Textbook Notes (369,099)
Canada (162,378)
MGTA01H3 (583)
Chapter 5

MGTA03 Chapter 5 Notes.docx

3 Pages

Management (MGT)
Course Code
Chris Bovaird

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MGTA03 Introduction to Management Chapter 5—Understanding International Business The Rise of International Business  globalization is the integration of marks globally, the world economy becomes a single interdependent system  imports are products that are made or grown abroad and sold in Canada  exports are products made or grown (domestically) in Canada that are sold abroad The Contemporary Global Economy  globalization has been sustainable:  governments and businesses have simply become more aware of the benefits of globalization to their countries and shareholders  new technologies make international travel, communication and commerce increasingly easier, faster and cheaper than every before  competitive pressures, a firm must enter foreign markets to keep up with its competitors The Major World Marketplace  per capita income is the average income per person of a country  World Bank, an agency of the UN divides countries according to per capita income  high-income countries: per capita income greater than $10 065  upper-middle-income countries: per capita income between $3 255 and $10 065  low-middle-income countries: per capita income between $825 and $3 255  low-income countries: per capita income less than $825 Forms of Competitive Advantage  there are so high levels of importing, exporting and other forms of international business activity because no country can produce all the goods and services that its people need Absolute Advantage  an absolute advantage exists when a country can produce something more cheaply and better (higher quality) than any other country Comparative Advantage  a comparative advantage is a nation’s ability to produce some products more cheaply or better than it can others National Competitive Advantage  national competitive advantage states that a country will be inclined to engage in international trade when factor conditions (factors of production), demand conditions (large domestic consumer base), related and supporting industries (strong local or regional suppliers or industrial customers) and strategies, structures and rivalries (industries that stress cost reduction, product quality, higher productivity and innovation)  international competitiveness refers to the ability of a country to generate more wealth that its competitors in world markets Import-Export Balances Balance of Trade  balance of trade is the difference in value between a country’s total exports and its total imports; a trade surplus occurs when a country exports more than it imports and a trade deficit occurs when a country imports more than it exports  Canada’s overall balance of trade is only favourable because its exports much more than it imports to the United States, with all other trading partners Canada has an unfavourable balance of trade Balance of Payments  balance of payments is the difference between money flowing in and out of a country as a result of trade and other transactions (includes money spent by tourists, money spent on foreign aid programs and money spent and received in the buying and selling of currency on international money markets) Exchange Rates  an exchange rate is the rate (ratio) at which the currency of one nation can be exchanged for that of another, currently the world system uses floating exchange rates  purchasing power is the number of goods/services that can be purchased with a unit of currency  factors that strength the value of the dollar: increase in demand for the currency or for goods manufactured at the expense of that currency  an increase in the value of the Canadian dollar is not good for Canadian businesses though it is good for Canadian consumers because it increases the price of all Canadian made products (and results in a drop for internationally made products) and thus Canadian consumers would be prompted to spend more on internationally-made products and less on Canadian-made products resulting in a trade deficit Exchange Rates and Competition  when the value of a country’s domestic currency rises, companies based there find it harder to export products to foreign markets and easier for foreign companies to enter local markets—more cost- efficient for domestic companies to move production to lower-cost sites in foreign countries  as the value of a country’s currency falls its balance of trade should improve because domestic companies should experience a boost in exports and there is a corresponding decrease in incentives for foreign companies to ship products into the domestic
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