1. Copyright © 2009 Pearson Education Canada2-1 Chapter 2 COMPETING COMPETING IN THE GLOBAL ECONOMY

2. Copyright © 2009 Pearson Education Canada2-2 WHY NATIONS TRADE Greater total output Wider variety of goods Expanded markets Lower Prices Increased local competition Economies of scale

3. Copyright © 2009 Pearson Education Canada2-3 Theories of Production and Trading AbsoluteAdvantageAbsoluteAdvantageComparativeAdvantageComparativeAdvantage

4. Copyright © 2009 Pearson Education Canada2-4 HOW INTERNATIONAL TRADE IS MEASURED Balance of trade - Trade surplus - Trade deficit Balance of payments -Cash inflow -Cash outflow

5. Copyright © 2009 Pearson Education Canada2-5 (New chart to be added)

6. Copyright © 2009 Pearson Education Canada2-6 TRADE RESTRICTIONS Protectionism Restrictive import standards Subsidies Dumping Tariffs Quotas Embargos

7. Copyright © 2009 Pearson Education Canada2-7 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)

8. Copyright © 2009 Pearson Education Canada2-8 TRADING BLOCS Advantages Wider markets Fosters economic growth Helps smaller countries Promotes competition Disadvantages Trade restrictions Economic isolation Decline in overall world trade Fewer choices

9. Copyright © 2009 Pearson Education Canada2-9 EXCHANGE RATES AND CURRENCY FLUCTUATIONS Floating exchange rates Fixed value systems Currency devaluation Government intervention

10. Copyright © 2009 Pearson Education Canada2-10 Opportunities   Growth potential   Increased sales   Operating efficiencies   New technologies   More consumer choice Challenges   Laws and customs   Consumer preferences   Ethical standards   Labour skills   Politics and economics THE GLOBAL BUSINESS ENVIRONMENT

11. Copyright © 2009 Pearson Education Canada2-11

12. Copyright © 2009 Pearson Education Canada2-12 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 CULTURAL DIFFERENCES IN GLOBAL BUSINESS

13. Copyright © 2009 Pearson Education Canada2-13 LEGAL DIFFERENCES IN GLOBAL BUSINESS Canadian law International law Local laws (country specific)

14. Copyright © 2009 Pearson Education Canada2-14 Importing and Exporting Licensing and Franchising Strategic Alliances and Joint Ventures Direct Foreign Investment OwnershipFinancialRisk LowLowLow LowLowLow ModerateModerateModerate HighHighHigh Common Forms Levels of Commitment FORMS OF INTERNATIONAL BUSINESS ACTIVITY

15. Copyright © 2009 Pearson Education Canada2-15 PRODUCT STRATEGIES FOR INTERNATIONAL MARKETS Standardize-selling the same product worldwide Customize-accommodating the lifestyles and habits of the local markets

16. Copyright © 2009 Pearson Education Canada2-16 HOW TO AVOID BUSINESS BLUNDERS ABROAD The importance of packaging The language barrier The problems with promotion Local customs Translation problems The need for research

17. Copyright © 2009 Pearson Education Canada2-17 DEALING WITH ECONOMIC SHOCKS IN A GLOBAL BUSINESS ENVIRONMENT DEALING WITH ECONOMIC SHOCKS IN A GLOBAL BUSINESS ENVIRONMENT Health issues Natural disasters Economic fluctuations Energy Terrorism Security