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MGTA01H3 Lecture Notes - Per Capita Income, Floating Exchange Rate, Fixed Exchange-Rate System

Management (MGT)
Course Code
Chris Bovaird

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Management Chapter 5
The Rise of International Business
Globalization – when economies are becoming a single interdependent system,
where the economies are seemingly merging.
Imports – products made or grown aboard but sold in Canada.
Exports – products made or grown domestically and shipped for sale abroad.
The Contemporary Global Economy
International Trade took place as far back as 2000 B.C.E.
Forces that influence globalization: new technologies for quick international travel,
communication, and commerce; firms going international to keep up with its
competitors. (NCCF)
The Major World Marketplaces
The three regions with largest economies, most influential markets and highest
income consumers are: North America, Europe, and Asia-Pacific.
Per capita income – the average income per person
Per capita income is used by World Bank to group countries:
High income countries –income per capita greater than 10,065. E.g. Canada and
United States
Upper-middle-income countries – between 3,255 and 10,065 E.g. Czech Republic
and Greece.
Lower middle-income countries – between 825 and 3,255. E.g. China and India.
Lower income countries (or developing countries)- less than 825 U.S. E.g. East
North America
Mexico is known to for its major cheap manufacturing centres, such as for
automobiles (with a 23.6 billion export)
Europe is divided by two regions Western Europe and Eastern Europe
Western Europe is dominated by Germany, the U.K, France, and Italy.

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European Union, EU, has unified the market, with bigger trade in this area
Ecommerce and technology, internet start ups (U.K), software (Ireland), and biotech
(France) are growing products
Example of Eastern Europe countries are Russia, Bulgaria, Albania, and Romania.
Government instability has hampered economic development, and used to consider
Asia Pacific
Examples of countries are Japan, China, Thailand, Malaysia, Singapore, Indonesia,
South Korea.
Products include Toyota, Toshiba (Japan); Samsung(South Korea); Chinese
Petroleum (Taiwan); and Financial Centres (Hong Kong).
Asia is hampered by poor electronic infrastructure, adoption of computers, lower –
income consumers, and currency crisis.
ASEAN – Association of Southeast Asian Nations; Economic group in Asia Pacific.
Forms of Competitive Advantage
Absolute Advantage is when a country produces cheaply and higher quality
products compared to another country. E.g. Economics- less labour needed to
produce a certain good. E.g. Canada with wheat
Comparative advantage is when a country can produce more efficiently than
another good. E.g. Economics – where a country produces one good better than
another. E.g. Korea with VCRs.
National Competitive advantage comes from four conditions:
Production Factor conditions: Labour, Capital, Entrepreneur, National Resources,
Information Tech, Social Organization.
Demand Conditions: Demand for innovative products, large enough market, market
wealthy enough to purchase product, market ready to purchase products.
Related and Supporting Industries – Strong local or regional suppliers and industrial
customers, transportation suppliers, and banking and capital management (funds).
Strategies, structure, and rivalries – Firms that reduce cost, higher productivity, new
products and innovation, and technology to gain information from economy.
Canada wants to trade with Korea due to competitive advantage, not absolute
advantage or comparative advantage. When absolute or comparative, it only means
pertaining to itself and in comparison to another, but in this case. They trade due to
competitive advantage.
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