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Chapter 5

MGMT 1000 Chapter Notes - Chapter 5: Absolute Advantage, Comparative Advantage, Canadian Dollar


Department
Management
Course Code
MGMT 1000
Professor
Kathleen Rodenburg
Chapter
5

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THE CONTEMPORARY GLOBAL ECONOMY
Globalization:
- Process by which the world’s economy is becoming a single interdependent system
- Impact of globalization doesn’t stop with firms with locations abroad. Even local operations
may still buy from international suppliers. → affected by fluctuations in exchange rates.
- Critics Say:
- Claim that businesses exploit workers in less-developed countries
- avoid domestic environmental tax regulations
- Leads to loss of culture heritage
- benefits the rich more than the poor
Distinctions Based on Wealth:
1. High Income Countries
a. Annual per-capita income greater than US$12,746
2. Upper-middle-income Countries:
a. Annual per-capita income between US$4126 and US$12,745
3. Low-middle-income Countries:
a. Annual per-capita income between US$1046 and US$4125
4. Low-income Countries: (developing countries)
a. Annual per-capita income of US$1045 or less
Geographic Clusters:
Three major marketplaces: North America, Europe, Asia- Pacific
- Include more upper-middle income and high-income nations
- Largest economies, biggest corps, influential financial markets, highest income consumers
North America:
- USA dominates → largest national marketplace, most stable economy for decades
- Has many issues (debt)
- USA and Canada are each other’s largest trading partner
- Mexico has major manufacturing centre: cheap labour and low transportation costs
Europe:
- Western (Germany, UK, France, Spain, Italy)
- Mature but fragmented marketplace
- Eastern
- Gained importance both as a marketplace and as a producer
Asia Pacific:
- Japan, China, Thailand, Malaysia, Singapore, Indonesia, South Korea, Taiwan, Philippines,
Vietnam, Australia
- Economies have grown rapidly in the last 30 years
- South Korea (Samsung, Hyundai)
- Japan is kick ass at producing: Toyota, Toshiba
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