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The Global Context of Business
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Chapter 2
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Sr.Chapter Chapter HeadingNo.No.
1. 3 Understanding the Global context of business (031012)
2. 4 Conducting Business Ethically and Responsibly3. 6 Organizing the Business Enterprise4. 7 Understanding Entrepreneurship and Small Business5. 8 Managing Human Resources6. 9 Understanding Employee Motivating, Satisfying and
Leadership7. 11 Understanding Marketing Processes and Consumer
Behavior8. 16 Managing Quality and Productivity9. 17 Managing Information Systems and Communication
Technology10. 19 Understanding Money and Banking11. 20 Intermediate Term and Lease Financing
Course Outline
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3
Marks Distribution
50 Terminal Examination
20 Mid Term Examination
15 Quizzes15 Final Assignment
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“We are in the midst of a
great transition from
narrow nationalism to
international partnership.”
~ Lyndon Baines Johnson
Intro of Global context
Lets see something interesting
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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.
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Chapter Review 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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Key Topics
The rise of global business Major world marketplaces and
trading partners Influences on international
business International business
management The impact of differences among
nations
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Definitions Quota: restriction on the number of certain type
of product that can be imported into a country. Embargo: complete ban on imports and exports,
imposed by a government for political reasons. Tariff: tax levied on imported products. Subsidy: government payments to help a
domestic business compete with foreign firms. Protectionism: the practice of protecting
domestic business against foreign competition.
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9
DefinitionsGross domestic product (GDP) is one the primary indicators
used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period
OrThe monetary value of all the finished goods and services
produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
Per capita income or income per person is a measure of mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population. It does not attempt to reflect the distribution of income or wealth
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1. The key drivers to globalization
Drivers:
Global market
Convergence
Global Competition
GovernmentInfluence
Cost Advantages
GlobalStrategies
Similar customer needs,Global customers, Transferable marketing
Trade policies, TechnicalStandards, host government,
policies
Scale economies,Sourcing efficiencies
Countries costs,High product development costs
Interdependence, Competitors globalHigh exports/imports,
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a. 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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b. Globalization Is Gaining Speed
Example: Asian financial markets in the late 90s directly affects stock markets worldwide.
Discussion: what product from other countries do you use\consume? Why have you chosen it?
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c. Categorizing Economies
High Income Countries: Per capita income greater than $9,386
Middle Income Countries: Per capita income between $765 and $9,386
Low Income Countries: Per capita income of less than $765
Discussion: what countries fall into each category?
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d. Major World Marketplaces
North America NAFTA Europe EU Pacific Asia Do we have any
economic agreement with other countries. What are they?
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The North American Marketplace (NAFTA)
Canada
United States
Mexico
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Europe and the Nations of the European Union
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• Austria
• Belgium
• Denmark
• Finland
• France
• Germany
• Greece
• Ireland
• Italy
• Ireland
• Italy
• Luxembourg
• Netherlands
• Portugal
• Spain
• Sweden
• United Kingdom
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The Nations of ASEAN
• Brunei
• Indonesia
• Malaysia
• Philippines
• Singapore
• Thailand
• Vietnam
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Pacific Asia RepresentsEnormous Business Potential
In less than a decade, Asian language speakers on the web will far exceed English speakers
Source: Time Global Business, Nov. 2001
English Japanese Chinese Korean0
50
100150200
250300350
400
450500
415
96
432
34
Projections for 2010 (in millions)
2 - 18
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2. Competitive Advantage Absolute Advantage:
when one country can produce a product cheaper and\or higher quality than any other country. Ex. OPEC
Comparative Advantage: when one country can produce certain goods or services
more efficiently and effectively than others. Ex. US software
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Competitive advantages When competitive advantage is materialized?When a firm earns persistently higher rate of
profit over its rivals. Determinants of profit level
1- Value of company products in customers’ eyes. 2- Company production cost.
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Competitive advantage
It can be created in certain industrial field, through the adoption of low-cost-differentiation strategy. . M. Porter
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National Competitive Advantage
Factor conditions Demand conditions Related and
supporting industries Strategies,
structures, and rivalries
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3. Import/Export Balances
Balance of Trade Trade Deficits Trade Surpluses
Balance of Payments
The total flow of money into or out of an economy
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3a. Exchange RatesHeavily 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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Exchange RatesHeavily Impact Global Trade
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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The U.S. Economy Has a Growing Trade Deficit
Copyright ©2003 Prentice Hall, Inc. 2 - 26
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
$400,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
U.S. Trade Deficit(in billions)
78,8
57 28,2
66
35,6
66
68,9
49 97,0
39
95,9
47
102,
113
105,
932
166,
898
255,
971
344,
716
0
200
400
600
800
1000
1200
1400
1600
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Imports Exports
U.S. Imports & Exports(in billions)
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Does It Make Sense to Go International?
Copyright ©2003 Prentice Hall, Inc. 2 - 27
YES
Is there international demand for
the firm’s product?
NO
Stay Domestic
Can the product be
modified to fit a foreign market?
NO
YES
Is the foreign business
climate suited to imports?
NO
Does the firm have or can it get thenecessary skills and
knowledgeto do
business abroad?
YES
NO
YES
Go International
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4. Levels of International Involvement
Importer & Exporter
International Firms Multinational Firms
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International Organizational Structures
Foreign Investment Private capital investment by firms of one country
into those of another. Strategic Alliances
a relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations
Branch Offices
Licensing Arrangements
Independent Agents
INV
OLV
EM
EN
THIGH
LOW
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5.Barriers to International Trade
Social & Cultural Differences Economic
Differences
Legal & Political Differences
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Take Time to Learn the Culture Thoroughly!
Este es nuestro nuevo auto:
el NOVA!
Ha, ha, ha, ha, ha, ha!!!
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The Customer’s LanguageA 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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Economic Differences
To operate effectively in another country, businesses must know when, and to what extent, the government is involved in a given industry.
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Legal & Political Differences
Quotas, Tariffs, & Subsidies Protectionism Local Content Laws Business Practice Laws
Day to day operations Cartels Dumping
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Relate to Pakistan
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Potentials Population – 170 million
Growing consumption Cheap labor
According to approximations, labor in Pakistan is $ 0.36 an hour; in India, it is $ 0.58 an hour and in China, it is $ 0.70 an hour
Feasible regulatory conditions As compared to india
Minerals Coal, Copper, Gold, Silver, Dolomite, Gypsum, Lime
stone, Natural Gas, Iron core, Rock salt, Bauxite, Marble, Gems, China Clay, Zinc, Lead and Chromite are some of Pakistan’s potential
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Potentials Coal reserves, iron and gems Agriculture Pakistan is the 4th largest producer of milk Fruit and agriculture processing
Coal facts
Macro economic indicators
Large scale job creation
Improving purchasing
power
Lower poverty
Greater consumption
Greater demand of good and services
Increased manufacturin
g
More jobs
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IntroductionCHAPTER NO
3NAME COMPANY NO. 4-2-12 11-2-12
Aruba 1 1Lunba 1 1Ayesha 1 1
Faria 2 1Safia Tabassum 2 1
Mashal 3 1Namreen 3 1
Asma 3 1Umair Iqbal 4 1
Shiraz Qureshi 4 1Ismail 4 1Anus 4 1Mir 5 1
Saad 5 1Najeeb Aslam 5 1
M. Ejaz 5 1
Snapshot of Sessional marks