chpt 5 notes

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Published on 17 Jun 2011
School
UTSC
Department
Management (MGT)
Course
MGTA01H3
Professor
Globalization- integration of markets globally
Imports- products that are grown or made abroad sold in Canada
Exports- products made or grown in Canada that are sold abroad
Contemporary global economy
International business is nothing new global economy is not big of a change as we think
International trade is becoming more important to most nations of the world .
In the past, there were strict policies nations follow to protect domestic business
Present- increasing international trade
to sustain globalization government realizes the benefits of globalization to country and new
technology to make international travel easier and cheaper
major world market places
contemporary world economy revolves around 3 major markets- north America, Europe and
asia pacific.
World bank uses per capita income to divide countries in 4 groups ( high income, upper middle
income low middle income and low income)
Per capita income- average income per person of a country
North America- composed of USA-largest and most stable economy, Canada, Mexico- cheap
labour and low transportation costs
Europe- reguarded as 2 regions- western and eastern Europe.
Western Europe- eg UK. France, Italy are increasingly important to ecocomerce and technology
eastern Europe- important as market place and producer but economic development was
slower because of government instability ( Russia, hungary all used to be communist)
asia pacific- japan, china, Singapore, Malaysia, etc. strong in automobile, electronics in
1970s/80s.--> currency crisis in 1990 slowed growth
acts as competition ofr north American eg Toyota, Toshiba,.
China is third largest economy next to US, japan.
Technology plays important role but asia has slow electronic infrastructure led to slow adoption
of computers, higher lower income consumers but technology companies are facing obstacles
to keep pace
ASEAN- association of southeast asian nations ( 1995, vietname became groups first
communist member) over 500 million gnp of 800 billion
Forms of competitive advantage- countrys need to import and export as they cant produce all
goods and services people need
-decisions on what a country imports/exports depends on their abilities to use resources.
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Absolute advantage- a nations ability to produce something more cheaply or better than any
other country- more higher quality true absolute advantages are rare
Comparative advantage- nation;s ability to produce some products more cheaply or better than
it can produce in other goods –eg Canada has advantage at farming. South korea in electronics
National competitive advantage- a country will be inclined to engage in international trade when
factor conditions, demand conditions, related and supporting industries, and
strategies/structures/rivalries are favourable
Factor condtions- factors of production
Demand conditions- large domestic strong demand
Related and supporting industries- strong local or regional suppliers and/or industrial customers
Strategies and structures and rivalries- firms and industries that stress cost reduction,
productivity and new products
International competitiveness- ability of a country to generate more wealth than its competitors
in world markets top 3- Switzerland finland Sweden
Canada high taxes overly conservative capital market were reasons for canadas lower rating
Balanace of trade-
Trade surplus- country exports more
Trade deficit- country imports more
Canada mostly trades with US but we export more than import but we are too reliant on US and
that leaves us vulnerable- (Canada too many of its eggs in one basket)
Balance of payments- difference between money flowing in and out of a country as a result of
trade and other transactions- eg balance of trade + money spent by tourists, money spent on
foreign aid programs
To have Canada have favorable balance of payments- exports, more foreign tourists, earnings
from investments have to be a lot
Exchange rate- ratio of one currency to another
After 2nd world war, fixed exchange rates- currency is constant
Floating exchange rates- value of a country’s currency to another depends on market conditions
( when there is high demand or high demand for goods made at expense of that currency) but
currency does not fluctuate by a lot n it takes a lot of time to have significant change in currency
value
How it affects market- if price of Canadian dollar is too high, few countries will want to buy from
Canada
Euro- a common currency shared among most of the members of the European union ( not
denmark Sweden or UK) in 2002
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Document Summary

Imports- products that are grown or made abroad sold in canada. Exports- products made or grown in canada that are sold abroad. International business is nothing new global economy is not big of a change as we think. International trade is becoming more important to most nations of the world . In the past, there were strict policies nations follow to protect domestic business. World bank uses per capita income to divide countries in 4 groups ( high income, upper middle income low middle income and low income) Per capita income- average income per person of a country. North america- composed of usa-largest and most stable economy, canada, mexico- cheap labour and low transportation costs. Europe- reguarded as 2 regions- western and eastern europe. 1970s/80s. --> currency crisis in 1990 slowed growth acts as competition ofr north american eg toyota, toshiba,. China is third largest economy next to us, japan.