Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Economic planning wikipedia , lookup
Steady-state economy wikipedia , lookup
Business cycle wikipedia , lookup
Production for use wikipedia , lookup
Criticisms of socialism wikipedia , lookup
Rostow's stages of growth wikipedia , lookup
Uneven and combined development wikipedia , lookup
Economics of fascism wikipedia , lookup
Chapter 9 Political and Economic Factors Affecting Internation al Business Prior Knowledge How does a country’s political system affect the country’s participation in international business? What are some political and financial risks faced by Canadian companies in the international business world? How are economic systems throughout the world becoming more interdependent and more global? 9.1 The Political Process: Government’s Role in International Trade Types of Political Systems 1. Democracy - government for and by the people 2. Totalitarian Systems - centralize power and often use the military to control the state 3. Mixed Economy - purely democratic or totalitarian political system is theoretical; most countries show characteristics of both 9.1 The Political Process: Government’s Role in International Trade Political Interdependence countries start to feel pressure to change their political, economic, and cultural practices 9.1 The Political Process: Government’s Role in International Trade Trade War - governments act aggressively in international markets and other forums to promote their own countries’ trading interests Economic Imperialism exploitation of developing countries by more developed countries 9.2 Assessing Global Political Risks POLITICAL RISK Refers to political decisions, conditions, events or activities in a country that affect the business climate Types of political risk 1.Ownership Risk 2.Operations Risk 3.Transfer Risk 9.2 Assessing Global Political Risks TYPES OF POLITICAL RISK 1. Ownership Risk Threatened by government takeover Done by government taking back property 9.2 Assessing Global Political Risks TYPES OF POLITICAL RISK 2. Operations Risk Government policies create delays i.e. new taxes, import restrictions, government regulations 9.2 Assessing Global Political Risks TYPES OF POLITICAL RISK 3. Transfer Risk Government policy affects currency exchange rates Policies cause currency devaluation or economic downturn Brainstorming Activity In groups of three select a global event/issue and identify an industry that would be affected. - Be sure to explain the reason as to why this industry would be affect. Identifying the Risks of International Trade Political – War, embargo Examples: 2006 Mexican Drug War, 2003 Iraq War, Gaza War, Military controls government, high corruption index Economic/Financial – Non-payment, exchange rate fluctuations Examples: Great depression, current recession, 2007 Canadian dollar at par with US dollar Identifying the Risks of International Trade Social – Kidnapping, terrorism, labour strike, religious Examples: New York 9/11, July 2005 London bombings (also called the 7/7 bombings), Madrid – Spain, March 11 2004 Train bombing Natural – Typhoons, earthquakes Examples: April 6, 2009 – Abruzzo region - Italy, May 2, 2008 Cyclone Nargis tore across the Irrawaddy Delta in southern Burma, 2004 Indian Ocean tsunami 9.3 Economic Factors Related to International Business Economic Systems – include all the factors and the rules and regulations involving production and consumption of goods/services Three most common economic systems: 1.Market Economy 2.Centrally Planned (command) Economy 3.Mixed Economy 9.3 Economic Factors Related to International Business Market Economy individual companies and consumers make the decisions about what, how, and whom goods and services are produced Forces of supply and demand control market economies 9.3 Economic Factors Related to International Business Market Economy Law of Supply states as price of a product increases, producers will be willing to produce more of that product Law of Demand states that as the price of a product increases, consumers will demand less of that product 9.3 Economic Factors Related to International Business Centrally Planned (command) Economies government regulates the amount, distribution, and price of goods and services Society is considered before individual needs State controls prices, wages, production quotas, and distribution of raw material Guaranteed basic standard of living, health benefits, and education Examples: North Korea and Cuba 9.3 Economic Factors Related to International Business Mixed Economy combines government involvement and private ownership of businesses Canada is considered a mixed economy for the following reasons: plays a major role in important industries (transportation, health care, and communications) PRIVATIZATION sell state-owned enterprises into private ownership It can occur in all types of economies Ex. 407 ETR Business Cycle Business Cycles DEPRESSION Economy slows and consumers buy less Factories shut down and high unemployment RECOVERY Economy starts to improve Business begin to resume production Consumers start to spend money Business Cycles PROSPERITY Economy at its best Investment is strong Job opportunities increase RECESSION Economy starts to slow Consumers buy less Occurs when total economic output shrinks for at least six months World Markets Stock exchanges discussing ability to create 24 hour stock trading around the world, this is known as GLOBAL EQUITY MARKET