Download Business Essentials 5e.

Chapter 4
The Global Context
of Business
PowerPoint Presentation by Charlie Cook
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All rights reserved.
“We are in the midst of a great
transition from narrow nationalism
to international partnership.”
— Lyndon Baines Johnson
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4–2
Key Topics
• The rise of global business
• Major world marketplaces and U.S. trading
partners
• Influences on international business
• International business management
• The impact of differences among nations
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4–3
Globalization Is Gaining Speed
• The world economy is
becoming a single,
interdependent system
• Export:
 Domestic product sold
abroad
• Import:
 Foreign product sold
domestically
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4–4
Major World Marketplaces
Europe
North America
Pacific Asia
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4–5
Pacific Asia Represents Enormous
Business Potential
Projections for 2010 (in millions)
500
450
400
432
415
350
In less than a decade,
Asian language
speakers on the web
will far exceed English
speakers.
300
250
200
150
100
96
50
34
0
English
Japanese
Chinese
Korean
Source: Time Global Business, Nov. 2001.
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4–6
Competitive Advantage
• Absolute Advantage
• Comparative Advantage
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4–7
National Competitive Advantage
• Factor conditions
• Demand conditions
• Related and
supporting industries
• Strategies, structures,
and rivalries
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4–8
Import/Export Balances
• Balance of Trade
 Trade Deficits
 Trade Surpluses
• Balance of Payments
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4–9
Exchange Rates Heavily Impact 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
• Implications for balance of trade?
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4–10
Exchange Rates Heavily 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 production facilities
• Implications for balance of trade?
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4–11
Levels of International Involvement
• Importer and Exporter
• International Firms
• Multinational Firms
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4–12
International Organizational Structures
INVOLVEMENT
HIGH
LOW
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• Foreign Investment
• Strategic Alliances
• Branch Offices
• Licensing Arrangements
• Independent Agents
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Barriers to International Trade
Social and Cultural
Differences
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Legal and Political
Differences
Economic
Differences
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Take Time to Learn the
Culture Thoroughly!
Este es nuestro
nuevo auto:
el NOVA!
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4–15
The Customer’s Language: A Critical
Business Success Factor
• In the U.S. alone, 18% of the population does
not speak English at home.
• Only 48% of the world’s Web users are native
English speakers.
• Consumers are four times more likely to buy a
product on the Internet if the website is in their
preferred language.
Source: Time Global Business, Nov. 2001
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4–16
Global Differences
• To operate effectively
in another country,
businesses must
know when, and to
what extent, the
government is
involved in a given
industry.
• Legal and Political
Differences
 Quotas, tariffs, and
subsidies
 Protectionism
 Local content laws
 Business practice laws
 Day to day operations
 Cartels
 Dumping
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4–17
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.
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4–18