1. © Sanjyot Dunung 2011, published by Flat World Knowledge
International Business: Opportunities and Challenges in a Flattening World, 1e By Mason Carpenter and Sanjyot P. Dunung
© Sanjyot Dunung 2011, published by Flat World Knowledge

2. © Sanjyot Dunung 2011, published by Flat World Knowledge
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3. Chapter 4 World Economies
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Learning Objectives
Understand how economies are classified
Evaluate the statistics used in classifications: GNP, GDP, PPP as well as HDI, HPI, GDI, and GEM
Understand what the developed world is
Identify the major developed economies
Understand what the developing world is
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5. © Sanjyot Dunung 2011, published by Flat World Knowledge
Learning Objectives
Identify the major developing economies and regions
Understand what the emerging markets and BRIC countries are
Identify key emerging markets
© Sanjyot Dunung 2011, published by Flat World Knowledge

6. Classification of Economies
When evaluating a country, a manager is assessing:
The country’s income and the purchasing power of its people
The legal, regulatory, and commercial infrastructure
The sophistication of the business environment
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7. Statistics Used in Classifications
Gross domestic product (GDP): The value of all the goods and services produced by a country in a single year
Per capita GDP: The value of the GDP divided by the population of the country
This is referred to as the nominal per capita GDP
GDP per person: The value of the GDP adjusted for purchasing power
Helps managers understand how much income local residents have
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8. Statistics Used in Classifications
Purchasing power parity (PPP): An economic theory that adjusts the exchange rate between countries to ensure that a good is purchased for the same price in the same currency
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Figure Per Capita GDP (Nominal) versus Per Capita GDP (PPP) of Select Countries (2010)
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10. Human Development Index (HDI)
Human development index (HDI): A summary composite index that measures a country’s average achievements in three basic aspects of human development: health, knowledge, and a decent standard of living
Human poverty index (HPI): A composite index that uses indicators of the most basic dimensions of deprivation: a short life (i.e., longevity), lack of basic education (i.e., knowledge), and lack of access to public and private resources (i.e., decent standard of living)
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The Developed World
Developed economies: Also known as advanced economies, these countries are characterized as postindustrial with high per capita incomes, competitive industries, transparent legal and regulatory environments, and well-developed commercial infrastructures
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The United States
The United States is the fourth-largest country in the world—after Russia, China, and Canada
The United States is the world’s largest single-country economy and accounts for nearly 25 percent of the global gross domestic product (GDP)
The strength of the U.S. economy is due in large part to its diversity
The United States has a service-based economy. In 2009, industry accounted for 21.9 percent of the GDP
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The United States
Services (including finance, insurance, and real estate) for 76.9 percent; and agriculture for 1.2 percent
Bull market: A market in which prices rise for a prolonged period of time
Bear market: A market in which prices steadily drop in a downward cycle
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Germany
Germany, a member of the EU (European Union), has the fifth-largest economy in the world
The country is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labor force
It is the largest and strongest economy in Europe
Services drive the economy, representing 72.3 percent (in 2009) of the total GDP
Industry accounts for 26.8 percent of the economy, and agriculture represents 0.9 percent
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Japan
Japan’s post–World War II success has been the result of a well-crafted economic policy closely administered by the government in alliance with large businesses
It also benefits from its highly skilled workforce
Japan has very few mineral and energy resources and relies heavily on imports to bring in almost all of its oil, iron ore, lead, wool, and cotton. It is the world’s largest importer of numerous raw materials including coal, copper, zinc, and lumber
As with other developed nations, services lead the economy, representing 76.5 percent of the national GDP, while industry accounts for 21.9 percent of the country’s output
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Developing World
Developing world: Countries that rank lower on various classifications including GDP and the HDI
These countries tend to have economies focused on one or more key industries and tend to have poor commercial infrastructure
The local business environment tends not to be transparent, and there is usually a weak competitive industry
Developing countries sometimes find that their economies improve and gradually they become emerging markets
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Developing World
Focusing only on today’s political, economic, and social conditions distorts the picture of what these countries have been and what they might become again
Developing economies typically have poor, inadequate, or unequal access to infrastructure
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18. Major Developing Economies and Regions
The Middle East
Africa
Nigeria
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19. How Do Developing Countries Become Emerging Markets?
A developing country, in order to evolve into an emerging market, must:
Seek to implement transparency in its government as well as in its political and economic institutions to help inspire business confidence in its country
Develop the local commercial infrastructure and reduce trade barriers to attract foreign businesses
Educate the population equally and create a healthy domestic workforce that’s both skilled and relatively cheap
First-mover advantage: The benefit that a company gains by entering into a market first or introducing a new product or service before its competitors
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20. What Exactly Is an Emerging Market?
Emerging market: An evolving definition that is currently viewed as a country that can be defined as a society transitioning from a centrally managed economy to a free market-oriented-economy, with increasing economic freedom
Gradual integration within the global marketplace
An expanding middle class
Improving standards of living, social stability, and tolerance
An increase in cooperation with multilateral institutions
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Key Emerging Markets
Asia
China
India
Europe
Russia
Africa
South Africa
Latin America
Brazil
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