Lesson 7.
Socioeconomic Impacts of
Business on International
Trade
Applied Economics
General Academic Strand | Accountancy, Business, and Management
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In August 2020, the Philippine
Statistics Authority reported
that the country experienced a
24.7% decrease in the total
value of exports and imports.
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This downturn was
attributed primarily to
the effects of the
coronavirus pandemic.
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What effects can local businesses have on
international trade?
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● Identify and explain the various socioeconomic
Learning factors affecting business and industry.
Objectives
(ABM_AE12II-e-g-11)
● Analyze and evaluate the viability of a business
and its impact on the community. (ABM_AE12II-
e-g-12)
● Formulate recommendations and strategies on
how to minimize and maximize a business’s
negative impact and positive impact,
respectively. (ABM_AE12II-e-g-13)
6
Learning
Objectives
● Discuss how domestic businesses can
impact foreign economies.
● Apply the different concepts of
international trade in analyzing various
economic situations.
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Filipinos Worldwide
Let’s
Connect
More and more Filipino-run businesses are
expanding their markets beyond the 7,641
islands of the country.
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Filipinos worldwide
Let’s
Connect
1. Do research on one Filipino business that was
founded in the country but have expanded
their operations or sales abroad.
2. Prepare a three-slide presentation on your
chosen business. Make sure to provide a brief
history of the company, identify where they
operate or sell outside of the country, and
what their signature products are.
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1. Which industry does your chosen business
Let’s belong to?
Connect
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2. Based on their history, did they expand
Let’s internationally right away?
Connect
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3. Did the firm’s expansion into the
Let’s international markets benefit the country?
Connect
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Essential
Question
How do businesses impact stakeholders
abroad?
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Impact of Businesses on International Trade
● One of the stakeholders of private businesses that
most individuals tend to overlook are the markets that
go beyond the jurisdiction of the home country.
● This expansion into international markets is usually
pursued by larger firms who have already maximized
their sales potential domestically.
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Impact of Businesses on International Markets
Exports and Imports
When domestic firms enter the
international market, they do this
mainly through the export of their
goods and services.
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Impact of Businesses on International Markets
Exports and Imports
However, not all firms are sellers.
Some businesses may instead
reach into international markets
to import products from abroad.
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Impact of Businesses on International Markets
Exports
Exports refer to goods and
services produced domestically
but are sold to foreigners.
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Impact of Businesses on International Markets
Exports
Firms export products that are
unique to the international
market or products that they are
able to produce at the
comparatively lower costs.
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Impact of Businesses on International Markets
Exports
Being able to sell products in
untapped markets opens up new
opportunities for sales and
increased brand recognition for
firms.
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Impact of Businesses on International Markets
Imports
Imports are products produced
abroad and are bought by
domestic consumers.
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Impact of Businesses on International Markets
Imports
While consumers are likely to
import final products, businesses
are more likely to import raw
materials that they need to
continue their operations.
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Impact of Businesses on International Markets
Exports and Imports
Similar to how demand and
supply work in an economy, the
volume of both exports and
imports can impact the
international market.
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Impact of Businesses on International Markets
Exports and Imports
Example:
Should an economy export a
significant amount of a certain
product, this could cause a
surplus in the global economy
and drive its price down.
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Impact of Businesses on International Markets
Effect of International
Trade on GDP
Gross domestic product (GDP) is
the measure of the value of all
final goods and services produced
in a country over a given period
of time.
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Impact of Businesses on International Markets
Effect of International
Trade on GDP
GDP can be computed through
the expenditure approach, which
identifies net exports as one of its
components.
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Impact of Businesses on International Markets
Effect of International
Trade on GDP
Net exports is the measure of the
value of all exports subtracted
from imports, or the country’s
trade balance.
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Impact of Businesses on International Markets
Effect of International
Trade on GDP
A trade surplus occurs when the
value of exports are larger than
the value of imports.
Trade surpluses positively
contribute to GDP.
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Impact of Businesses on International Markets
Effect of International
Trade on GDP
A trade deficit occurs when the
value of imports are larger than
the value of exports.
Trade deficits negatively impact
GDP.
