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The Global Context of Business: Instructor Lecture Powerpoints

The document discusses key concepts related to global business including globalization, major world marketplaces, trade agreements and alliances such as NAFTA and the EU, exchange rates, forms of competitive advantage, international business management, levels of international involvement, and barriers to international trade such as legal and political differences.

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42 views

The Global Context of Business: Instructor Lecture Powerpoints

The document discusses key concepts related to global business including globalization, major world marketplaces, trade agreements and alliances such as NAFTA and the EU, exchange rates, forms of competitive advantage, international business management, levels of international involvement, and barriers to international trade such as legal and political differences.

Uploaded by

vegasus
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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4

chapter The Global Context of Business

Business Essentials, 7th Edition


Ebert/Griffin

Instructor Lecture PowerPoints


PowerPoint Presentation prepared by
© 2009 Pearson Education, Inc. Carol Vollmer Pope Alverno College
The Contemporary Global Economy
• Globalization
– The process by which the world’s various
national economies and trading systems
are fast becoming a single, highly
interdependent system
• Exports: Domestically produced products sold
in foreign markets
• Imports: Foreign products sold in domestic
markets

© 2009 Pearson Education, Inc.


The Major World Marketplaces
• Distinctions Based on Wealth
– High-income countries
– Upper middle-income countries
– Low middle-income countries
– Low-income countries (developing countries)
• Geographic Clusters
– North America
– Europe
– Pacific Asia

© 2009 Pearson Education, Inc.


Trade Agreements and Alliances
• Significant Agreements and Treaties
– North American Free Trade Agreement
(NAFTA)
• Canada, Mexico, and the United States
• Effects: increases direct foreign investment, increases
exports and imports, creates jobs
– European Union (EU)
• Most European nations
• Effects: eliminates quotas, removes trade barriers, and sets
uniform tariffs on internally traded EU imports and exports
– Association of Southeast Asian Nations
(ASEAN)
• Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, Philippines, Singapore, Vietnam
© 2009 Pearson Education, Inc.
FIGURE 4.1 The Nations of the European Union

© 2009 Pearson Education, Inc.


FIGURE 4.2 The Nations of the Association of
Southeast Asian Nations (ASEAN)

© 2009 Pearson Education, Inc.


Exchange Rates Impact Global Trade (cont’d)

• 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 domestic
production facilities
• Implications for the balance of trade?

© 2009 Pearson Education, Inc.


Forms of Competitive Advantage
• Absolute Advantage
– When a country can produce something that is
cheaper and/or of higher quality than any other
country
– An advantage based on possessing a scarce
resource (e.g., oil) or favorable physical location
• Comparative Advantage
– When a country can produce goods more
efficiently or better than other countries can
produce the same goods
– An advantage based on superior productivity (e.g.,
technologically advanced manufacturing
© 2009 Pearson Education, Inc.
Forms of Competitive Advantage (cont’d)

• National Competitive Advantage


– Conditions favoring heavy involvement in
international business:
1. Factor conditions—labor, capital, entrepreneurs, physical
resources, and information resources
2. Demand conditions—a large domestic consumer base that
promotes strong demand for innovative products
3. Related and supporting industries—strong local or regional
suppliers and/or industrial customers
4. Strategies, structures, and rivalries—domestic firms and
industries that stress cost reduction, product quality, higher
productivity, and innovative products

© 2009 Pearson Education, Inc.


International Business Management

• Going International
– Gauging International Demand
• Foreign demand for a company’s product may be greater than, the
same as, or weaker than domestic demand
– Adapting to Customer Needs
• A firm must decide whether and how to adapt its products to meet
the special demands of foreign customers
– Outsourcing
• Paying suppliers and distributors to perform certain business
processes or to provide needed materials or services
– Offshoring
• Outsourcing to foreign countries

© 2009 Pearson Education, Inc.


Levels of International Involvement

• Exporters
– Make products in one country to distribute and
sell in others
• Importers
– Buy products in foreign markets and bring them
home for resale
• International firms
– Conduct much of their business abroad and may
maintain overseas manufacturing facilities
• Multinational firms
– Design, produce, and market products in many
nations © 2009 Pearson Education, Inc.
Barriers to International Trade

Social and Cultural Legal and Political


Differences Differences

Economic
Differences

© 2009 Pearson Education, Inc.


Legal and Political Differences
• Quotas, Embargoes, Tariffs, and Subsidies
– Quota: Restricts the number of products of a certain
type that can be imported, raising the prices of those
imports
– Embargo: Government order forbidding exportation
and/or importation of a product or all products from
a specific country
– Tariffs: Taxes on imported products
– Subsidy: Government payment to help a domestic
business compete with foreign firms
• Protectionism
© 2009 Pearson Education, Inc.
– The practice of protecting domestic business at the
Legal and Political Differences (cont’d)

• Local Content Laws


– Requirements that products sold in a country be
at least partly made there
• Business Practice Laws
– Host countries govern business practices within
their jurisdictions
• Cartels
– Associations of producers that control supply and
prices
• Dumping
– Selling a product abroad for less than the cost of
© 2009 Pearson Education, Inc.
production at home
Key Terms

export advantage
absolute
Association of Southeast Asian Nations (ASEAN)
exporter
balancedirect
foreign of payments
investment (FDI)
balance of
General Agreement
trade on Tariffs and Trade (GATT)
branch office
globalization
business practice law
import
cartel
importer
comparative advantage
independent agent
dumping
international firm
embargo arrangement
licensing
euro content law
local
European Union
multinational firm
(EU)
exchangecompetitive
national rate advantage

© 2009 Pearson Education, Inc.


Key Terms (cont.)

North American Free Trade Agreement (NAFTA)


offshoring
outsourcing
protectionism
quota
strategic alliances
subsidy
tariff
trade deficit
trade surplus
World Trade Organization (WTO)

© 2009 Pearson Education, Inc.

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