Unit #3:Day 4

Opening Activity

Hold onto your homework for now

Pepsi’s response to Mean Joe Green: http://www.youtube.com/watch?v=lHDgYHNokmE

Unit #3:Day 4

Today’s Questions?

1. What are imports and exports?

2. What is the trade balance?

3. What is an exchange rate?

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Today’s Agenda:

1. Take some notes

2. Start talking about Nike• Share your homework• Read an article• Watch a CNBC video on Nike

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Trade with Other Nations • Why do so?

– Our economy cannot provide all the goods consumers want– Additional markets/consumers to sell our goods to

• Imports– Goods & services that U.S. companies buy from other countries

• Exports– Goods & services that U.S. companies sell to other countries

• Balance of trade = difference between exports & imports– Positive/Surplus = Exports > Imports– Negative/Deficit = Imports > Exports

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Trade with Other Nations

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Trade with Other Nations

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Can anything stop the Chinese export machine? In August the mainland's trade surplus hit $18.8 billion -- the fourth straight month with a record-setting gap. For the year to date, the surplus stands at

$94.7 billion, 57% ahead of a year ago. Although China's imports jumped to a record $72 billion, exports surged nearly a third to -- yes, another record -- $90.8 billion. And much of that gap can be attributed to the vast quantities of goods shipped to eager American consumers.

For the year, China's exports to the U.S. look set to approach $300 billion, up from $243 billion in 2005.

Just what are Americans buying? Numbers won't be available until 2007, but it's a safe bet that gizmos such as TVs and iPods were

popular. U.S. Commerce Dept. data show that electronic gear was the largest category of imports from China last year. That's a big change from a decade ago, when low-tech manufactured goods dominated.

Below, the true scope of America's imports from China.

Trade with China

From Forbes magazine in 2006

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Trade with Other Nations

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How Other Companies Address Challenges• Domestic Business Operations

– Watch clip on how Wal-Mart is able to sell products at low prices

– Reaction?– Changed the manufacturer & retailer relationship

• Push production: Manufacturers decide what to produce

• Pull production: Retailers decide what to sell

– Not without controversy• Lost jobs/shifting production to the lowest cost producer

Point: Firms need to establish their core competency

& continue to find ways to deliver it

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Doing Business Internationally• Another challenge faced by businesses involved in

international trade is the various currencies used around the world

• Examples:– Russia uses the rubble– EU uses the euro– Great Britain the pound– Japan the yen

• Firms doing business internationally need to pay for the goods or services with the local currency

– i.e., currencies need to be exchanged

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International Currencies • Exchange rate

– Value of a currency in one country compared with the value in another

– http://www.xe.com/ucc/ – http://moneycentral.msn.com/investor/charts/chartdl.aspx?

D4=1&ViewType=0&&ShowChtBt=Refresh+Chart&DateRangeForm=1&ComparisonsForm=1&D5=0&D3=0&PeriodType=7&C9=1&DisplayForm=1&Symbol=%2FGBPUS&CP=0&PT=7&CE=0

– http://moneycentral.msn.com/investor/charts/chartdl.aspx?iax=1&Symbol=%2fEURUS&CP=0&PT=11

• Exchange rates, the relative values of two currencies, affect the prices of products

– Example: $1 US = 1.06 euros; 1 euro = $0.94

– Strong dollar

• $1 US = 1.15 euros; 1 euro = $0.86

• Makes our exports more expensive in foreign countries; imports are cheaper

– Weak dollar

• $1 US = 1.01 euros; 1 euro = $0.98

• Makes our exports cheaper in foreign countries; imports are now more expensive

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Nike Article • Please write one of your challenges that you think

Nike faces on the board– On your way back to your desk pick up the article “On

the Run” – I will need it back so please don’t write on it

• Start reading the article• Distribute corresponding worksheet• Work on this with a partner

– Realize the questions are not necessarily in order & require you to analyze and draw inferences & conclusions

– Just need to turn in one worksheet per pair

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Nike Video• Turn in worksheet

• Start watching video & will finish next time

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Today’s Questions?

1. What are imports and exports?– Imports: Goods & services that U.S. companies buy from other

countries– Exports: Goods & services that U.S. companies sell to other

countries2. What is the trade balance?

– Dollar value/Difference between a country’s exports and imports3. What is an exchange rate?

– Value of a currency in one country compared with the value in another

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Homework • Study for quiz • Quiz will cover:

– Chapter 1 from your book– Terms:

• NAFTA & EU• SWOT• Formal Trade Barriers (quotas, tariffs and embargos)

– Will have a math question on calculating a new price with a tariff

• Informal Trade Barriers (culture, religion, etc.)• Imports/Exports• Balance of Trade: Trade Surplus & Trade Deficit• Exchange Rate• Push production & pull production• Social responsibility

• I will collect your Note Sheet before you take the quiz so make sure it is complete

– Print one out from the Daily File if you lost it

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Labor Production Costs

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GAP Inc. • Why don’t you pay factory workers more?

Workers’ wages are determined by law and the factory that employs them. As one of many customers of a factory, we negotiate prices for finished products. However, our Code of Vendor Conduct clearly requires that factories pay workers the local legal minimum, or prevailing industry wage, whichever is higher. We actively monitor payment of wages to ensure that workers are consistently being paid the wages they are entitled to for the hours they’ve worked, including overtime. In instances where we've discovered non-compliance, we have forced payment of back wages and required factories to improve record keeping. To earn and keep our business, factories must compensate workers appropriately for all hours worked.

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Nike

• http://www.nike.com/nikebiz/gc/mp/pdf/disclosure_list_2005-06.pdf

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Stock Research Project • Selecting stocks – What can you look at when

choosing your picks?– Company/industry news– Product you use/believe in– Market leader or a up and comer– Fundamental & Technical analysis

1. Earnings per share (EPS)

2. Price to earnings ratio (PE)

3. Financial statements

4. Moving averages

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Stock Research Project • www.fidelity.com/tradingknowledgecenter

– Trading Knowledge Center

• Going to go to computer lab to work on project

• Investigate some stocks you would be interested in researching

• We will spend time on this project next class and I will go over more technical specifics

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Stock Research Project • Individual project• Choose two stocks you would recommend

– One to buy– One to short sell

• Complete stock research report for each stock & present your recommendations to the class

– Will be evaluated on your analysis and ability to defend your recommendations

• 1 presentation will be given each class period moving forward

• You need to pick a presentation date and your stocks– No duplicate stock recommendations will be allowed

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Stock Research Project • Short selling

– Take a pessimistic view– Make money if the stock goes down

• Borrow shares from a broker & replace them (cover) at a lower price

– Very risky: Potential loss is limitless– Look at an example

• Build A Bear (BBW)

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How Other Companies Address Challenges• Domestic Business Operations

– Watch clip on how Wal-Mart is able to sell products at low prices

– Reaction?– Changed the manufacturer & retailer relationship

• Push production: Mftrs. decide what to produce

• Pull production: Retailers decide what to sell

– Not without controversy• Lost jobs/shifting production to the lowest cost producer

Point: Firms need to establish their core competency

& continue to find ways to deliver it

Unit #3:Day 4

Today’s Agenda:

1. Take some notes

2. Watch a segment of a video that shows how Wal-Mart is able to deliver low prices

3. Start talking about Nike• Share your homework• Read an article• Watch a CNBC video on Nike