© 2006 Pearson Education Canada Inc.Chapter Chapter 2 Competing in the Global Economy

© 2006 Pearson Education Canada Inc.Chapter The Global Business Environment Opportunities  Growth Potential  Increased Sales  Operating Efficiencies  New Technologies  More Consumer Choices Challenges  Laws and Customs  Consumer Preferences  Ethical Standards  Labour Skills  Politics and Economics

© 2006 Pearson Education Canada Inc.Chapter Barriers to Going Global 69% 65% 52% 44% 41% 36% 0%20%40%60%80%100% Personal Behaviour Cultural Differences Business Styles Remote Headquarters Labour Laws Accounting and Taxes

© 2006 Pearson Education Canada Inc.Chapter Cultural Differences In Global Business Consider the other person’s customsConsider the other person’s customs Deal with the individualDeal with the individual Clarify your intent and meaningClarify your intent and meaning Adapt your style to the other personAdapt your style to the other person Show respectShow respect

© 2006 Pearson Education Canada Inc.Chapter Legal Differences In Global Business Canadian Laws International Laws Country-Specific Laws

© 2006 Pearson Education Canada Inc.Chapter International Business Activity Importing and Exporting Licensing and Franchising Strategic Alliances and Joint Ventures Direct Foreign Investment OwnershipFinancialRisk LowLowLow LowLowLow ModerateModerateModerate HighHighHigh Common Forms Levels of Commitment

© 2006 Pearson Education Canada Inc.Chapter International Product Strategies Standardization Customization

© 2006 Pearson Education Canada Inc.Chapter Why Do Nations Trade? Greater Total Output Wider Variety of Goods Expanded Markets Lower Prices Increased Local Competition Economies of Scale

© 2006 Pearson Education Canada Inc.Chapter Theories of Production and Trading AbsoluteAdvantageAbsoluteAdvantageComparativeAdvantageComparativeAdvantage

© 2006 Pearson Education Canada Inc.Chapter Measuring International Trade Balance of Trade Balance of Payments Surplus Deficit Cash Inflow Cash Outflow

© 2006 Pearson Education Canada Inc.Chapter Canadian Balance of Trade

© 2006 Pearson Education Canada Inc.Chapter Protectionism and Trade Restrictions SanctionsSanctionsRestrictingImportsRestrictingImportsSubsidiesSubsidiesDumpingDumping TariffsTariffsQuotasQuotasEmbargoesEmbargoes

© 2006 Pearson Education Canada Inc.Chapter Agreements and Organizations Promoting Free Trade General Agreement on Tariffs and Trade (GATT) World Trade Organization (WTO) International Monetary Fund (IMF) The World Bank Asia Pacific Economic Cooperation Council (APEC)

© 2006 Pearson Education Canada Inc.Chapter Trading Blocs Advantages Help smaller countries Promote competition Widen markets Foster economic growth Disadvantages Economic isolation Trade restrictions Decline in world trade Fewer choices

© 2006 Pearson Education Canada Inc.Chapter Global Trading Blocs European Union (EU) North American Free Trade Agreement (NAFTA) Association of Southeast Asian Nations (ASEAN) South America’s Mercosur Argentina Bolivia* Brazil Chile* Paraguay Uruguay * Chile and Bolivia are associate members Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam Canada Mexico United States Austria Belgium Cyprus* Czech Republic Denmark Estonia Germany Greece Finland France Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Poland Portugal Slovakia Slovenia Spain Sweden The Netherlands United Kingdom *Only the Southern part of Cyprus is part of the EU.

© 2006 Pearson Education Canada Inc.Chapter North American Free Trade Agreement (NAFTA) Canada United States Mexico

© 2006 Pearson Education Canada Inc.Chapter The European Union MinimizingEstablishing Local Regulations Variations in Product Standards Trade Protectionism Global Product Standards Consumer Protection EnvironmentalProtection

© 2006 Pearson Education Canada Inc.Chapter Impact of the Euro EconomicImpactEconomicImpact CentralizedBankingCentralizedBanking Foreign Exchange Costs Costs UnifiedCurrencyUnifiedCurrency

© 2006 Pearson Education Canada Inc.Chapter Foreign Exchange Rates and Currency Valuations Floating Exchange Rates Government Intervention Currency Devaluation Fixed Value System

© 2006 Pearson Education Canada Inc.Chapter Dealing With Global Shocks Tighter Security More Delays Increased Costs Cargo Restrictions