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  1. Chapter 4 Understanding the Global Context of Business

  2. Overview • Rise of international business • Major world marketplaces • International business strategies • Competitive advantage • Import-export balances • Exchange rates • Foreign competition shape • Factors influencing the decision to engage in international business

  3. Rise of International Business • The world economy is becoming a single, interdependent system • Export: Domestic (i.e., U.S.) product sold abroad • Import: Foreign product sold domestically (i.e., in the U.S.) Growth Competitiveness Index

  4. The Major Trading Partners of theUnited States 2004 Data: http://ita.doc.gov/td/industry/otea/usfth/aggregate/H04T10.html http://www.ita.doc.gov/td/industry/otea/usfth/aggregate/H04T11.html Table 4–1

  5. Major World Marketplaces Europe North America Pacific Asia http://www.forbes.com/

  6. The North American Marketplace and the Nations of NAFTA 1994 Figure 4–2 http://en.wikipedia.org/wiki/NAFTA http://utopia.utexas.edu/articles/tbr/nafta.html?sec=business&sub=economics

  7. Europe and the Nations of the European Union 1992 • Austria • Belgium* • Denmark • Finland • France* • Germany (West)* • Greece • Ireland • Italy* • Ireland • Italy • Luxembourg* • Netherlands* • Portugal • Spain • Sweden • United Kingdom • Austria • Belgium • Denmark • Finland • France • Germany • Greece • Ireland • Italy • Ireland • Italy • Luxembourg • Netherlands • Portugal • Spain • Sweden • United Kingdom • New in 2004: • Cyprus • the Czech Republic • Estonia • Hungary • Latvia • Lithuania • Malta • Poland • Slovakia • Slovenia Figure 4–3 http://europa.eu.int/abc/history/index_en.htm#

  8. The Nations of ASEAN1967 Plus 3: Japan, China, South Korea • Brunei Darussalam • Cambodia • Indonesia* • Laos • PDR • Malaysia* • Myanmar • Philippines* • Singapore* • Thailand* • Vietnam Figure 4–4 http://www.aseansec.org/

  9. 500 450 400 350 300 432 415 250 200 150 100 50 96 0 34 English Japanese Chinese Korean Pacific Asia Represents Enormous Business Potential Projections for 2010 (in millions) In less than a decade, Asian language speakers on the web will far exceed English speakers. Source: Time Global Business, Nov. 2001.

  10. Competitive Advantage • Absolute Advantage: controls the market • Saudi oil • French wine • Columbian coffee • Comparative Advantage: influences the market • U.S. computers and agricultural products • Indian technological expertise

  11. NationalCompetitive Advantage • Factor conditions • Demand conditions • Related and supporting industries • Strategies, structures, and rivalries

  12. Import/Export Balances • Balance of Trade • Trade Deficits • Trade Surpluses • Balance of Payments http://www.iie.com/research/topics/hottopic.cfm?HotTopicID=9 

  13. Exchange Rates and 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 • 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 http://www.x-rates.com/

  14. Going International Figure 4–8 http://www.ipfrontline.com/depts/article.asp?id=4411&deptid=2

  15. Review • Rise of international business • Major world marketplaces • International business strategies • Factors influencing the decision to engage in international business On Wednesday—courtesy of Lisa and Andrew: • Levels of international involvement and international organizational structure • Key barriers to international trade

  16. 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. • 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.