competing in global environments

7/23/2019 Competing in Global Environments

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All Rights ReservedBUSINESS MANAGEMENT: A Malaysian Perspective (Second Edition! "#$ord %a&ar Sdn' Bhd' ()*+,-T. /0/ 31

1o2peting in Glo3al Environ2ents

CHAPTER THREE


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FUNDAMENTALS OF

INTERNATIONAL TRADE

International trade refers to transactions madebetween countries.

Simply, it is the export of goods and servicesamong nations.

Basis of international trade no single nation canproduce all the goods and services that are needed

by the society.


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ADVANTAGES OF

INTERNATIONAL TRADE

Increase in the countrys total output.

ggressive competition among businesses results

in lower prices of goods and services.

!reater variety of goods and services forconsumers to choose.

Increase efficiency in local production to matchwith the "uality of imported products.


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It promotes businesses to speciali#e and reapeconomies of scale.

It enables countries to produce what they canand buy the rest from trading partners in amutually beneficial exchange.

ADVANTAGES OF

INTERNATIONAL TRADE (cont.)


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HOW DOES A NATION KNOW

WHAT TO PRODUCE AND WHAT

GOODS TO TRADE FOR?

Understanding the theories o$:

bsolute advantage

$omparative advantage


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ABSOLUTE ADVANTAGE

nation is said to have an absolute advantage inthe production of a goodif it can produce moreefficiently than all other countries.

It therefore has a pure monopoly in theproduction of a particular product.


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Output per

Unit of Input

Diamond Production

South Africa

Other

countries of

the World

Absolute= VirtualMonopoly

ABSOLUTE ADVANTAGE (cont.)


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THEORY OF COMPARATIVE

ADVANTAGE

%ropounded by &avid 'icardo in the late ()thcentury.

*his theory supported the idea of free economicexchange and explains gains from speciali#ation.


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country should sell to other countries those

products that it produces most effectively and

efficiently, and should buy from other countriesthose products that it cannot produce as

effectively and efficiently.

COMPARATIVE ADVANTAGE


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lectrical !oods

Output per

Unit of Input

Malaysia

"apan Malaysia

"apan

#ars

COMPARATIVE ADVANTAGE

(cont.)


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MEASURING INTERNATIONAL

TRADE

Balance of trade the ratio of total value ofexports to imports.

If exports are more than imports, there isfavourable balance of trade or trade surplus.

If imports are more than exports, the nation is saidto have unfavourable balance of trade or tradedeficit.


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BALANCE OF TRADEMALAYSIA

!AN"DEC #$$%

+' billion-

*otal exports .(

*otal imports /0.12222222222222222222222222222222222222

Balance of trade 4 5 *'0

3 4avourable balance of trade


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BALANCE OF TRADEMALAYSIA

!AN"OCT #$&&

+' billion-

*otal exports 05.0

*otal imports 1.52222222222222222222222222222222222222

Balance of trade 4 5 06' 6

3 4avourable balance of trade


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MEASURING INTERNATIONAL

TRADE (cont.)

Balance of payments the difference betweenmoney flowing into the country and moneyflowing out of the country over a specifiedperiod of time.

alaysias balance of payments divided intotwo ma6or accounts7 current or goods and services account capital and financial account.


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LIMITATIONS OF INTERNATIONAL

TRADE

*he danger of economic speciali#ation

8conomic and political interdependenceamong trading partners.


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TRADE PROTECTIONISM

!overnment policies implemented to restrictforeign competition from affecting local industriesapart from fulfilling other social interests.

*hey may come in many forms, as follows7 *ariffs or taxes

9uotas

8mbargoes

Subsidies and grants 'estrictive import standards and licenses

%referential treatment


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WHY DO NATIONS ADOPT

PROTECTIONIST POLICIES?

*o protect industries in infancy

*o diversify the economy

*o correct a temporary unfavourable balance ofpayment position

*o protect declining industries

*o prevent dumping +the export of goods in large"uantities at substantially lower prices compared

with home2produced goods-


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FREE TRADE

*he movement of goods and services amongstnations without political or economic barriers.

In simple terms, do away with protectionistpolicies.


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THE CONCEPT OF GLOBALI'ATION

*he global economic integration of many nationaleconomies into one global economy.

*o globali#e means to develop business, society, etc soas to ma:e international influence or action possible.

!lobal trade enables countries to produce what theycan and buy the rest in a mutually beneficial exchange

relationship. *his happens through the process of free trade or trade

liberali#ation.

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TRADE LIBERALI'ATION

;oosen or remove restrictions on trade.

ar:et liberali#ation initiatives7

4ree trade areas +4*s- Bilateral 'egional, e.g. S8< 4*

ultilateral =*> + whole world-

(5 member countries.


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WHY DO WE NEED TO

LIBERALI'E TRADE?

*o support globali#ation, the global economicintegration of many economies into one global

economy. *o globali#e means to develop business, society,

etc. so as to ma:e international influence or actionpossible over the world.


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!lobal trade enables countries to produce whatthey can and buy the rest in a mutually beneficial

exchange relationship. *his happens through the process of free trade?

trade without imposing restrictions.

WHY DO WE NEED TO

LIBERALI'E TRADE? (cont.)


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WHY DO WE NEED TO GLOBALI'E

IN THE FIRST PLACE?

8conomists believe that the world will be ableto en6oy greater levels of output and higherstandards of living.

