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Chapter 5-10

MGTA03 Chapter 5-10 Notes

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 5 Understanding International Business The Rise of International Business Globalization the integration of markets globally Imports products that are made or grown abroad and sold in Canada Exports - products made or grown in Canada that are sold aboard The Contemporary Global Economy Trade between nations can actually be traced back as far as 200BCE International trade is becoming increasingly central to the fortunes of most nations of the world, as well as their largest business Today international trade is encouraged and more freely opening their borders to foreign business, offering incentives for their own domestic businesses to expand internationally, and making it easier for foreign firms to partner with local firms through various alliances The Major World Marketplace The contemporary world economy revolves around three major marketplaces: North America, Europe, and Asia-Pacific Three geographic regions are home to most of the worlds largest economies, biggest multi-national corporation, most influential financial markets and highest income consumers The World Bank, an agency of the United Nations uses per capita income Per capita income the average income per person of a country o High income countries are those with per capita income greater than U.S. $10 065. (include Canada, the United Sates, most countries in Europe, Australia, New Zealand, Japan, South Korea, Kuwait, Hong Kong) o Upper-middle-income countries are those with per capita income between U.S. $3255 and U.S. $10065. (include Czech Republic, Greece, Hungary, Poland) o Low-middle-countries are those with per capita income between U.S. $825 and U.S. $3255 (include Colombia, Guatemala, Samoa, and Thailand ) Some of these, including China and India, have huge populations and are seen as potentially attractive markets for international business o Low-income countries (often called developing countries) are those with annual per-capita income of less than U.S. $825. Due to low literacy rates, weak infrastructures, unstable governments, and related problems, these countries are less attractive to international business. North America The United States dominates the North American business region (the single largest marketplace and enjoys the most stable economy in the world Canada also plays a major role in the international economy Untied States and Canada are each others largest trading partner Mexico has also become a major manufacturing centre, especially along the southern U.S. border; where cheap labour and low transportation costs have encouraged many firms, from the United States and other countries to build manufacturing plants Europe Has often been regarded as two regions Western Europe and Eastern Europe www.notesolution.com Western Europe is dominated by Germany, the United Kingdom, France and Italy, has long been a mature but fragmented marketplace. The transformation of the European Union (EU) in 1992 into a unified market place has further increased the regions importance Ecommerce and technology have also become increasingly important in this region Eastern Europe, once primarily communist, has also gained in importance both as marketplace and as producer Asia-Pacific consists Japan, China, Thailand, Malaysia, Singapore, Indonesia, South Korea, Taiwan, the Philippines, Australia, and New Zealand a currency crisis in the late 1990s generally slowed growth in virtually every country of the region is an important force in the world economy and a major source of competition for North American firms China, the most densely populated country in the world, continues to emerge as an important market in its own right. (worlds third largest economy, behind United States and Japan) In Asia however, the emergence of technology firms has been hampered by a poorly developed electronic infrastructure, slower adoption of computers and information technology, a higher percentage of lower-income consumers, and the afore mentioned currency crisis Forms of Competitive Advantage Countries tend to export products that they can produce better or less expensively than other countries, using the proceed s to import products that they cannot produce as effectively Absolute Advantage a nations ability to produce something more cheaply or better than any other country o Exists when a country can produce something more cheaply andor higher quality than any other country Comparative Advantage a nations ability to produce some products more cheaply or better than it can others o it can produce more efficiently or better than other goods National Competitive Advantage a country will be inclined to engage in international trade when factor conditions, demand conditions, related and supporting industries, and strategiesstructurerivalries are favourable 1) Factor conditions are factors of production that we identified in Chapter 1 2) Demand conditions reflect a large domestic consumer base that promotes strong demand for innovative products 3) Related and supporting industries include strong local or regional suppliers andor industrial customers 4) Strategies, structures, and rivalries refer to firms and industries that stress cost reduction, product quality, higher productivity, and innovative new products When all of these conditions exist, a nation will naturally be inclined to engage in international business (Japan has strong domestic demand for automobiles) International Competitiveness the ability of a country to generate more wealth than its competitors in world markets www.notesolution.com
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