Chapter 5: Understanding International Business
-Several forces have combined to spark and sustain globalization:
-Governments and business see the benefits of exploiting the global market.
-New technologies and easier mode of communications.
-Competitive pressures: firm must enter foreign markets to keep up with competitors.
Three major markets: North America, Europe (West+East), Asia-Pacific
-Countries are divided based on their per capita income: High-income (>10065), Upper-middle income
(3255-10065), Low-middle income (825-3255), Low-income (<825).
-ASEAN (Association of Southeast Asian Nations): Thailand, Vietnam, Philippines, Singapore, Malaysia,
-No country can produce all the goods and services that its people need. Thus, they require impor t and
expor t to acquire and trade goods efficiently.
-True absolute advantage is rare. In reality, “absolute advantages” are always relative.
-Absolute Advantage: things that nation makes and sell because others can’t due to natural or industrial
-Comparative Advantage: things that a nation makes and sells because they choose to due to better
-National Competitive Advantage: A country will be inclined to engage in international trade when factor
of production conditions, demand conditions, related and suppor t in g industries (strength), and
strategies,/structure/rivalries are favourable.
-International competitiveness: the ability of a county to generate more wealth than its competitors in
-Canada’s overall trade balance is favourable only because of its large expor t to the United States; almost
all of its other trading par tners are unfavourable.
-Balance of payments: the difference between money flowing in to and out of a country as a result of
trade and other transactions.
-Although Canada has a favourable balance of trade, it has had an unfavourable balance of payment for
-In floating exchange rates (norm), the currency values of one country fluctuate due to market demand as
opposed to fixed exchange rates.
-Fluctuation in exchange rates can have an impor tant impact on the balance of trade. If the foreign
exchange rate is weaker than the norm, it is cheaper to acquire through impor t, and domestic products
become more expensive to foreign consumers. Thus, it could lead trade deficits because domestic
consumers are more prompted to buy international.
-Britain, Sweden, and Denmark do not use the Euro.
-Exchange rate fluctuations can be a major factor in international competition. As value of a currency
becomes stronger, companies based there find it harder to export and easier for foreign companies to
enter local markets. It also makes it more cost-efficient for domestic companies to move production
operations to lower-cost sites in foreign countries.
-As the value of a country’s currency falls, its balan ce of trade should improve because domestic
companies should experience a boost in expor ts. There should also be a corresponding decrease in the
incentives for foreign companies to ship products into the domestic market.
-If there is international demand for its product, a firm must consider whether and how to adapt that
product to meet the special demands and expectations of foreign customer.