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RSM100Y1 (431)
Chapter 5

chapter 5

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Rotman Commerce
Stojanovic Dragan

Chapter 5 Understanding International BusinessTHE CONTEMPORARY GLOBAL ECONOMY y World economy is fast becoming a single interdependent systema process called globalization y Globalization the integration of markets globally y More and more countries are encouraging international tradeimport and export y New technologies have made international travel communication and commerce easier faster and cheaper than ever before y Sometimes a firm must enter foreign markets to keep up with its competitors y Critics say globalization allows businesses to exploit workers in less developed countries and bypass domestic environmental and tax regulationsNikes sweatshops etc y Also say that it leads to loss of cultural heritage and often benefits the rich more than the poor The Major World Marketplacesthe average income per person in a country y Per Capita Incomey The World Bank uses per capita income to divide countries into one of four groups I Highincome countrieshave higher per capita earning than US 11 115 include Canada USA Japan Australia South Korea Kuwait UAE etc II Uppermiddleincome countriesthose with per capita between US 3595 and US 11 115 include Greece Hungary Poland Turkey Mexico Argentina South Africa etc III Low middleincome countriesthose with per capita earning between US 905 and US 3595 include China Columbia India Samoa Thailand Guatemala etc IV Lowincome countriesdeveloping countries those with annual percapita income of less than US 905 Due to low literacy rates weak infrastructure unstable governments and related problems such as Somalia 1 Geographic Clusters y World economy revolves around three major marketplaces North America Europe and AsiaPacifica North Americay USA dominates the North American business region y Canada also plays a major role in the international economy y Mexico has become a major manufacturing centre for firms because of low wages rate but China has emerged with even lower wages nowb Europey Ecommerce and technology have become increasingly important in this region y There has been a surge in internet setups exports of software biotech startups etc
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