Introduction To International Business Chapter 2

CHAPTER 2: GLOBAL MARKETPLACE & BUSINESS CENTRE
INTRODUCTION TO INTERNATIONAL BUSINESS (MGT361)
INTERNATIONAL BUSINESS
It is very important to understand at how international business people look at the world economy.
Three common features of Econ Structures:

Political System
Economic System
Geography
Political System
The political system is the way a country govern their country Changes of government mean changing in system practice. DEMOCRACY, MONARCHY, TOTALITARIAN??????
Economic System
Refer to system on how monetary and fiscal policies which include currency system, banking and taxation policies, government spending, trade and investment policies.
COMMUNIST, SOCIALIST, FREE MARKET SYSTEM???????
Geography
Refer to locations, size and distance of the market.
Try to look for this countries:

Bahamas Iceland Cyprus Luxembourg San Marino
DESCRIBE THESE COUNTRY IN TERM OF GEOGRAPHIC FACTORS
Culture:

Shared borders Common heritage Similar income levels (Triad and Quad Countries) Ownership of Natural Resources
The World Economy
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
Marketplaces of North America

United States Canada Mexico Greenland Countries of Central America and the Caribbean
United States

Third largest population in world Fourth largest land mass Largest economy 27 percent of worlds GDP in 2006 Prime market for exports
The U.S. Dollar
Invoicing currency
Flight capital
Canada

Second largest land mass 80 percent of population concentrated along U.S./Canadian border Rich natural resources Trade with U.S. - single largest bilateral trade relationship in the world
Advantages of Canada

Proximity to U.S. market Stability of legal and political systems Excellent infrastructure and educational systems
Mexico

Largest Spanish-speaking nation Federal government system Participant in NAFTA along with U.S. and Canada
Central America and the Caribbean
Economic development hindered by:

Political instability Chronic U.S. military intervention Inadequate educational systems Weak middle class Poverty Import limitations
Marketplaces of Western Europe
European Union Member Countries
Other Countries in Western Europe
Map 2.2 Western Europe
Euro Countries

Belgium France Luxembourg Germany Italy Netherlands
Ireland Greece Portugal Spain Austria Finland
Marketplaces of Eastern Europe

Russia Estonia Latvia Lithuania Armenia
Belarus Georgia Moldova Ukraine Azerbaijan
Marketplaces of Central Europe

Romania Bosnia-Herzegovina Croatia Macedonia Slovenia Serbia Montenegro
Albania Austria Bulgaria Czech Republic Slovak Republic Hungary Poland
Map 2.3 The Former Soviet Union
Marketplaces of Asia

Japan Australia and New Zealand The Four Tigers China
India Afghanistan and Central Asian Republics Southeast Asian Countries
Map 2.4 Asia
Japan
Second largest economy GDP of $4.3 trillion in 2006 Industries controlled by keiretsu GDP growth rate of 1.6 percent (since 2000)
Map 2.5 Australia and New Zealand
The Four Tigers
South Korea
Taiwan
Singapore
Hong Kong
China
Worlds most populous country approximately 1.3 billion people Communist ideology mixed with marketoriented economic policies Heavy FDI
Figure 2.3 Annual FDI Flows to China 1982-2006
India
Worlds second most populous country Per capita GDP of $820 British colony until 1947
Southeast Asian Countries
Thailand, Malaysia, and Indonesia (Archipelago) Low labor costs Significant FDI in recent years Continued recovery from currency crisis in 1997 and 1998
Marketplaces of Africa and the Middle East
Africa

Middle East

867 million people 54 countries Major economies:

Cradle of civilization Major economies:

South Africa Ivory Coast Algeria Nigeria
Saudi Arabia Kuwait UAE
Map 2.6 Africa and the Middle East
Map 2.7 The Middle East
Marketplaces of South America

Brazil Bolivia Uruguay Argentina Chile
Colombia French Guiana Paraguay Peru Ecuador Venezuela
Map 2.8 South America
Chapter Objectives

Explain the importance of the GATT and the WTO to international business Contrast the different forms of economic integration among cooperating countries Analyze the opportunities for international businesses created by completion of the EUs internal market Describe the other major trading blocs in todays world economy
General Agreement on Tariffs and Trade
Developed as part of the Havana, Cuba, conference in 1947 Provided forum for trade ministers to discuss barriers to international trade
The Role of the GATT

The GATTs goal was to promote a free and competitive international trading environment benefiting efficient producers by sponsoring multilateral negotiations to reduce tariffs, quotas, and other nontariff barriers
Table 10.1 GATT Negotiating Rounds
Most Favored Nation (MFN) Principle

