trade balance

• imports: goods and services purchased abroad

• exports: goods and services sold abroad

• trade balance: the difference between a country’s imports and exports

  • trade surplus — imports < exports

  • trade deficit — imports > exports

    • US currently in a deficit

• GDP: gross domestic product

  • US currently has the largest economic value by GDP

  • value created in a given country’s economy

• free trade areas — facilitate international trade

  • USMCA replaced NAFTA

  • EU

• protectionism

  • tariff: a tax on imports

  • quota: a restriction on the quantity of goods that can enter a country

  • embargo: a total ban on the import of a good from a particular country

economic advantages

• absolute advantage: the ability of a producer to produce more of a good than another producer with the same quantity of inputs

  • inputs include land, labor, and capital

  • entities will benefit from specialization based on their comparative advantages

• comparative advantage: the idea that producers should produce the goods that they are most efficient at producing

  • includes opportunity cost (absolute advantage does not)

  • eg. US — imports simple manufactured goods and exports sophisticated, high tech products

• diamond in national advantages

  • factor conditions — labor, infrastructure → ability to compete in an industry

    • significant impact on entrepreneurship and productivity

  • demand conditions — demand for products/services in market

  • related/supporting industries — presence/absence of competitors

  • firm strategy, structure, and rivalry — nature of domestic rivalry and how companies are created/organized/managed

    • bankruptcy: US → liquidation vs. reorganization (how to best pay off debts)

international expansion

• direct export

  • market product internationally, export directly to consumer

    • eg. google ads

      • easy to advertise to people abroad

      • can be very specific with target market

• foreign intermediary

  • someone who understands business in a given country who can help you run a business there

  • may be employee or free agent

• licensing agreement

  • an agreement with a parent company to run a business in a certain way while giving up ownership

• strategic alliance/joint venture

  • share with other countries in a given country

  • eg. airlines may share websites

• multinational corporations

  • have officials globally

  • need to have expertise in each country

    • deal with language barriers, differing laws

• cultural differences — note Geert Hofstede’s cultural dimensions

  • individualism vs. collectivism

  • long- vs. short-term orientation

  • masculinity vs. femininity

  • high vs. low power distance

  • high vs. low uncertainty avoidance

international career planning

• advantages of working abroad

  • career advancement

  • exciting work environment

  • working with different people

  • exciting place to live (food, culture)

• disadvantages of working abroad

  • language barrier

  • safety

  • differing customs/culture shock

  • different currency

  • leaving family and friends

• expatriates (expats)

  • citizens of one country who temporarily live/work in another

• businesses encourage international work via

  • raises

  • time off to travel home

    • covering travel expenses

  • building expat communities abroad that mimic home cultures

  • providing security personnel