© 2006 pearson education canada inc.chapter 2 - 1 chapter 2 competing in the global economy
TRANSCRIPT
© 2006 Pearson Education Canada Inc. Chapter 2 - 1
Chapter 2Chapter 2 Competing in the
Global Economy
© 2006 Pearson Education Canada Inc. Chapter 2 - 2
The GlobalThe GlobalBusiness EnvironmentBusiness 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 2 - 3
Barriers to Going GlobalBarriers to Going Global
69%
65%
52%
44%
41%
36%
0% 20% 40% 60% 80% 100%
Personal Behaviour
Cultural Differences
Business Styles
RemoteHeadquarters
Labour Laws
Accounting andTaxes
© 2006 Pearson Education Canada Inc. Chapter 2 - 4
Cultural Differences In Cultural Differences In Global BusinessGlobal 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 2 - 5
Legal Differences In Legal Differences In Global BusinessGlobal Business
Canadian Laws
International Laws
Country-Specific Laws
© 2006 Pearson Education Canada Inc. Chapter 2 - 6
International Business ActivityInternational Business Activity
Importing and ExportingImporting and Exporting
Licensing and FranchisingLicensing and Franchising
Strategic Alliances Strategic Alliances and Joint Venturesand Joint Ventures
Direct Foreign InvestmentDirect Foreign Investment
OwnershipOwnership FinancialFinancial RiskRisk
LowLow LowLow LowLow
LowLow LowLow LowLow
ModerateModerate ModerateModerate ModerateModerate
HighHigh HighHigh HighHigh
Common FormsCommon FormsLevels of CommitmentLevels of Commitment
© 2006 Pearson Education Canada Inc. Chapter 2 - 7
International Product International Product StrategiesStrategies
StandardizationStandardization
CustomizationCustomization
© 2006 Pearson Education Canada Inc. Chapter 2 - 8
Why Do Nations Trade?Why Do Nations Trade?
Greater TotalGreater TotalOutputOutput
Greater TotalGreater TotalOutputOutput
Wider Variety Wider Variety of Goodsof Goods
Wider Variety Wider Variety of Goodsof Goods
Expanded MarketsExpanded MarketsExpanded MarketsExpanded Markets
Lower PricesLower PricesLower PricesLower Prices
IncreasedIncreasedLocal CompetitionLocal Competition
IncreasedIncreasedLocal CompetitionLocal Competition
Economies of ScaleEconomies of ScaleEconomies of ScaleEconomies of Scale
© 2006 Pearson Education Canada Inc. Chapter 2 - 9
Theories of Theories of Production and Production and
TradingTrading
AbsoluteAbsoluteAdvantageAdvantageAbsoluteAbsolute
AdvantageAdvantageComparativeComparativeAdvantageAdvantage
ComparativeComparativeAdvantageAdvantage
© 2006 Pearson Education Canada Inc. Chapter 2 - 10
MeasuringMeasuringInternational TradeInternational Trade
Balance Balance of Tradeof Trade
BalanceBalanceof Paymentsof Payments
SurplusSurplus
DeficitDeficit
Cash InflowCash Inflow
Cash OutflowCash Outflow
© 2006 Pearson Education Canada Inc. Chapter 2 - 11
Canadian Balance of TradeCanadian Balance of Trade
© 2006 Pearson Education Canada Inc. Chapter 2 - 12
Protectionism Protectionism and Trade Restrictionsand Trade Restrictions
SanctionsSanctionsSanctionsSanctions RestrictingRestrictingImportsImports
RestrictingRestrictingImportsImports SubsidiesSubsidiesSubsidiesSubsidies DumpingDumpingDumpingDumping
TariffsTariffsTariffsTariffs QuotasQuotasQuotasQuotas EmbargoesEmbargoesEmbargoesEmbargoes
© 2006 Pearson Education Canada Inc. Chapter 2 - 13
Agreements and Organizations Agreements and Organizations Promoting Free TradePromoting 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 2 - 14
Trading BlocsTrading Blocs
AdvantagesAdvantages
Help smaller countries
Promote competition
Widen markets
Foster economic growth
DisadvantagesDisadvantages
Economic isolation
Trade restrictions
Decline in world trade
Fewer choices
© 2006 Pearson Education Canada Inc. Chapter 2 - 15
Global Trading BlocsGlobal Trading BlocsEuropean Union (EU)
North AmericanFree Trade
Agreement (NAFTA)
Association ofSoutheast AsianNations (ASEAN)
SouthAmerica’sMercosur
Argentina
Bolivia*
Brazil
Chile*
Paraguay
Uruguay
*Chile and Bolivia are associate members
BruneiCambodiaIndonesia
LaosMalaysia
Myanmar PhilippinesSingaporeThailandVietnam
Canada
Mexico
United States
AustriaBelgiumCyprus*
Czech RepublicDenmarkEstonia
GermanyGreeceFinlandFrance
HungaryIreland
ItalyLatvia
LithuaniaLuxembourg
MaltaPoland
PortugalSlovakiaSlovenia
SpainSweden
The NetherlandsUnited Kingdom
*Only the Southern part of Cyprus is part of the EU.
© 2006 Pearson Education Canada Inc. Chapter 2 - 16
North American Free North American Free Trade Agreement Trade Agreement
(NAFTA)(NAFTA)
CanadaCanada
United StatesUnited States
MexicoMexico
© 2006 Pearson Education Canada Inc. Chapter 2 - 17
The European UnionThe European Union
MinimizingMinimizing EstablishingEstablishing
Local RegulationsLocal Regulations
Variations in Variations in Product StandardsProduct Standards
Trade ProtectionismTrade Protectionism
GlobalGlobalProduct StandardsProduct Standards
Consumer ProtectionConsumer Protection
Environmental Environmental ProtectionProtection
© 2006 Pearson Education Canada Inc. Chapter 2 - 18
Impact of the EuroImpact of the EuroImpact of the EuroImpact of the Euro
Economic Economic ImpactImpact
Economic Economic ImpactImpact
CentralizedCentralizedBankingBanking
CentralizedCentralizedBankingBanking
Foreign ExchangeForeign ExchangeCostsCosts
Foreign ExchangeForeign ExchangeCostsCosts
UnifiedUnifiedCurrencyCurrencyUnifiedUnified
CurrencyCurrency
© 2006 Pearson Education Canada Inc. Chapter 2 - 19
Foreign Exchange Rates Foreign Exchange Rates and Currency Valuationsand Currency Valuations
Floating Exchange Rates
Government Intervention
Currency Devaluation
Fixed Value System
© 2006 Pearson Education Canada Inc. Chapter 2 - 20
Dealing With Global Dealing With Global ShocksShocks
Tighter SecurityTighter Security More DelaysMore Delays
Increased CostsIncreased CostsCargo RestrictionsCargo Restrictions