copyright © 2009 pearson education canada2-1 chapter 2 competing competing in the global economy

Copyright © 2009 Pearson Education Canada 2-1

Chapter 2Chapter 2 COMPETING COMPETING

IN THEIN THE

GLOBAL GLOBAL

ECONOMYECONOMY


WHY NATIONS TRADEWHY NATIONS TRADE

• Greater total output

• Wider variety of goods

• Expanded markets

• Lower Prices

• Increased local competition

• Economies of scale


Theories of Theories of Production and TradingProduction and Trading

AbsoluteAbsolute

AdvantageAdvantage

AbsoluteAbsolute

AdvantageAdvantageComparativeComparative

AdvantageAdvantage

ComparativeComparative

AdvantageAdvantage


HOW INTERNATIONAL HOW INTERNATIONAL TRADE IS MEASUREDTRADE IS MEASURED

• Balance of

trade

- Trade surplus

- Trade deficit

• Balance of payments

-Cash inflow

-Cash outflow


• (New chart to be added)


TRADE RESTRICTIONSTRADE RESTRICTIONSProtectionismProtectionism

• Restrictive import standards

• Subsidies

• Dumping

• Tariffs

• Quotas

• Embargos


AGREEMENTS AND AGREEMENTS AND ORGANIZATIONS PROMOTING ORGANIZATIONS PROMOTING

FREE TRADEFREE 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)


TRADING BLOCSTRADING BLOCS

Advantages• Wider markets

• Fosters economic growth

• Helps smaller countries

• Promotes competition

Disadvantages• Trade restrictions

• Economic isolation

• Decline in overall world trade

• Fewer choices


EXCHANGE RATES AND EXCHANGE RATES AND CURRENCY FLUCTUATIONSCURRENCY FLUCTUATIONS

• Floating exchange rates

• Fixed value systems

• Currency devaluation

• Government intervention


Opportunities

Growth potential

Increased sales

Operating efficiencies

New technologies

More consumer choice

Challenges

Laws and customs

Consumer preferences

Ethical standards

Labour skills

Politics and economics

THE GLOBAL BUSINESS THE GLOBAL BUSINESS ENVIRONMENTENVIRONMENT


• 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

CULTURAL DIFFERENCES IN CULTURAL DIFFERENCES IN GLOBAL BUSINESSGLOBAL BUSINESS


LEGAL DIFFERENCES IN LEGAL DIFFERENCES IN GLOBAL BUSINESSGLOBAL BUSINESS

• Canadian law

• International law

• Local laws (country specific)


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

FORMS OF INTERNATIONAL FORMS OF INTERNATIONAL BUSINESS ACTIVITYBUSINESS ACTIVITY


PRODUCT STRATEGIES FOR PRODUCT STRATEGIES FOR INTERNATIONAL MARKETSINTERNATIONAL MARKETS

• Standardize-selling the same product worldwide

• Customize-accommodating the lifestyles and habits of the local markets


HOW TO AVOID BUSINESS HOW TO AVOID BUSINESS BLUNDERS ABROADBLUNDERS ABROAD

• The importance of packaging

• The language barrier

• The problems with promotion

• Local customs• Translation

problems • The need for

research


DEALING WITH ECONOMIC DEALING WITH ECONOMIC SHOCKS IN A GLOBAL BUSINESS SHOCKS IN A GLOBAL BUSINESS

ENVIRONMENTENVIRONMENT

• Health issues

• Natural disasters

• Economic fluctuations

• Energy

• Terrorism

• Security

copyright © 2009 pearson education canada2-1 chapter 2 competing competing in the global economy

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