Understanding the Global Context of Business Chapter 4 Understanding the Global Context of Business

Overview Rise of international business Major world marketplaces International business strategies Competitive advantage Import-export balances Exchange rates Foreign competition shape Factors influencing the decision to engage in international business

Rise of International Business The world economy is becoming a single, interdependent system Export: Domestic (i.e., U.S.) product sold abroad Import: Foreign product sold domestically (i.e., in the U.S.) Growth Competitiveness Index

The Major Trading Partners of the United States 2004 Data: http://ita.doc.gov/td/industry/otea/usfth/aggregate/H04T10.html http://www.ita.doc.gov/td/industry/otea/usfth/aggregate/H04T11.html Table 4–1

Major World Marketplaces Europe North America Pacific Asia http://www.forbes.com/

The North American Marketplace and the Nations of NAFTA 1994 Figure 4–2 http://en.wikipedia.org/wiki/NAFTA http://utopia.utexas.edu/articles/tbr/nafta.html?sec=business&sub=economics

Europe and the Nations of the European Union 1992 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom Austria Belgium* Denmark Finland France* Germany (West)* Greece Ireland Italy* Italy Luxembourg* Netherlands* Portugal Spain Sweden United Kingdom New in 2004: Cyprus the Czech Republic Estonia Hungary Latvia Lithuania Malta Poland Slovakia Slovenia Figure 4–3 http://europa.eu.int/abc/history/index_en.htm#

The Nations of ASEAN 1967 Plus 3: Japan, China, South Korea Brunei Darussalam Cambodia Indonesia* Laos PDR Malaysia* Myanmar Philippines* Singapore* Thailand* Vietnam Figure 4–4 http://www.aseansec.org/

Pacific Asia Represents Enormous Business Potential Projections for 2010 (in millions) In less than a decade, Asian language speakers on the web will far exceed English speakers. English Japanese Chinese Korean 50 100 150 200 250 300 350 400 450 500 432 415 96 34 Source: Time Global Business, Nov. 2001.

Competitive Advantage Absolute Advantage: controls the market Saudi oil French wine Columbian coffee Comparative Advantage: influences the market U.S. computers and agricultural products Indian technological expertise

National Competitive Advantage Factor conditions Demand conditions Related and supporting industries Strategies, structures, and rivalries

Import/Export Balances Balance of Trade Trade Deficits Trade Surpluses Balance of Payments http://www.iie.com/research/topics/hottopic.cfm?HotTopicID=9 

Exchange Rates and Global Trade When an economy’s currency is strong: Domestic companies find it harder to export products Foreign companies find it easier to import products Domestic companies may move production to cheaper sites in foreign countries When an economy’s currency is weak: Domestic companies find it easier to export products Foreign companies find it harder to import products Foreign companies may invest in production facilities http://www.x-rates.com/

Going International Figure 4–8 http://www.ipfrontline.com/depts/article.asp?id=4411&deptid=2

Review Rise of international business Major world marketplaces International business strategies Factors influencing the decision to engage in international business On Wednesday—courtesy of Lisa and Andrew: Levels of international involvement and international organizational structure Key barriers to international trade

Chapter Review Discuss the rise of international business, describe the major world marketplaces. Explain how competitive advantage, import-export balances, exchange rates, and foreign competition shape international business strategies. Discuss what factors influence whether a company should engage in international business. Identify different levels of international involvement and international organizational structure. Describe key barriers to international trade.