chap 3 global context of business new

The Global Context of Business

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Chapter 2

Sr.Chapter Chapter HeadingNo.No.

1. 3 Understanding the Global context of business (031012)

2. 4 Conducting Business Ethically and Responsibly3. 6 Organizing the Business Enterprise4. 7 Understanding Entrepreneurship and Small Business5. 8 Managing Human Resources6. 9 Understanding Employee Motivating, Satisfying and

Leadership7. 11 Understanding Marketing Processes and Consumer

Behavior8. 16 Managing Quality and Productivity9. 17 Managing Information Systems and Communication

Technology10. 19 Understanding Money and Banking11. 20 Intermediate Term and Lease Financing

Course Outline

3

Marks Distribution

50 Terminal Examination

20 Mid Term Examination

15 Quizzes15 Final Assignment

“We are in the midst of a

great transition from

narrow nationalism to

international partnership.”

~ Lyndon Baines Johnson

Intro of Global context

Lets see something interesting

Chapter Review Discuss the rise of international business,

describe the major world marketplaces.

Explain how competitive advantage, import-export balances, exchange rates, and foreign competition shape international business strategies.

Chapter Review Discuss what factors influence whether a

company should engage in international business.

Identify different levels of international involvement and international organizational structure.

Describe key barriers to international trade.

Key Topics

The rise of global business Major world marketplaces and

trading partners Influences on international

business International business

management The impact of differences among

nations

Definitions Quota: restriction on the number of certain type

of product that can be imported into a country. Embargo: complete ban on imports and exports,

imposed by a government for political reasons. Tariff: tax levied on imported products. Subsidy: government payments to help a

domestic business compete with foreign firms. Protectionism: the practice of protecting

domestic business against foreign competition.

9

DefinitionsGross domestic product (GDP) is one the primary indicators

used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period

OrThe monetary value of all the finished goods and services

produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

Per capita income or income per person is a measure of mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population. It does not attempt to reflect the distribution of income or wealth

1. The key drivers to globalization

Drivers:

Global market

Convergence

Global Competition

GovernmentInfluence

Cost Advantages

GlobalStrategies

Similar customer needs,Global customers, Transferable marketing

Trade policies, TechnicalStandards, host government,

policies

Scale economies,Sourcing efficiencies

Countries costs,High product development costs

Interdependence, Competitors globalHigh exports/imports,

a. Globalization Is Gaining Speed

The world economy is becoming a single, interdependent system

Export: Domestic product sold abroad

Import:Foreign product sold domestically

b. Globalization Is Gaining Speed

Example: Asian financial markets in the late 90s directly affects stock markets worldwide.

Discussion: what product from other countries do you use\consume? Why have you chosen it?

c. Categorizing Economies

High Income Countries: Per capita income greater than $9,386

Middle Income Countries: Per capita income between $765 and $9,386

Low Income Countries: Per capita income of less than $765

Discussion: what countries fall into each category?

d. Major World Marketplaces

North America NAFTA Europe EU Pacific Asia Do we have any

economic agreement with other countries. What are they?

The North American Marketplace (NAFTA)

Canada

United States

Mexico

Copyright ©2003 Prentice Hall, Inc. 2 - 15

Europe and the Nations of the European Union

Copyright ©2003 Prentice Hall, Inc. 2 - 16

• Austria

• Belgium

• Denmark

• Finland

• France

• Germany

• Greece

• Ireland

• Italy

• Ireland

• Italy

• Luxembourg

• Netherlands

• Portugal

• Spain

• Sweden

• United Kingdom

The Nations of ASEAN

• Brunei

• Indonesia

• Malaysia

• Philippines

• Singapore

• Thailand

• Vietnam

Copyright ©2003 Prentice Hall, Inc. 2 - 17

Pacific Asia RepresentsEnormous Business Potential

In less than a decade, Asian language speakers on the web will far exceed English speakers

Source: Time Global Business, Nov. 2001

English Japanese Chinese Korean0

50

100150200

250300350

400

450500

415

96

432

34

Projections for 2010 (in millions)

2 - 18

2. Competitive Advantage Absolute Advantage:

when one country can produce a product cheaper and\or higher quality than any other country. Ex. OPEC

Comparative Advantage: when one country can produce certain goods or services

more efficiently and effectively than others. Ex. US software

Competitive advantages When competitive advantage is materialized?When a firm earns persistently higher rate of

profit over its rivals. Determinants of profit level

1- Value of company products in customers’ eyes. 2- Company production cost.

