1. Understanding the Global Context of Business
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 the United States
2004 Data:
Table 4–1

5. Major World Marketplaces
Europe
North America
Pacific Asia

6. The North American Marketplace and the Nations of NAFTA
1994
Figure 4–2

7. Europe and the Nations of the European Union
1992
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
United Kingdom
Austria
Belgium*
Denmark
Finland
France*
Germany (West)*
Greece
Ireland
Italy*
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

8. The Nations of ASEAN 1967 Plus 3: Japan, China, South Korea
Brunei Darussalam
Cambodia
Indonesia*
Laos
PDR
Malaysia*
Myanmar
Philippines*
Singapore*
Thailand*
Vietnam
Figure 4–4

9. 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.
English
Japanese
Chinese
Korean 50
100
150
200
250
300
350
400
450
500
432
415 96 34
Source: Time Global Business, Nov

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. National Competitive 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

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

14. Going International Figure 4–8

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.