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MGTA02H3 (363)
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Management (MGT)

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 abroad  The Contemporary Global Economy o Globalization has sustained because:  Govs and businesses aware of benefits of it  Tech makes travel and communication easy  Sometimes businesses must enter foreign markets to keep up with competitors  Major World Marketplaces o World bank uses per capita income to divide countries into one of four groups: 1. High income countries – Per capita income greater than US $10 065 (Ex: US, Canada, Australia, New Zealand, Japan, Kuwait) 2. Upper middle income countries – Per capita income between $3255 and $10 065 (Ex: Czech Republic, Greece, Mexico) 3. Low middle income countries – Per capita between $825 and $3255 (Ex: Colombia, Thailand, India, China) 4. Low income countries (Developing Countries) – Less than $825 (Ex: Somalia) o North America o Europe  Western Europe > Eastern  Eastern been affected by government instability (Russia, Bulgaria, etc) o Asia Pacific  Forms of Competitive Advantage o Absolute Advantage – Nation’s ability to produce something more cheaply or better than any other country o Comparative Advantage – A nation’s ability to produce some products more cheaply or better than it can others o 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  International competitiveness – The ability of a country to generate more wealth than its competitors in world markets  Import-Export Balances o Balance of Trade –Difference in value between country’s total exports and imports o Trade Surplus – exports > imports o Trade Deficit – Imports > exports o Balance of Payments – Difference b/w money flowing in to and out of a country as a result of trade and other transactions  Other transactions – money spent by tourists, on foreign aid, buying/selling of currency on intl money  *See figure 5.4  Exchange Rates o Exchange Rate – Ratio of one currency to another o Currency gets stronger as demand for it increases (aka when demand for Canadian goods increases; currency gets stronger) o Ex: if Cdn dollar gets stronger than pound; Canadians would spend more on british products and british would spend less on Canadian products; Imports > Exports – Trade deficit o Exchange Rates and Competition  Dollar gets stronger –  Harder to export  Easier to import  Move production to foreign co
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