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Impact of Businesses on International Markets
Effect of Businesses on Foreign Governments
When local businesses purchase significant amounts of
products or raw materials from foreign sources, they
positively contribute to the economy of other countries.
This may impact the macroeconomic goals set by the
country’s government.
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Impact of Businesses on International Markets
Effect of Businesses on Foreign Governments
● Foreign governments may also levy taxes on imported
goods called tariffs.
● These are imposed to raise prices in an effort to
discourage imports and protect local industries.
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Check Your
Progress
How else can governments protect their
industries from the effects of the international
market?
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Impact of Businesses on International Markets
Effect of Businesses on
Foreign Industries
Local businesses will also
inevitably impact foreign
industries through the
competition that they pose.
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Impact of Businesses on International Markets
Effect of Businesses on
Foreign Industries
The additional competition may
push foreign companies to
innovate upon their own products
in order to remain relevant and
competitive in the market.
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Impact of Businesses on International Markets
Effect of Businesses on
Foreign Industries
Businesses do not necessarily
need to be competitors to foreign
industries, however, as some may
choose to instead be buyers in
the market.
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Impact of Businesses on International Markets
Effect of Businesses on
Foreign Industries
Should a domestic firm choose to
import raw materials or capital
goods from abroad, their
transactions can help improve the
state of foreign industries.
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Impact of Businesses on International Markets
Effect of Businesses on
Foreign Consumers
Participation in the international
market also exposes firms to
consumers from different
countries.
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Impact of Businesses on International Markets
Effect of Businesses on
Foreign Consumers
The goods and services that they
provide to the international
market could have an impact on
the lives of foreign consumers.
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Impact of Businesses on International Markets
Effect of Businesses on
Foreign Consumers
These goods and services may
provide quality of life
improvements, while others may
present undesirable effects and
externalities.
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Identification. Rearrange the letters below to identify
the correct answer.
Try This!
1. This occurs when imports exceed exports
in a given period of time.
TDEDFIRIACET
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Identification. Rearrange the letters below to identify
the correct answer.
Try This!
2. These are taxes imposed by governments
on imported goods and services.
AFSFTRI
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Identification. Rearrange the letters below to identify
the correct answer.
Try This!
3. This is the component of GDP that takes
international trade into account.
RONTTPSEEX
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Identification. Rearrange the letters below to identify
the correct answer.
Try This!
4. Trade surpluses happen when the total
value of exports is _____________ than
imports.
ARRETGE
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Identification. Rearrange the letters below to identify
the correct answer.
Try This!
5. While exports positively affect overall GDP,
imports _____________ affects it.
EIGANVLYET
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Wrap- ● Businesses, for the most part, impact the
Up
international market through the export and
import of goods and services.
● Exports are products made domestically and
sold to foreign consumers, while imports are
goods produced abroad and consumed
domestically.
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● Exports and imports can impact the gross domestic
Wrap- product of both domestic and foreign countries. A
Up trade surplus positively impacts the local economy,
while a trade deficit negatively affects it.
● Businesses may also impact other foreign
stakeholders through their participation in the
international market. These foreign stakeholders
include:
○ Foreign governments
○ Foreign industries
○ Foreign consumers
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Challenge
Yourself
What are two possible reasons why more
businesses do not tap into the international
market?
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Bibliography
Blink, Jocelyn, and Ian Dorton. “The Foundations of Economics.” Essay. In Economics Course Companion, 2nd ed., 2–8.
Oxford: Oxford University Press, 2011.
Ferrell, O. C., Geoffrey A. Hirt, and Linda Ferrell. Business Foundations: A Changing World. New York, NY: McGraw-Hill
Education, 2020.
Lominé Loykie, Martin Mwenda Muchena, and Robert A. Pierce. Business Management: Course Companion. Oxford:
Oxford University Press, 2014.
Maley, Sean, and Jason Welker. “The Foundations of Economics.” In Economics: Supporting Every Learner across the IB
Continuum, 1–10. Pearson Education, 2011.
Mankiw, N. Gregory. Principles of Economics. Boston, MA: Cengage Learning, 2021.
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