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MGTA01H3 (583)
Chapter 5

MGTA03 Chapter 5

9 Pages
67 Views

Department
Management (MGT)
Course Code
MGTA01H3
Professor
Chris Bovaird

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Chapter 5 – Understanding International Business
The Rise of International Business
-increasing amount of world trade today
-Globalization: The integration of markets globally
-imports: products that are made or grown abroad and sold in Canada
-exports: products that are made and grown in Canada and sold abroad
The Contemporary Global Economy
-trade has been around for many years already, North American tribes trading
dates and clothing for olives and spices in Middle East
Capital mobilitymovement of money from country to country
Imports only represent slightly higher proportion of GDP than it used to
Countries nowadays encourage international trade and not just domestic trade
Countries are offering incentives for domestic companies to trade interntionally
and they are creating more opportunities for domestic businesses to make
alliances with foreign firms
Therefore, many firms are now competing on a global scale
There are forces which help to spark and sustain globalization: government and
businesses who accept it because they recognize the benefits, the advancement of
technology to make traveling, communication, commerce overseas phone calls
easier and faster than before, and there are also the competitive pressure of
needing to keep up with global competition
The Major World Marketplaces
Contemporary world economy has 3 major marketplaces: North America, Europe
and AsiaPacific as they have the most influential financial markets, highest
income consumers, etc.
World Bankpart of the United Nations uses per capita income (the average
income per person) to measure and divide countries into one of four groups
-High Income Countries – per capita income greater than U.S $10, 065 (examples:
Canada, Australia, Japan, Hong Kong)
-Upper-Middle-Income Countriesper capita income between US $3255 and US
$10,065 (examples: Greece, Poland, Mexico, Turkey)
-Low Middle-Income Countriesper capita GDP of in between US $825 and US
$3255 (examples: China, India, [<- even though, they are attractive for international
business because they have huge populations] Columbia, Thailand
www.notesolution.com
-Low-Income Countries (Developing Countries) – per captia income of less than
$825 US. Usually unattractive for international business because of low literacy rates,
weak infrastructures, unstable governments (example: Somalia)
North America
United states is North America’s largest marketplace and most stable
economy
United States and Canada are each others’ largest trading partners, but each
are quite successfully in international business by maintaining international
competition
Mexico has become a major manufacturing centre, and its auto industry is
quite active because of how near the south of the US border there’s cheap
labour and low transportation costs, so many firms build manufacturing plants
there, even their suppliers have built plants there making it even less
expensive
Europe
Europe is recognized as 2 places: Western Europe and Eastern Europe
For Western Europe, In 1992, the European Union transformed Europe into a
unified marketplace helped
There are many international firms located in Western Europe and Ecommerce
and technology have become important such as internet startups, exporting
software, internet companies
Western Europe contains countries like Germany, UK, France, Italy
For Eastern Europe, it has gained importance as a producer and a marketplace,
there are factories built in these countries and production plants
However, government stability is a problem and stopped economic development
Countries in this region include Poland, Russia, Bulgaria
Asia-Pacific
This region is fuelled by strong automobiles industry, banking industry,
electronics and more
Economies of countries were growing in 1970s and 1980s but started to decline in
growth and still are now because of a currency crisis
Asia-Pacific is a major competitor of North America because of companies like
Toshiba, Toyota, Hong Kong’s financing centre, etc.
Japan is the world’s second largest economy, China trailing in 3rd.
www.notesolution.com
However, in Asia, there is poor electronic infrastructure, slower adaptation of
computers, lower income consumers, therefore the technology companies in this
region are having trouble
There is a ASEAN (Association of Southeast Asian Nations) – and organization
for economic, political, social, etc. of countries in this region.
Forms of Competitive Advantage
Since no countries can produce all the goods and services that people need they
trade by exporting and importing
Countries export products that they can produce more efficiently and cheaper and
use the proceeds to buy imports
International trade can be explained with Comparative advantage and Absolute
advantage
Absolute Advantage
Country has absolute advantage if it has the ability to produce a good more
cheaply and better in quality than any country.
Canada has approximate absolute advantage in timber
There is no real absolute advantage or it is rare
Comparative Advantage
Country has comparative advantage if it can produce a good more efficiently than
or better than goods of another country
Canada has comparative advantage in farming
National Competitive Advantage
A more widely accepted model of why nations engage in national trade
Four conditions to encourage a country to engage in trade:
-Factor conditions: Factors of Production
-Demand conditions: consumers in country who have demand for the productions
-Related and supporting industries: strong local and regional suppliers and
industrial customers
-Strategies, structures and rivalries: firms and industries that stress cost reduction,
produce better
International Competitiveness: Country’s ability to generate more wealth than its
competitors in world markets
www.notesolution.com

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Description
Chapter 5 Understanding International Business The Rise of International Business -increasing amount of world trade today -Globalization: The integration of markets globally -imports: products that are made or grown abroad and sold in Canada -exports: products that are made and grown in Canada and sold abroad The Contemporary Global Economy -trade has been around for many years already, North American tribes trading dates and clothing for olives and spices in Middle East Capital mobility movement of money from country to country Imports only represent slightly higher proportion of GDP than it used to Countries nowadays encourage international trade and not just domestic trade Countries are offering incentives for domestic companies to trade interntionally and they are creating more opportunities for domestic businesses to make alliances with foreign firms Therefore, many firms are now competing on a global scale There are forces which help to spark and sustain globalization: government and businesses who accept it because they recognize the benefits, the advancement of technology to make traveling, communication, commerce overseas phone calls easier and faster than before, and there are also the competitive pressure of needing to keep up with global competition The Major World Marketplaces Contemporary world economy has 3 major marketplaces: North America, Europe and AsiaPacific as they have the most influential financial markets, highest income consumers, etc. World Bank part of the United Nations uses per capita income (the average income per person) to measure and divide countries into one of four groups -High Income Countries per capita income greater than U.S $10, 065 (examples: Canada, Australia, Japan, Hong Kong) -Upper-Middle-Income Countries per capita income between US $3255 and US $10,065 (examples: Greece, Poland, Mexico, Turkey) -Low Middle-Income Countries per capita GDP of in between US $825 and US $3255 (examples: China, India, [
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