Chapter 4 - INTRO TO BUSINESS CHAPTER 4 Competing in World...

INTRO TO BUSINESS 02/03/12
CHAPTER 4: Competing in World Markets
Learning Goals
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Explain the importance of international business and the primary reasons nations
trade and discuss the concepts of absolute and comparative advantage in
international trade.
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Describe how nations measure international trade in the significance of exchange
rates.
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Identify the major barriers that confront global business.
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Explain how international trade organizations and economic communities reduce
barriers to international trade.
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Compare the different levels of involvement used by businesses when entering global
markets.
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Distinguish between global business strategy and a multi domestic business strategy.
Why Nations Trade
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Boots economic growth
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Expands markets
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More efficient production systems
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Less reliance of the economies of home nations
International Sources of Factors of Production
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Decisions to operate abroad depend upon availability, price, and quality of:
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Labor
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Natural resources
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Capital
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Entrepreneurship
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Companies doing business overseas must make strategic decisions.
Additional Environmental Factors to which Companies are Exposed
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New social and cultural factors
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Economic and political environments
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Legal restrictions
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Companies can expand their markets, seek growth opportunities in other nations,
make their production and distribution systems more efficient, and reduce their
dependence on the economies of their home nations.
Size of the International Marketplace
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As developing nations expand into the global marketing, opportunities grow.
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Many developing countries have posted high growth rates of annual GDP.
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United States 4.4%
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China 11.1%
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India 9.4%

Population Size and Prosperity
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Through developing nations generally have lower per capita income, many have
strong GDP growth rates and their huge populations can be lucrative markets.
Top 10 Trading Partners with U.S.
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Canada 40 billion
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China 35 billion
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Mexico 29 billion
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Japan 14 billion
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Germany 11 billion
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United Kingdom 8 billion
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South Korea 6 billion
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France 5 billion
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Taiwan 4.6 billion
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Brazil 4.3 billion
Absolute and Comparative Advantage
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Absolute advantage: Country can maintain a monopoly or produce at a lower cost
than any competitor.