1. © 2006 Pearson Education Canada Inc.Chapter 2 - 1 Chapter 2 Competing in the Global Economy

2. © 2006 Pearson Education Canada Inc.Chapter 2 - 2 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

3. © 2006 Pearson Education Canada Inc.Chapter 2 - 3 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

4. © 2006 Pearson Education Canada Inc.Chapter 2 - 4 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

5. © 2006 Pearson Education Canada Inc.Chapter 2 - 5 Legal Differences In Global Business Canadian Laws International Laws Country-Specific Laws

6. © 2006 Pearson Education Canada Inc.Chapter 2 - 6 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

7. © 2006 Pearson Education Canada Inc.Chapter 2 - 7 International Product Strategies Standardization Customization

8. © 2006 Pearson Education Canada Inc.Chapter 2 - 8 Why Do Nations Trade? Greater Total Output Wider Variety of Goods Expanded Markets Lower Prices Increased Local Competition Economies of Scale

9. © 2006 Pearson Education Canada Inc.Chapter 2 - 9 Theories of Production and Trading AbsoluteAdvantageAbsoluteAdvantageComparativeAdvantageComparativeAdvantage

10. © 2006 Pearson Education Canada Inc.Chapter 2 - 10 Measuring International Trade Balance of Trade Balance of Payments Surplus Deficit Cash Inflow Cash Outflow

11. © 2006 Pearson Education Canada Inc.Chapter 2 - 11 Canadian Balance of Trade

12. © 2006 Pearson Education Canada Inc.Chapter 2 - 12 Protectionism and Trade Restrictions SanctionsSanctionsRestrictingImportsRestrictingImportsSubsidiesSubsidiesDumpingDumping TariffsTariffsQuotasQuotasEmbargoesEmbargoes

13. © 2006 Pearson Education Canada Inc.Chapter 2 - 13 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)

14. © 2006 Pearson Education Canada Inc.Chapter 2 - 14 Trading Blocs Advantages Help smaller countries Promote competition Widen markets Foster economic growth Disadvantages Economic isolation Trade restrictions Decline in world trade Fewer choices

15. © 2006 Pearson Education Canada Inc.Chapter 2 - 15 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.

16. © 2006 Pearson Education Canada Inc.Chapter 2 - 16 North American Free Trade Agreement (NAFTA) Canada United States Mexico

17. © 2006 Pearson Education Canada Inc.Chapter 2 - 17 The European Union MinimizingEstablishing Local Regulations Variations in Product Standards Trade Protectionism Global Product Standards Consumer Protection EnvironmentalProtection

18. © 2006 Pearson Education Canada Inc.Chapter 2 - 18 Impact of the Euro EconomicImpactEconomicImpact CentralizedBankingCentralizedBanking Foreign Exchange Costs Costs UnifiedCurrencyUnifiedCurrency

19. © 2006 Pearson Education Canada Inc.Chapter 2 - 19 Foreign Exchange Rates and Currency Valuations Floating Exchange Rates Government Intervention Currency Devaluation Fixed Value System

20. © 2006 Pearson Education Canada Inc.Chapter 2 - 20 Dealing With Global Shocks Tighter Security More Delays Increased Costs Cargo Restrictions