Transcript MM 6.03 Slide Show/Notes

6.00 Understand economics trends and
communication.
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Finish 6.02
6.03 - Determine global trade’s impact on
business decision-making.
Section 1 – International Trade –
◦ Slide Show/notes
◦ Business & the World Handout
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Section 2 – Currency
◦ Slide Show/Notes

Section 3 – Culture and Trade
◦ Slide Show/notes
◦ Worksheet
Warm up – Current Event
 6.03 - Determine global trade’s
impact on business decision-making.
 Section 1 – International Trade –

◦ Slide Show/notes
◦ Business & the World Handout

Section 2 – Currency

Section 3 – Culture and Trade
◦ Slide Show/Notes
◦ Slide Show/notes
◦ Worksheet

Snow Day – No School
6.03 - Determine global trade’s
impact on business decision-making.
 Section 1 – International Trade –

◦ Review Slide Show/notes
◦ Business & the World Handout

Section 2 – Currency
◦ Review Slide Show/Notes

Section 3 – Culture and Trade

◦ Slide Show/notes
◦ Worksheet
Unit 3 Test on THURSDAY!!!
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Review for Unit 3 Test
Unit 3 Economic Trends
◦ Objectives 2.04, 6.01, 6.02, 6.03
◦ Slide Shows/Notes
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Quia Reviews
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Unit 3 Test – THURSDAY – TOMORROW!!!
Definitions:
Imports – Goods brought into the
country
 Exports – Goods sent to other
countries
 International Trade – Good exchanged
between countries
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Absolute Advantage –
◦ The general ability to produce more goods or
services using fewer resources.
◦ A person or country has an absolute advantage in
production largely due to superior technology or
greater technical efficiency.
◦ An absolute advantage exists if a person, country,
business, government, or some other entity can
produce more output using fewer inputs than a
comparable entity.
http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=absolute+advantage
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Comparative Advantage –
◦ The ability to produce one good at a relatively lower
opportunity cost than other goods, especially
compared to production in another country.
◦ While a person, country, business, government, or
other producing entity may or may not have an
absolute advantage in production, every producer
has a comparative advantage in the production of
something.
http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=comparative+advantage
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EC – 022 Slide Show
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Reasons that international trade takes
place.
◦ Comparative advantage
◦ Lack of raw materials or production
capabilities
◦ Desire to build positive relations
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Gains from international trade.
◦ New products that otherwise wouldn’t be
available
◦ One nation exports, another nation
imports; both should benefit
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Ways in which U.S. economy is affected by
international trade.
◦ Positive – gain new products or the raw
materials to build products for other
countries (Japan)
◦ Negative – can lower prices on domestic
goods or if we import too much we go
into debt
http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=international+trade
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Describe types of trade barriers.
◦ Tariffs
◦ Quotas
◦ Subsidies of domestic industries
◦ Embargos
http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=international+trade
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Techniques used by governments to
improve international trade relations.
◦ International labor standards
◦ Environmental standards
◦ Lowering trade barriers to developing
countries
◦ World Trade Organization (WTO)
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Worksheet
Definitions:
◦ Exchange rate - The price of the
currency of one country stated in
terms of the currency of another
country, that is, the rate of exchange
of one currency for another. In
general, exchange rates reflect the
overall health, vitality, and
productivity of a nation's economy.
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=exchange+rate
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Exchange-rate quotation - exchange
rate quotation is given by stating the
number of units of a price currency
that can be bought in terms of 1 unit
currency. For example, in a quotation
that says the EUR-USD exchange rate
is 1.2 USD per EUR, the price
currency is USD and the unit currency
is EUR.
http://www.forex-trading-i.com/exchange-rate.html
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Free-floating currency - also termed
a Flexible Exchange Rate, is an
exchange rate determined through the
unrestricted interaction of supply and
demand in the foreign exchange
market
 Pegged
currency - its value is
maintained by the government in
question at a fixed rate relative to
the other currency. In 1983 the
Hong Kong dollar was linked to
the United States dollar.
http://www.forex-trading-i.com/exchange-rate.html
 Foreign-exchange
market - A
market that trades the currencies
of different countries. The foreign
exchange market is actually a
series of different markets, each
exchanging the currency of one
nation for that of another nation.
 Strong/weak dollar
◦ Strong means that the dollar is worth
more of the foreign currency
◦ Weak means it is worth less
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Arbitrage - the activity of exploiting
imbalances between two or more markets.
Foreign money exchangers operate their
entire businesses on this principle. They
find tourists who need the convenience of a
quick cash exchange. Tourists exchange
cash for less than the market rate and then
the money exchanger converts those
foreign funds into the local currency at a
higher rate. The difference between the two
rates is the spread or profit.
http://www.wisegeek.com/what-is-arbitrage.htm
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Distinguish between direct and indirect
exchange-rate quotations.
◦ Direct - A foreign exchange rate quoted as the
domestic currency per unit of the foreign currency.
In other words, it involves quoting in fixed units of
foreign currency against variable amounts of the
domestic currency.
◦ Indirect - A foreign exchange rate quoted as the
foreign currency per unit of the domestic currency.
In an indirect quote, the foreign currency is a
variable amount and the domestic currency is fixed
at one unit.
http://www.investopedia.com/terms/i/indirectquote.asp#ixz
z1h5ca0F5J
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Exchange rates
◦ how much foreign currency a dollar will
buy
