs

Consumer Preferences

Ethical Standards

Labor Skills

Politics and Economics

Page 18: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Cultural Differences In Cultural Differences In Global BusinessGlobal Business

Consider the other personConsider the other person’’s customss customs

Deal with the individualDeal with the individual

Clarify your intent and meaningClarify your intent and meaning

Adapt your style to the other personAdapt your style to the other person

Show respectShow respect

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 18

Page 19: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Legal Differences In Global Legal Differences In Global BusinessBusiness

Common Law (US, UK)Common Law (US, UK)

Civil Law (France, Italy, Turkey etc.)Civil Law (France, Italy, Turkey etc.)

Theocratic Law (Iran, Saudi Arabia)Theocratic Law (Iran, Saudi Arabia)

IMF and WTO (found restrictive laws in TR and RUS)IMF and WTO (found restrictive laws in TR and RUS)

Issues (Bribery different Acts against it.. Foreign Corrupt Issues (Bribery different Acts against it.. Foreign Corrupt

Practices Act )Practices Act )

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 19

Page 20: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 20

Page 21: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

International Business ActivityInternational Business Activity

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 21

Importing and ExportingImporting and Exporting

Licensing and FranchisingLicensing and Franchising

Strategic Alliances Strategic Alliances and Joint Venturesand Joint Ventures

Direct Foreign InvestmentDirect Foreign Investment

OwnershipOwnership FinancialFinancial RiskRisk

LowLow LowLow LowLow

LowLow LowLow LowLow

ModerateModerate ModerateModerate ModerateModerate

HighHigh HighHigh HighHigh

Common FormsCommon FormsLevels of CommitmentLevels of Commitment

Page 22: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

Strategic Approaches to Strategic Approaches to International MarketsInternational Markets

Products

Support

Promotion

Pricing

Staffing

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 22

Page 23: Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D

© Prentice Hall, 2005 Business In Action 3e

Chapter 3 - 23

Impact of Terrorism on Impact of Terrorism on Global BusinessGlobal Business

GovernmentGovernmentExpendituresExpenditures

Business Business ExpendituresExpenditures

BankingBankingTransportationTransportation