The most favored nation principle requires that any preferential treatment granted to one country must be extended to all countries.
Exceptions to the MFN Principle
Members permitted to lower tariffs to developing countries without lowering them for more developed countries Regional arrangements promote economic integration (e.g., EU and NAFTA)
Goals of the World Trade Organization (WTO)
Promote trade flows by encouraging nations to adopt nondiscriminatory, predictable trade policies Reduce remaining trade barriers through multilateral negotiations Establish impartial procedures for resolving trade disputes among members
Differences between WTO and GATT
GATT focused on promoting trade in goods; WTOs mandate includes:

trade in goods trade in services international intellectual property protection trade-related investment
WTOs enforcement powers are stronger
Figure 10.1 The WTOs Principles of the Trading System
WTO Challenges

The Cairns Group Multifibre Agreement General Agreement on Trade in Services (GATS) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Trade-Related Investment Measures Agreement (TRIMS)
Enforcement of WTO Decisions

Country failing to live up to the agreement may have a complaint filed against it WTO panel evaluates complaint If found in violation, the country may be asked to eliminate the trade barrier
Forms of Economic Integration

Free Trade Area Customs Union Common Market Economic Union Political Union
Figure 10.2 Forms of Economic Integration
European Union (EU)

Most important regional trading bloc 27 member countries 491 million population Combined GDP of $14.4 trillion
Map 10.1 The European Union
Governing Organizations of the EU

The Council of the European Union The European Commission The European Parliament The European Court of Justice
The European Parliament shares responsibility for adopting the EUs budget with the European Commission
Figure 10.3 The Co-Decision Procedure
Three Pillars of the Maastricht Treaty
A new agreement to create common foreign and defense policies among members A new agreement to cooperate on police, judicial, and public safety matters The old familiar European Community, with new provisions to create an economic and monetary union among member states
Maastricht Treaty
The most important aspect of the Maastricht Treaty was the establishment of the Economic and Monetary Union.
Economic and Monetary Union
The creation of a single currency called the euro European Central Bank - responsible for controlling the Eurozones money supply, interest rates, and inflation
Components of the Treaty for Europe (Treaty of Amsterdam)
A strong commitment to attack the EUs chronic high levels of unemployment A plan to strengthen the role of the European Parliament by expanding the number of areas that require use of the co-decision procedure Establishment of a two-track system
Treaty of Nice
Sought to reduce the risk of political gridlock as the number of members increases reduced number of areas where unanimity is required for Council approval adjusted number of votes assigned to each Council member
The North American Free Trade Agreement

Implemented in 1994 to reduce barriers to trade and investment among Canada, Mexico, and the United States
Major Regional Trade Associations

AFTA ANCOM APEC CACM CARICOM CEMAC CER
ECOWAS EU EFTA GCC MERCOSUR NAFTA SADC
Map 10.2 Free Trade Agreements in Central and South America and the Caribbean
Map 10.3 The ASEAN Members
Map 10.4 Asia-Pacific Economic Cooperation Initiative (APEC)
Map 10.5 Free Trade Agreements in Africa
Review Questions

Explain what is Economic Integration Discuss the levels of Economic Integration State the reasons for regional economic integration Discuss the regional economic integration in Europe, America and elsewhere Identify the opportunities and threats of regional economic

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CHAPTER 2: GLOBAL MARKETPLACE & BUSINESS CENTRE

INTRODUCTION TO INTERNATIONAL BUSINESS (MGT361)

Three common features of Econ Structures:

COMMUNIST, SOCIALIST, FREE MARKET SYSTEM???????

Refer to locations, size and distance of the market.

Try to look for this countries:

Bahamas Iceland Cyprus Luxembourg San Marino

DESCRIBE THESE COUNTRY IN TERM OF GEOGRAPHIC FACTORS

The World Economy

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Marketplaces of North America

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

The U.S. Dollar

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Central America and the Caribbean

Economic development hindered by:

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Marketplaces of Western Europe

European Union Member Countries

Other Countries in Western Europe

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Map 2.2 Western Europe

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Belgium France Luxembourg Germany Italy Netherlands

Ireland Greece Portugal Spain Austria Finland

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Marketplaces of Eastern Europe

Russia Estonia Latvia Lithuania Armenia

Belarus Georgia Moldova Ukraine Azerbaijan

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Marketplaces of Central Europe

Romania Bosnia-Herzegovina Croatia Macedonia Slovenia Serbia Montenegro

Albania Austria Bulgaria Czech Republic Slovak Republic Hungary Poland

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Map 2.3 The Former Soviet Union

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Japan Australia and New Zealand The Four Tigers China

India Afghanistan and Central Asian Republics Southeast Asian Countries

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Map 2.4 Asia

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Map 2.5 Australia and New Zealand

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

The Four Tigers

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 2.3 Annual FDI Flows to China 1982-2006

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Southeast Asian Countries

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Marketplaces of Africa and the Middle East

867 million people 54 countries Major economies:

Cradle of civilization Major economies:

South Africa Ivory Coast Algeria Nigeria

Saudi Arabia Kuwait UAE

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Map 2.6 Africa and the Middle East