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Factors that increase demand for
currencies.
◦ Strong economy for the countries with
that currency
◦ Weak economy for countries wanting that
currency
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Factors that cause a currency to lose
value relative to other currencies.
◦ Balance of trade
◦ economic conditions of each country
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How do economic factors affect
exchange rates?
◦ Strong economies strengthen the currency
and vice-versa
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How does market psychology affect
exchange rates?
◦ Money is worth as much as people think it is
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How do political conditions influence
exchange rates?
◦ Politics is believed to directly affect the
economy – ie – gov’t unstable, currency value
goes down because there is fear that it won’t
be worth anything if government is
overturned
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What is the difference between free-floating
and pegged currency?
◦ Free floating changes with economic conditions,
◦ Pegged is connected to the value of a specific
currency
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What factors influence free-floating
currency?
◦ Economy,
◦ politics,
◦ balance of trade, etc.
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What institutions utilize the foreign
exchange market?
◦ Governments,
◦ companies that trade goods in foreign
markets (exporters),
◦ investors,
◦ speculators,
◦ tourists
◦ banks.
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What types of financial instruments are
used in foreign exchange markets?
◦ Currencies
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Explain the advantages/disadvantages of a
strong U.S. dollar.
◦ Advantages:
 Can get good deals when traveling abroad,
 good exchange rate on imports
◦ Disadvantages:
 Exported goods can see lost sales due to being
too expensive
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What are the advantages/disadvantages of a
weak U.S. dollar?
◦ Advantage
 Increased sales of exports
 Increased tourism in US
◦ Disadvantage
 Imported goods are more expensive
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What are the risks of speculating on the price
of foreign currency?
◦ Fluctuations can be hard to predict,
◦ government policy changes can greatly impact the
exchange rates
Hofstede’s dimensions of national cultures
◦ Individualism vs. Collectivism: Is the culture based
on the importance and freedom of the individual or
the good of the society (not mutually exclusive). A
society's position on this dimension is reflected in
whether people’s self-image is defined in terms of
“I” or “we.”
◦ Power distance: the degree to which the less
powerful members of a society accept and expect
that power is distributed unequally. The
fundamental issue here is how a society handles
inequalities among people.
http://geert-hofstede.com/dimensions.html
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Uncertainty avoidance: the degree to which the
members of a society feel uncomfortable with
uncertainty and ambiguity. The fundamental
issue here is how a society deals with the fact
that the future can never be known: should we
try to control the future or just let it happen?
Masculinity vs. femininity: The masculinity side of
this dimension represents a preference in society
for achievement, heroism, assertiveness and
material reward for success. Society at large is
more competitive. Its opposite, femininity, stands
for a preference for cooperation, modesty, caring
for the weak and quality of life. Society at large is
more consensus-oriented.
http://geert-hofstede.com/dimensions.html
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Explain why business subcultures shape the
behaviors of businesspeople.
◦ People adapt to what is expected of them if they wish to be
successful
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Explain how language impacts knowing when and
how business will be conducted.
◦ Clarity of communication
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Explain how culture influences communication.
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Discuss how the interrelationship of business law and
religion impacts international business activities.
◦ What is acceptable and expected
◦ What culture is prevalent and set up the ethics of the
county?
◦ Theocracy?
◦ Understanding of different ways or must it be done only
one way?
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Identify ways to overcome issues with the
crossover of business law and religion in
international business activities.
◦ Study your clients, learn about what is important
and what is acceptable and expected
◦ Carefully design ads, and even packaging to fit into
the culture
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Describe how corruption impacts
international business activities.
◦ Some cultures allow those with power to exercise it
for their own benefit (bribes)
◦ Not following the norms could hinder your
business, but following the foreign norms could get
you in trouble in America
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Explain how a country’s level of involvement
impacts international trade.
◦ What can the country and its citizens handle?
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Discuss how culture can hamper international
trade.
◦ Cultures can clash in how they chose to interact.
What is acceptable and expected in one might be
criminal in the other.
◦ Large and small mistakes can impact the future of
commerce.
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Explain how culture can impact trade partner
selection.
◦ The culture affects what the individuals will find
acceptable and pleasing
◦ Fitting into the culture will improve the odds of
doing business successfully
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Describe how culture can impact negotiations
in international trade.
◦ Differing views can emphasize different parts of the
negotiation process or the items being traded
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Discuss how culture can impact product
delivery in international trade.
◦ What value does the sending/receiving country
place on speedy and efficient delivery?
◦ Is rest as important as work? (Spain and the siesta)
◦ What is good enough condition?
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Explain how positive/negative experiences
with a culture can update one’s beliefs.
◦ We all make judgments
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Describe how culture can impact the selection
of trade goals in international trade.
◦ What is important in that culture affects what will
be important in trade