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Chapter 4Chapter 4

Understanding the Global Context of Business

Overview

Rise of international business

Major world marketplaces

International business strategies Competitive advantage

Import-export balances

Exchange rates

Foreign competition shape

Factors influencing the decision to engage in international business

Rise of International Business

The world economy is becoming a single, interdependent system

Export: Domestic (i.e., U.S.) product sold abroad

Import: Foreign product sold domestically (i.e., in the U.S.)

Growth Competitiveness Index

The Major Trading Partners of theUnited States

2004 Data:

http://ita.doc.gov/td/industry/otea/usfth/aggregate/H04T10.html

http://www.ita.doc.gov/td/industry/otea/usfth/aggregate/H04T11.html

Table 4–1

Major World Marketplaces

North AmericaNorth America

EuropeEurope

Pacific AsiaPacific Asia

http://www.forbes.com/

The North American Marketplace and the

Nations of NAFTA

Figure 4–2

http://en.wikipedia.org/wiki/NAFTA

http://utopia.utexas.edu/articles/tbr/nafta.html?sec=business&sub=economics

1994

Europe and the Nations of the European Union

Figure 4–3

• AustriaAustria

• Belgium*Belgium*

• DenmarkDenmark

• FinlandFinland

• France*France*

• Germany Germany (West)*(West)*

• GreeceGreece

• IrelandIreland

• Italy*Italy*

• IrelandIreland

• ItalyItaly

• Luxembourg*Luxembourg*

• Netherlands*Netherlands*

• PortugalPortugal

• SpainSpain

• SwedenSweden

• United KingdomUnited Kingdom

http://europa.eu.int/abc/history/index_en.htm#

1992• AustriaAustria

• BelgiumBelgium

• DenmarkDenmark

• FinlandFinland

• FranceFrance

• GermanyGermany

• GreeceGreece

• IrelandIreland

• ItalyItaly

• IrelandIreland

• ItalyItaly

• LuxembourgLuxembourg

• NetherlandsNetherlands

• PortugalPortugal

• SpainSpain

• SwedenSweden

• United KingdomUnited Kingdom

New in 2004:New in 2004:

• CyprusCyprus

• the Czech Republicthe Czech Republic

• EstoniaEstonia

• HungaryHungary

• LatviaLatvia

• LithuaniaLithuania

• MaltaMalta

• PolandPoland

• SlovakiaSlovakia

• SloveniaSlovenia

The Nations of ASEAN

1967

Figure 4–4

http://www.aseansec.org/

• Brunei DarussalamBrunei Darussalam

• CambodiaCambodia

• Indonesia*Indonesia*

• LaosLaos

• PDRPDR

• Malaysia*Malaysia*

• MyanmarMyanmar

• Philippines*Philippines*

• Singapore*Singapore*

• Thailand*Thailand*

• VietnamVietnam

Plus 3: Japan, China, South Korea

Pacific Asia Represents Enormous Business Potential

Source: Time Global Business, Nov. 2001.

English Japanese Chinese Korean0

50

100

150

200

250

300

350

400

450

500

415

9696

432

34

Projections for 2010 (in millions)

In less than a decade, Asian language speakers on the web will far exceed English speakers.

Competitive Advantage

Absolute Advantage: controls the market Saudi oil French wine Columbian coffee

Comparative Advantage: influences the market U.S. computers and agricultural products Indian technological expertise

NationalCompetitive Advantage

Factor conditions Demand conditions Related and supporting

industries Strategies, structures, and

rivalries

Import/Export Balances

Balance of Trade Trade Deficits Trade Surpluses

Balance of Payments

http://www.iie.com/research/topics/hottopic.cfm?HotTopicID=9 

Exchange Rates and 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

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

http://www.x-rates.com/

Going International

Figure 4–8

http://www.ipfrontline.com/depts/article.asp?id=4411&deptid=2

Review

Rise of international business

Major world marketplaces

International business strategies

Factors influencing the decision to engage in international business

On Wednesday—courtesy of Lisa and Andrew:

Levels of international involvement and international organizational structure

Key barriers to international trade

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.

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.