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3. global context of business - itb - ayesha aman - Economics

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itb - ayesha aman - Economics

itb - ayesha aman - Economics

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  • 1. CHAPTER 4 Understanding the Global Context of Business Copyright 2004 Prentice Hall, Inc.
  • 2. Chapter Outline
    • The Rise of International Business
    • International Business Management
    • Barriers to International Trade
    Copyright 2004 Prentice Hall, Inc.
  • 3. What Is Globalization? Process by which the world economy is becoming a single interdependent system Copyright 2004 Prentice Hall, Inc.
  • 4. What Are Imports and Exports? Imports are products made or grown abroad but sold domestically, while exports are products made or grown domestically but shipped and sold abroad Copyright 2004 Prentice Hall, Inc.
  • 5. The Contemporary Global Economy
    • Several forces have combined to spark and sustain globalization:
      • Governments and businesses are aware of the benefits of globalization to businesses and shareholders.
      • New technologies make international travel, communication and commerce much faster and cheaper.
      • Competitive pressures sometimes force a firm to expand into foreign markets to keep up with competitors.
    Copyright 2004 Prentice Hall, Inc.
  • 6. The Price of Global Communication Copyright 2004 Prentice Hall, Inc.
  • 7. Trade Agreements
    • General Agreement on Tariffs and Trade ( GATT )
    • North American Free Trade Agreement ( NAFTA )
    • European Union ( EU )
    • World Trade Organization ( WTO )
    Copyright 2004 Prentice Hall, Inc.
  • 8. The North American Marketplace and the Nations of NAFTA Copyright 2004 Prentice Hall, Inc.
  • 9. The Major World Marketplaces
    • Per capita income is the average income per person.
      • High-income countries : those with per capita income greater than $9,386.
      • Middle-income countries : those with per capita income of less than $9,386 but more than $765.
      • Low-income countries (or Developing countries ): those with per capita income of less than $765.
    Copyright 2004 Prentice Hall, Inc.
  • 10. The Major World Marketplaces
    • North America
      • World’s largest marketplace and most stable economy
      • U.S. dominates
    • Europe
      • Western Europe is a mature but fragmented marketplace
      • Eastern Europe has gained importance as a marketplace and a producer
    • Pacific Asia
      • Nations of the ASEAN are an important force in the world economy and a major source of competition for North American firms
    Copyright 2004 Prentice Hall, Inc.
  • 11. Europe and the Nations of the European Union Copyright 2004 Prentice Hall, Inc.
  • 12. The Nations of ASEAN Copyright 2004 Prentice Hall, Inc.
  • 13. The Major Trading Partners of the U.S. Copyright 2004 Prentice Hall, Inc.
  • 14. Forms of Competitive Advantage
    • Absolute advantage is the ability to produce something more efficiently than any other country can
    • Comparative advantage is the ability to produce some products more efficiently or better than other products
    • National competitive advantage is an international competitive advantage stemming from a combination of factor conditions; demand conditions; related and supporting industries; and firm strategies, structures and rivalries
    Copyright 2004 Prentice Hall, Inc.
  • 15. Attributes of National Competitive Advantage Copyright 2004 Prentice Hall, Inc.
  • 16. Import-Export Balances
    • Balance of trade is the economic value of all products a country imports minus the economic value of all products it exports
      • Trade deficit occurs when a country’s imports exceed its exports (a negative balance of trade), while a trade surplus occurs when exports exceed imports (a positive balance of trade)
    Copyright 2004 Prentice Hall, Inc.
  • 17. Import-Export Balances Copyright 2004 Prentice Hall, Inc.
    • Balance of payments is the flow of money into or out of a country
  • 18. Exchange Rates
    • Exchange rate is the rate at which the currency of one nation can be exchanged for that of another
      • Fixed exchange rates : the value of any country’s currency relative to that of another remain constant
      • Floating exchange rates : the value of one country’s currency relative to that of another varies with market conditions
      • Euro : a common currency shared among most of the members of the EU
    Copyright 2004 Prentice Hall, Inc.
  • 19. Exchange Rates and Competition
    • When a country’s currency rises —becomes stronger —companies based there find it harder to export products to foreign markets and easier for foreign companies to enter local markets
    • When the value of a currency declines —becomes weaker —companies based there find it easier to export to foreign markets and harder for foreign companies to enter local markets
    Copyright 2004 Prentice Hall, Inc.
  • 20. Canadian vs. U.S. Prices Copyright 2004 Prentice Hall, Inc.