Chapter 2: International Business
Ignorance of basic geography, market characteristics, culture and politics may lead to lost profits
or, in the extreme, doom a venture to failure. Linguistic and cultural ties, past political
associations, and military alliances play significant roles in the world pattern of trade and
investment and in shaping the opportunities available to businesses today.
Much of the world’s current economic activity is concentrated in a group of countries called the
triad: japan, European Union, USA. Or the quad: triad + Canada.
The marketplaces of North America
USA has only the world’s third largest population and fourth largest land mass, yet it possesses
the largest economy, accounting for almost 30% of the world’s 40.9 trillion GDP in 2004.
It is the prime market for lower-income countries trying to raise their standards of living through
export-oriented economic development strategies.
The USA dollar serves as an invoicing currency: the currency in which the sale of goods and
services is denominated. It is used for about half of all international transactions and is an
important component of foreign-currency reserves worldwide.
The USA also attracts flight capital: money sent out of a politically or economically unstable
country to one perceived as a safe haven.
The world’s second largest land mass. 80% of the population is concentrated within a 100-mile
band along the country’s southern border with the USA. Canada is a big exporter of rich natural
resources: forest products, petroleum, minerals, and grain.
The USA is the dominant market for Canadian goods, receiving over ¾ of canada’s exports in a
typical year. Two-way trade between the USA and Canada, which totalled $514 billion in 2004,
forms the single largest bilateral trading relationship in the world.
International investors have long been attracted to Canada because of its proximity to the huge
USA market and the stability of its political and legal systems. Canada’s excellent infrastructure
and educational systems also contribute to the performance of its economy. However, a lingering
threat to canada’s political stability-and to its ability to attract foreign
investment- is the long-
standing conflict between French-speaking Canadians. And English speaking Canadians.
Now the world’s largest Spanish speaking nation. Like the USA, mexico is a federal system but
one whose head of government, a president, is elected by popular vote every six years.
In 1994, Canada, mexico, and USA initiated the north American free trade agreement (nafta),
which is reducing barriers to trade among the 3 countries over a 15 year period.
Central America and the Caribbean
2 dozen other countries that are divided geographically into 2 groups: central America and the
island states of the Caribbean.