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Chapter 5

MGTA01H3 Chapter Notes - Chapter 5: Market (Place)


Department
Management (MGT)
Course Code
MGTA01H3
Professor
H Laurence
Chapter
5

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Chapter 5: Understanding 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 world economy revolves around three major market places: North
America, Europe, and Asia-Pacific. These three geographic regions are home to most of the
worlds largest economies, biggest national corporations, most influential financial markets,
and highest income consumers
Per Capita Income: the average income per person of a country (annually)
High Income Countries: annual per capita income exceeds U.S. $10 065
Canada, Japan, United States, most countries in Europe, Australia, New
Zealand, South Korea, Kuwait, the United Arab Emirates, Israel, Singapore, and
Taiwan (Hong-Kong falls in here even though not an independent nation)
Upper-Middle Income Countries: annual per capita between U.S. $3255 and U.S. $10065
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Czech Republic, Greece, Hungary, Poland, most countries comprising the
former Soviet Bloc, Turkey, Mexico, Argentina, and South Africa
Low-Middle Income Countries: annual per capita between U.S. 825 and U.S. $3255
Columbia, Guatemala, Samoa, and Thailand; some of these, including India
and China, have huge populations and are seen as potentially attractive markets for
international business.
Low Income Countries (often called “Developing Countries): annual per capita
income less than U.S. $825
Due to low literacy rates, weak infrastructure, unstable governments, these
countries are less attractive to international business. East African nation of
Somalia is plagued by drought, civil war, and starvation, plays virtually no role in
the world economy.
North America: United States dominates the North American business region. It is the single
largest market place and enjoys the most stable economy in the world. Canada also plays a major
role in the international economy; moreover the United States and Canada are each other’s
biggest trading partner. Mexico is a major manufacturing centre where cheap labour and low
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transportation costs have encouraged many firms from all around the world to build
manufacturing plants.
Europe: Often regarded as two parts, Western and Eastern Europe. Western Europe, dominated
by Germany, United Kingdom, France, and Italy, has long been a mature but fragmented
marketplace. Eastern Europe, once primarily communist, has also gained importance, both as a
marketplace and as a producer. On the other hand, government instability has hampered
economic development in Russia, Bulgaria, Albania, Romania, and other countries in this region.
Asia-Pacific: Consists of Japan, 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
the 1970’s and 1980’s. A currency crisis in the late 1990s generally slowed growth in virtually
every country of the region. Asia-Pacific 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, is the third largest economy in the world behind the United States and Japan.
Absolute Advantage: a nations ability to produce something more cheaply or better than any
other country
Comparative Advantage: a nations ability to produce some products more cheaply or better
than it can others.
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 formidable.
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