4ree trade promotes competition.


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WHY DO WE NEED TO GLOBALI'E

IN THE FIRST PLACE? (cont.)

$onse"uently, resources will be moreefficiently allocated and mobili#ed to the

places which can best produce goods andservices at the lowest cost.

$onsumers en6oy lower prices.


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EMERGENCE OF TRADING BLOCKS

IN THE GLOBAL ENVIRONMENT

=hile free trade is promoted in the world oftoday, in reality nations group together to form

trading bloc:s.

*hey trade among themselves and regard theirtrading bloc: as one huge mar:et.


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TRADING BLOCKS

>rgani#ations of nations that remove tradebarriers among member nations to promote freetrade among them.

*his limits foreign competition since membernations co2operate among themselves to promotemutual trading benefits.


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FOUR MOST POWERFUL

TRADING BLOCKS

*he 8uropean @nion +8@-

*he


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WORLD TRADE ORGANI'ATION

(WTO)

4ormed on ( Aanuary ( to replace !** +(/C-with the following ob6ectives7

*o reduce trade barriers.

*o eliminate discrimination in international trade.

*o prevent the establishment of further trade barriers.

*o consult one another for unilateral benefits.


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(WTO) (cont.)

n organi#ation consisting of member countries $urrently (5 members

!oal help producers of goods and services,exporters, and importers conduct their business

a:e rules on trade between nations greement is legally binding

negotiated and agreed on by members ain function to ensure that trade flows as

smoothly, predictably and freely as possible.

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(WTO) (cont.)

*argets7

;iberali#ation schedule7

&eveloped countriesDE1(1

&eveloping countriesDE1E1



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STRATEGIES TO PENETRATE

THE GLOBAL MARKET

Importing and

exporting

;icensing

4ranchising

Strategic alliances

Aoint ventures

4oreign direct

Investment


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MALAYSIA AND ITS ETERNAL

TRADE



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MALAYSIA AND ITS ETERNAL

TRADE (cont.)

>ne of the worlds E1 largest trading nations.

ccording to * FearneyG4oreign %olicy!lobali#ation index, alaysia is ran:ed the (th most

globali#ed nation in the world. *he =orld Ban: has ran:ed alaysia as the E/th

nation in terms of ease of doing business.

alaysias open policy to international trade. Importance of international trade to the alaysianeconomy.


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MALAYSIA BALANCE OF TRADE

alaysia has continuously recorded acommendable or positive trade balance since E111

+the beginning of the millennium- when global free

trade was promoted through the =*>.

*he 4ebruary E1(( alaysia 8xternal Statistics'eport stated that H it was the (01th consecutive

month of trade surplus since


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MA!OR EPORTS OF MALAYSIA*

#$$%

8lectrical and electronic goods +//.(K of totalexports-.

%alm oil and palm oil2based products +C./K-,crude petroleum +.5K-, li"uefied natural gas+/.5K-, timber and timber2based products +5.)K-and petroleum products +5.EK-.


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MA!OR IMPORTS OF MALAYSIA*

#$$%

*hree main categories7

Intermediate goods +C1.K of total

imports-$apital goods +(5.K-

$onsumption goods +.CK-

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MA!OR EPORTS OF MALAYSIA*

#$&&

8lectrical and electronic goods +5C.K of totalexports-.

%alm oil and palm oil2based products +(1.0K-,li"uefied natural gas +0.K-, petroleumproducts +.)K-, crude petroleum +/./K- and

timber2based products +E.5K-.


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MA!OR IMPORTS OF MALAYSIA*

#$&&

8lectronics

achinery

%etroleum products %lastics

Lehicles

Iron and steel products $hemicals


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MALAYSIA TRADING PARTNERS*

#$$6

8xport destinationsDS8


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MALAYSIA0S TOP FIVE TRADING

PARTNERS IN #$$%

*he @nited States of merica

*he 'epublic of Singapore

*he 8uropean @nion Aapan

*he %eoples 'epublic of $hina


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MALAYSIA0S TOP TEN TRADING

PARTNERS IN #$&&

*he 'epublic ofSingapore

*he %eoples 'epublicof $hina

Aapan

*he 8uropean @nion

*he @nited States ofmerica


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*hailand

*he 'epublic ofIndonesia

*he 'epublic ofForea

*aiwan

Mong Fong

MALAYSIASTATUS OF MARKET


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MALAYSIA STATUS OF MARKET

LIBERALI'ATION AND

GLOBALI'ATION

Being a member of the =*>, alaysia has beensupportive in promoting global trade.

Being a member of S8


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Bilateral agreements are being negotiated withAapan, %a:istan, $hile and I$, %* among &) and !S*%.


LIBERALI'ATION AND

GLOBALI'ATION (cont.)



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*hrough the S8< 8conomic $ommunity+8$-, there will be a single mar:et andproduction base with free flow of goods and

services, investments, s:illed labour and free flowof capital.

alaysia will be directly involved in this initiative,being a strong member of S8


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FINAL WORDS

s a member of =*>, alaysia will continue toliberali#e its international trade in support of

globali#ation.

!lobal trade has so far benefited alaysia, as seenby the positive balance of trade and balance of

payments.


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FINAL WORDS (cont.)

any local companies are expanding theirbusiness in S8I$nations to tap the huge mar:et potential.

!lobal trade will certainly continue to be amain feature in the alaysian economicscenario.

competing in global environments

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