03

THE
ECONOMICS
OF FOREIGN
TRADE
TOPIC 3
BY PROF. LANUZA
TWO ECONOMIC PRINCIPLES OF BUYING
AND SELLING AMONG COMPANIES IN
DIFFERENT COUNTRIES
1. ABSOLUTE ADVANTAGE - exists when a country can produce a
good or service at a lower cost than other countries. *present as a
result of the natural resources of a country

2. COMPARATIVE ADVANTAGE - in this situation, a country specializes

in the production of a good or service at which it is relatively more
efficient.
MEASURING ECONOMIC PROGRESS
GROSS DOMESTIC PRODUCT (GDP)

- Measures the output of goods that a country produces within its

borders. It includes items produced with foreign resources

GROSS NATIONAL PRODUCT (GNP)

- Measures the total value of all goods and services produced by the
resources of a country.
INTERNATIONAL TRADE ACTIVITY
Important measure of a country’s international business activity

1. Balance of Trade - the difference between a country’s exports and

imports. *favorable balance of trade occurs when a country
exports (sells) more than it imports (buys) - also known as trade
surplus. *unfavourable balance of trade - occurs if a country
imports more than it exports - also known as trade deficit.
2. Foreign exchange rate - is the value of one country’s money in
relation to the value of the money of another country. *foreign
debt - is the amount a country owes to other countries.
INTERNATIONAL TRADE ACTIVITY
Important measure of a country’s international business activity

3. Consumer Price Index (CPI) - used in the U.S which measures

inflation (general increases in prices in a country). This information can
help consumers and business managers make buying decisions

4. Unemployment rate - the percentage of population who are

capable of working but are currently unemployed. When people are not
earning an income, they cannot purchase needed goods and services,
and therefore, resulting to a weaker economy.
 04
CULTURAL
INFLUENCES
ON GLOBAL
BUSINESS
TOPIC 4

BY PROF. LANUZA
CULTURAL INFLUENCES ON GLOBAL
BUSINESS
● CULTURE
○ Is a system of learned, shared, unifying and interrelated
beliefs, values and assumptions
● BELIEFS
○ Are ideas about the nature of a person, thing or concept
● VALUES
○ Are the positive and negative ideals, customs, and institutions
of a group
● ASSUMPTIONS
○ Are ideas that are taken for granted as fact
CULTURAL INFLUENCES ON GLOBAL
BUSINESS
● A culture is the sum of a group’s way of life

THE SUBCULTURES WITHIN A SOCIETY

● A subcultures is a subset of larger culture

● It may have some values, beliefs and assumptions that are different
than the larger culture of which it is a part

INFLUENCES OF CULTURES AND SUBCULTURES

● Is the idea that you carry your beliefs, values, and assumptions with
you at all times and it influences how you respond to others
● Different countries varies in business subcultures worldwide
 CULTURE AND SOCIAL
ORGANIZATIONS
TOPIC 5

05 BY PROF. LANUZA
HOW CULTURE AFFECTS FAMILY
RELATIONSHIPS AND VALUES?

● Social Organizations includes the relationships between

both family, unit, and society
● These components affect not only the entire culture, but
also many other institutions, including the business
community.
SOCIETY’S INSTITUTION

● Can be just as important to a culture as family

relationships. Social institutions such as education, gender
roles, mobility, and class systems also influence people’s
lives.
● They also are influential in making business choices.
 06
COMMUNICATIO
N ACROSS
CULTURES
TOPIC 6
BY PROF. LANUZA
LANGUAGE DIFFERENCES

● Language facilitates
international business
transactions
● Many languages are used
for business purposes
● More people use English to
conduct international
business than any other
language
● English can be concise and
precise as compared with
other languages
LANGUAGE DIFFERENCES

● Learning a second
language is essential in
foreign trade
● Learning any language will
help businessmen the
culture of those who speak
it
● This helps those in foreign
trade to succeed in the
world of international
business
 Direct and
Indirect
Communication
 Examples of low-
Contexting context culture

● Refers to how
● U.S. and Germany
direct or indirect
communication is
● A low-context Examples of
culture is one that
communicates very
high-context
directly culture
● A high-context
culture is one that ● Japan and Saudi
communicates Arabia
indirectly
NON-VERBAL COMMUNICATION
● Some businesses convey an idea using only noverbal
communication techniques

TYPES OF NONVERBAL COMMUNICATIONS

1. Body language
2. Appearance
3. Eye contact
4. Touching
5. Personal space
6. Color
7. Numbers
8. Emblems
9. Smells
 07
VALUES
AROUND THE
WORLD
TOPIC 7
BY PROF. LANUZA
VALUES VARY AMONG CULTURES
● Some of the more important fundamental values involve the
following:
1. Individualism - is the belief in the individual and his ability to
function relatively independently. Example: U.S
2. Collectivism - the belief that the group is more important
than the individual. Example: Japan
3. Technology - Some cultures embrace technology as a means
of providing more and better material objects.
4. Leadership, Power and Authority - Different cultures have
different values relating to leadership, power, and authority.
These are influential in making business decisions.
VALUES VARY AMONG CULTURES
5. Religion - Religion beliefs regulate the behaviors of members of
many cultural groups, including business organizations.

6. Time - Time may be viewed as a valuable resource and

businessmen carefully allocate it to achieve business objectives.
ADJUSTING TO CULTURAL DIFFERENCES
● ETHNOCENTRISM
○ Is the belief that one’s culture is better than other cultures
● CULTURE SHOCK
○ Is a normal reaction to all the differences of another
culture
● REVERSE CULTURE SHOCK
○ Is your reaction to becoming reacquainted with your own
culture after having accepted another culture
○ It is a normal reaction to the cultural readjustment
process
○ To be a successful participant in the global economy, you
must be culturally sensitive which is the key for success in
the global economy
 ACTIVITY 3 (ASYNCHRONOUS)
For submission on February 22, 2022. Answer completely (10 points each)

I. How can a nation create an absolute advantage through its investment activities?
II. Explain why cultural knowledge of a country is necessary for being successful in
international business
III. Give 5 examples of countries using nonverbal communications in dealing with
foreign transactions
IV. Why do people and businesses need to make adjustments for cultural differences
V. Why might advanced technology be negatively viewed in a developing country
with a large, uneducated workforce?

PLEASE DO NOT COPY AND PASTE. USE THE TEMPLATE PROVIDED IN ANSWERING
THE ACTIVITY. IDENTIFY REFERENCES USED.