Page 111 - Business Principles and Management

Unit 1

To illustrate this process, consider IBM computers made in the United States
and sold in Korea. Assuming an exchange rate of $1 = 1,000 won, a $1,200
computer would sell in Korea for 1,200,000 won (1,200 1,000). As more
Koreans buy IBM computers, they will need more and more U.S. dollars to pay
for the computers. This will increase the demand for dollars, and more won
will be needed to buy a dollar. Thus, if $1 is now worth 1,200 won, the IBM
computer will cost the Koreans 1,440,000 won (1,200 1,200).
With the computers costing more, Koreans will buy fewer of them and U.S.
exports will decline. Contrast this situation with what happens to a Korean
product—say, a Samsung mobile phone costing 120,000 won. The phone will
sell in the United States initially for $120 (120,000/1,000). When the exchange
rate becomes $1 = 1,200 won, the same phone will now cost Americans less:
120,000/1,200, or $100. This decline in price will lead Americans to buy more
Samsung phones, which will lead to an increasing demand for won and raise the
value of the won in terms of dollars. In turn, American goods will become less
expensive to Koreans, and they will buy more American products. Thus, the
trade deficits work out over the long run.

CHECKPOINT
Explain the difference between current and capital
accounts.

Career Opportunities in International Business

The growth of international business has created many new types of jobs.
In addition to those who work for foreign firms in the United States, over
150,000 Americans work abroad for American or foreign firms.
Many people work in various aspects
of international business, such as export-
ing and importing, teaching and translat-
ing languages, administering trade laws,
managing offices and operations in for-
eign countries, and in banking and insur-
The world is becoming more competitive. Many
ance firms. Others work in international
countries produce more goods and services than
trade organizations such as the WTO
the U.S. in specific product categories. Point
and the IMF, or in federal and state gov-
your browser to www.thomsonedu.com/schoo/
ernment agencies. As countries become
bpmxtra. Use the Nation Master’s Menu system
economically interdependent, more and
to view “Economy,” then choose at least four
more jobs will require a knowledge of
product categories (world trade > exports > international business.
product) to determine which countries are the Most international companies hire at
top 10 producers of each product. Determine the entry level, but usually they send
where the United States places in these product workers abroad who are very skilled,
categories. Investigate the background of three mature, and experienced. Studies show
high producers and explain why they are able to that the average salary in foreign compa-
produce at such a high level.
nies located in the United States is higher
than for similar jobs in American compa-
www.thomsonedu.com/school/bpmxtra
nies. As firms gain experience in doing

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