Competitive advantage

It can be created in certain industrial field, through the adoption of low-cost-differentiation strategy. . M. Porter

National Competitive Advantage

Factor conditions Demand conditions Related and

supporting industries Strategies,

structures, and rivalries

3. Import/Export Balances

Balance of Trade Trade Deficits Trade Surpluses

Balance of Payments

The total flow of money into or out of an economy

3a. Exchange RatesHeavily Impact Global Trade

When an economy’s currency is strong: Domestic companies find it harder to

export products Foreign companies find it easier to

import products Domestic companies may move

production to cheaper sites in foreign countries

Implications for balance of trade?

Exchange RatesHeavily Impact Global Trade

When an economy’s currency is weak: Domestic companies find it easier to

export products Foreign companies find it harder to

import products Foreign companies may invest in

production facilities Implications for balance of trade?

The U.S. Economy Has a Growing Trade Deficit

Copyright ©2003 Prentice Hall, Inc. 2 - 26

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

$400,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

U.S. Trade Deficit(in billions)

78,8

57 28,2

66

35,6

66

68,9

49 97,0

39

95,9

47

102,

113

105,

932

166,

898

255,

971

344,

716

0

200

400

600

800

1000

1200

1400

1600

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Imports Exports

U.S. Imports & Exports(in billions)

Does It Make Sense to Go International?

Copyright ©2003 Prentice Hall, Inc. 2 - 27

YES

Is there international demand for

the firm’s product?

NO

Stay Domestic

Can the product be

modified to fit a foreign market?

NO

YES

Is the foreign business

climate suited to imports?

NO

Does the firm have or can it get thenecessary skills and

knowledgeto do

business abroad?

YES

NO

YES

Go International

4. Levels of International Involvement

Importer & Exporter

International Firms Multinational Firms

International Organizational Structures

Foreign Investment Private capital investment by firms of one country

into those of another. Strategic Alliances

a relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations

Branch Offices

Licensing Arrangements

Independent Agents

INV

OLV

EM

EN

THIGH

LOW

5.Barriers to International Trade

Social & Cultural Differences Economic

Differences

Legal & Political Differences

Take Time to Learn the Culture Thoroughly!

Este es nuestro nuevo auto:

el NOVA!

Ha, ha, ha, ha, ha, ha!!!

The Customer’s LanguageA Critical Business Success Factor

In the U.S. alone, 18% of the population does not speak English at home.

Only 48% of the world’s Web users are native English speakers.

Consumers are four times more likely to buy a product on the Internet if the website is in their preferred language.Source: Time Global Business, Nov. 2001

Economic Differences

To operate effectively in another country, businesses must know when, and to what extent, the government is involved in a given industry.

Legal & Political Differences

Quotas, Tariffs, & Subsidies Protectionism Local Content Laws Business Practice Laws

Day to day operations Cartels Dumping

35

Relate to Pakistan

36

37

38

39

40

Potentials Population – 170 million

Growing consumption Cheap labor

According to approximations, labor in Pakistan is $ 0.36 an hour; in India, it is $ 0.58 an hour and in China, it is $ 0.70 an hour

Feasible regulatory conditions As compared to india

Minerals Coal, Copper, Gold, Silver, Dolomite, Gypsum, Lime

stone, Natural Gas, Iron core, Rock salt, Bauxite, Marble, Gems, China Clay, Zinc, Lead and Chromite are some of Pakistan’s potential

41

Potentials Coal reserves, iron and gems Agriculture Pakistan is the 4th largest producer of milk Fruit and agriculture processing

Coal facts

Macro economic indicators

Large scale job creation

Improving purchasing

power

Lower poverty

Greater consumption

Greater demand of good and services

Increased manufacturin

g

More jobs

42

    IntroductionCHAPTER NO

3NAME COMPANY NO. 4-2-12 11-2-12

Aruba 1 1Lunba 1 1Ayesha 1 1

Faria 2 1Safia Tabassum 2 1

Mashal 3 1Namreen 3 1

Asma 3 1Umair Iqbal 4 1

Shiraz Qureshi 4 1Ismail 4 1Anus 4 1Mir 5 1

Saad 5 1Najeeb Aslam 5 1

M. Ejaz 5 1

Snapshot of Sessional marks