Chapter 2 The Global Context of Business http://www.slideshare.net/Subjectmaterial
Sr. Chapter Chapter HeadingNo.No.1. 3 Understanding the Global context of business (031012)2. 4 Conducting Business Ethically and Responsibly3. 6 Organizing the Business Enterprise4. 7 Understanding Entrepreneurship and Small Business5. 8 Managing Human Resources6. 9 Understanding Employee Motivating, Satisfying and Leadership7. 11 Understanding Marketing Processes and Consumer Behavior8. 16 Managing Quality and Productivity9. 17 Managing Information Systems and Communication Technology10. 19 Understanding Money and Banking11. 20 Intermediate Term and Lease Financing
Marks Distribution50 Terminal Examination20 Mid Term Examination15 Quizzes15 Final Assignment 3
“We are in the midst of agreat transition from narrownationalism to internationalpartnership.” ~ Lyndon Baines Johnson
Chapter Review Discuss the rise of international business, describe the major world marketplaces. Explain how competitive advantage, import- export balances, exchange rates, and foreign competition shape international business strategies.
Chapter Review Discuss what factors influence whether a company should engage in international business. Identify different levels of international involvement and international organizational structure. Describe key barriers to international trade.
Key Topics The rise of global business Major world marketplaces and trading partners Influences on international business International business management The impact of differences among nations
Definitions Quota: restriction on the number of certain type of product that can be imported into a country. Embargo: complete ban on imports and exports, imposed by a government for political reasons. Tariff: tax levied on imported products. Subsidy: government payments to help a domestic business compete with foreign firms. Protectionism: the practice of protecting domestic business against foreign competition.
DefinitionsGross domestic product (GDP) is one the primary indicators used to gauge the health of a countrys economy. It represents the total dollar value of all goods and services produced over a specific time periodOrThe monetary value of all the finished goods and services produced within a countrys borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.Per capita income or income per person is a measure of mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population. It does not attempt to reflect the distribution of income or wealth 9
1. The key drivers to globalization Global market Drivers: Convergence Similar customer needs, Global customers, Transferable marketing Trade policies, Technical Scale economies, GovernmentStandards, host government, Global Sourcing efficiencies Cost Influence policies Strategies Countries costs, Advantages High product development costs Interdependence, Competitors global High exports/imports, Global Competition
a. Globalization Is Gaining SpeedThe world economy isbecoming a single,interdependent systemExport:Domestic product soldabroadImport:Foreign product solddomestically
b. Globalization Is GainingSpeed Example: Asian financial markets in the late 90s directly affects stock markets worldwide. Discussion: what product from other countries do you useconsume? Why have you chosen it?
c. Categorizing Economies High Income Countries: Per capita income greater than $9,386 Middle Income Countries: Per capita income between $765 and $9,386 Low Income Countries: Per capita income of less than $765 Discussion: what countries fall into each category?
d. Major World Marketplaces North America NAFTA Europe EU Pacific Asia Do we have any economic agreement with other countries. What are they?
Pacific Asia RepresentsEnormous Business Potential Projections for 2010 (in millions) 500 In less than a 450 decade, Asian 400 415 432 language 350 speakers on 300 the web will 250 far exceed 200 English 150 speakers 100 96 50 34 0 English Japanese Chinese KoreanSource: Time Global Business, Nov. 2001 2 - 18
2. Competitive Advantage Absolute Advantage: when one country can produce a product cheaper andor higher quality than any other country. Ex. OPEC Comparative Advantage: when one country can produce certain goods or services more efficiently and effectively than others. Ex. US software
Competitive advantages When competitive advantage is materialized?When a firm earns persistently higher rate of profit over its rivals. Determinants of profit level 1- Value of company products in customers’ eyes. 2- Company production cost.
Competitive advantage It can be created in certain industrial field, through the adoption of low-cost- differentiation strategy. M. Porter
National Competitive Advantage Factor conditions Demand conditions Related and supporting industries Strategies, structures, and rivalries
3. Import/Export Balances Balance of Trade Trade Deficits Trade Surpluses Balance of PaymentsThe total flow of money into or out of an economy
3a. Exchange RatesHeavily Impact Global Trade When an economy’s currency is strong: Domestic companies find it harder to export products Foreign companies find it easier to import products Domestic companies may move production to cheaper sites in foreign countries Implications for balance of trade?
Exchange RatesHeavily Impact Global Trade When an economy’s currency is weak: Domestic companies find it easier to export products Foreign companies find it harder to import products Foreign companies may invest in production facilities Implications for balance of trade?
4. Levels of International Involvement Importer & Exporter International Firms Multinational Firms
International OrganizationalStructures HIGH INVOLVEMENT Foreign Investment Private capital investment by firms of one country into those of another. Strategic Alliances a relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations Branch Offices Licensing Arrangements Independent Agents LOW
5.Barriers to International Trade Legal & Political Social & Cultural Differences Differences Economic Differences
Take Time to Learn the Culture Thoroughly! Este es nuestro nuevo auto: Ha, ha, ha, ha, el NOVA! ha, ha!!!
The Customer’s LanguageA Critical Business Success Factor In the U.S. alone, 18% of the population does not speak English at home. Only 48% of the world’s Web users are native English speakers. Consumers are four times more likely to buy a product on the Internet if the website is in their preferred language.Source: Time Global Business, Nov. 2001
Economic DifferencesTo operate effectively in anothercountry, businesses must know when,and to what extent, the government isinvolved in a given industry.
Legal & Political Differences Quotas, Tariffs, & Subsidies Protectionism Local Content Laws Business Practice Laws Day to day operations Cartels Dumping
Potentials Population – 170 million Growing consumption Cheap labor According to approximations, labor in Pakistan is $ 0.36 an hour; in India, it is $ 0.58 an hour and in China, it is $ 0.70 an hour Feasible regulatory conditions As compared to india Minerals Coal, Copper, Gold, Silver, Dolomite, Gypsum, Lime stone, Natural Gas, Iron core, Rock salt, Bauxite, Marble, Gems, China Clay, Zinc, Lead and Chromite are some of Pakistan’s potential 40
MacroPotentials economic indicators Large More jobs scale job creation Coal reserves, iron and gems Agriculture Pakistan is the 4th largest producer of milk Increased manufactu Improving purchasin ring g power Fruit and agriculture processing Greater demand of Lower good and poverty services Greater consumpti on 41
Snapshot of Sessional marks Introduction CHAPTER NO 3 NAME COMPANY NO. 4-2-12 11-2-12 Aruba 1 1 Lunba 1 1 Ayesha 1 1 Faria 2 1 Safia Tabassum 2 1 Mashal 3 1 Namreen 3 1 Asma 3 1 Umair Iqbal 4 1 Shiraz Qureshi 4 1 Ismail 4 1 Anus 4 1 Mir 5 1 Saad 5 1 Najeeb Aslam 5 1 M. Ejaz 5 1 42