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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.