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MGTA01H3 (583)
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Chapter 5


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Management (MGT)

The rise of international business More firms are engaging in international business, the world economy is becoming a single interdependent systemprocess called globalization Importsproducts that are made or grown abroad and sold in Canada Exportsproducts made or grown in Canada that are sold abroad The contemporary global economy Trade between nations have been going on since 2000 BCE MIT professor points out that imports now represent only a slightly higher proportion of GDP than they did 100 years ago, and that capital mobility is about the same as it was in 1914 But international trade is becoming increasingly central to the fortunes of most nations of the world, and their largest businesses More countires are now aggressively encouraging international trade opening their borders to foreign businesses, offering incentives for domestic business to expand internationally As industries and markets become global firms that compete in them are also going global Forces that combined to spark and sustain globalization Governments and businesses have 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 There are competitive pressures: sometimes a firm simply must enter foreign markets to keep up with its competitors The major world marketplaces There are three major market placesNorth America, Europe and Asia- Pacifichome to worlds largest economies, biggest multi-national corps, influential financial markets and highest income consumers World bank uses per capita income to divide countries into four groups High income countriesper capita greater than 10,065 USD Canada, Canada, most in Europe, oceana, japan, south korea, etc Upper middle income countriesper capital between $ 3255- 10065northern Europe, countries that made up soviet bloc, Greece, mexico, etc Low middle income countriesper capita between 825- 3255 USDThailand, India, China Low income countries (often called developing)per capital of less than 825 USD annually. Due to low literacy, weak infrastructures, unstable governments and related problems, these countries are less attractive to international businesseg. East African nationis North America US dominates the NA business regionsingle largest marketplace and enjoys the most stable economy in the world US and Canada are each others largest trading partners Mexico has also become a major manufacturing center, esp along the US border, where cheap labour and low transportation costs have encouraged many international and US firms to build manufacturing plants Europe Divided into twoWest and East Europe Western Europe is dominated by germany, UK, France and Italy The formation of the European union in 1992 unified the marketplace and further increased the regions importance Ecommerce and technology have also become increasingly important in this region Eastern Europe, once primarily communist has gained in importanceas marketplace and consumer But government instability has hampered economic development in Russia, Bulgaria and other countries in that region Asia- Pacific Consists ofJapan, China, Thailand, Malaysia, Singapore, Indonesia, south Korea, Taiwan, the Philippines, Australia and new Zealand Fuelled by strong entries in the automobile, electronics and banking industries, the economies of these countries grew rapidly in 70s and 80sbut a currency crisis in the 90s slowed growth It is an important force in the world economy and a major source of competition for North American firms rd Most indicators suggest that the Chinese economy is now the worlds 3 largest after the US and Japan Technology places an increasingly important role in this regionbut the emergence of technology firms has been hampered by poorly developed electronic infrastructure, slower adoption of computers and information technology The southeast Asian nations countries of Asia- Pacific (ASEAN) founded in 67 is an organization for economic, political, social and cultural cooperation Today it has a population of over 500 milli and a GNP of ~ 800 billi Forms of competitive advantage There are high levels of importing, exporting and other international business activities because no country can produce all the goods and services its people need Countries tend to export products that they can produce better or less expensively than other countries, using the proceeds to import products that they cant produce as effectively Absolute advantage Absolute advantageexists when a country can produce something more cheaply and/or of higher quality than any other country Saudi oil, Brazilian coffee and Canadian timber are absolute advantages But examples of true absolute advantages are rare, in reality absolute advantages are always relative Comparative advantage Comparative advantagesa nations ability to produce some products more cheaply or better than other goods
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