International Business International business is a term used to collectively describe topics relating to the operations of firms with interests in multiple countries. Such firms are sometimes called multinational corporations (MNCs) or TNC’s transnational corporations. Well known MNCs include :McDonalds, General Motors, Toyota, LG, Sony, and BP. Most of the largest corporations operate in multiple national markets. MNCs typically have subsidiaries or joint ventures in each national market. How these companies are organised, how they operate, and their lines of business are heavily influenced by: socio-cultural, political, global, economic and legal environments of each country that the firm does business in. The management of the parent company typically must incorporate all the legal restrictions of the home company into the management of companies in based in very different legal and cultural frameworks. International business by its nature is a primary determinant of international trade, One of the results on the increasing success of international business ventures is GLOBALISATION (WIKIPEDIA)
ReviewECONOMIC INDICATORS: Inflation Unemployment rate GDP Trade – Imports/Exports Exchange rate (AUD Fluctuations) External factors: things that can affect production/profits (natural factors- weather: (e.g. Australian banana crisis in 2006). Gross domestic product (GDP) is the standard measure of the value of the goods and services produced by a country during a period. Per capita GDP is a broad indicator of economic living standards. (OECD FACTBOOK 2008)
Gross domestic product Billion US dollarscurrent prices and PPPs, 2006 or latest available year
There is a relationship between economic growth and world trade(handout: graphical representations) This flows then through the economy and injects other sectors of the economy. Ultimately this will also raise our living standards – In class question Why do you think world trade will increase our standards of living?
AGGREGATE DEMAND – In economics the term aggregate or total demand is associated with how the economy is performing – With globalisation, trade increases, employment increases and thus demand in the economy as a whole increases as well. TNC’S (Transnational Corporations) – These have also contributed to Australia growth in world trade – TNC’s are business organisations who not only see the world as their marketplace but also have production facilities in many places around the world – Read the following link now http://www.answers.com/topic/transnational-corporation?cat=technology
TNC’S and Foreign Investment TNC’S bring with them new forms of technology. (direct foreign investment) This also helps countries stay up to date with changes in the world economy This is very important to developing countries. If a country closes itself off from the rest of the world, then they will fall behind in technology and overtime become less competitive. – E.G. North Korea
Pair Question Should Australian’s buy a product at a cheaper price if it can be made cheaper in a foreign country? How would it impact on the economy if the government refused to let Australian’s buy the cheaper product by imposing a ban on imports?
The Business CycleThe business cycle represents boom andbust cycles that take place in an economy.Have a look at the graph below
Most world economies due to trade follow the same business cycle If the USA has an economic shock this will flow onto Australia? – In class discussion WHY DO YOU THINK THIS HAPPENS? What do you know from the sub prime mortgage crisis in the USA of 2007 Thus on conclusion we can conclude that due to globalisation and trade the world’s economies are closely aligned.
Questions - individual Explain how trade flows increase economic growth of a country. Explain the effect on a country of direct foreign investment. Explain the impact of the international business cycle on domestic and world economies.
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