Bài giảng Economics - Chapter 4 Business in a Borderless World

Chapter FourBusiness in aBorderless WorldInternational BusinessRefers to the buying, selling, and trading of goods and services across national boundaries4-1Absolute AdvantageAbsolute advantage exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item.Example: DeBeers Consolidated Mines, Ltd. (virtually controls the world’s diamond trade).4-2Comparative AdvantageComparative advantage occurs when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items.Example: the U.S. agricultural commodities, such as corn and wheat, Canadian automotive products4-3Where Canadian ExportsWent in 20004-4Source: Statistics Canada and US Census Bureau, June 4, 2001Top 5 Countries Canada Traded with in 2000ExportsImportsTrade BalanceUnited States$359B$229B$130B SurplusJapan$9.1B$16.6B$7.5B DeficitUnited Kingdom$5.7B$13.0B$7.3B DeficitChina$3.6B$11.3B$7.7B DeficitMexico$2.0B$12.1B$10.1B DeficitSource: Statistics Canada and US Census Bureau, Trade BarriersEconomicLegal/politicalSocial/culturalTechnological4-6A Comparative Economic Analysis of Canada, Switzerland, andthe United States4-7Country Corruption Perception Index1. Denmark2. Finland3. Sweden4. New Zealand5. Iceland6. Canada7. Singapore8. Netherlands (tie)8. Norway (tie)10. Switzerland4-8Source: Transparency International, “The Transparency International 1998Corruption Perceptions Index”. www.transparency.de1. Cameroon2. Paraguay3. Honduras4. Tanzania (tie)4. Nigeria (tie)6. Indonesia7. Colombia8. Venezuela (tie)8. Ecuador (tie)10. RussiaTop 10 Least Corrupt CountriesTop 10 Most Corrupt CountriesCross-Cultural Similaritiesin Eating Trends4-9Sources: Tullio Caputo and Neil, “What Canadians are Eating,” Canadian Social Trends, Statistics Canada, Winter 1990; KathleenDeveney, “America’s Heartland Acquires Global Taste, Wall Street Journal, Oct. 11, 1995, pp. B1, B6; “Hot Stuff!” Canadian Grocer, June 1996, pp. 9-13; “Out of the Deep Freeze,” Canadian Grocer, Oct. 1996, pp. 22-23; Norihiko Shirouzu, “Home-Cooked Fish, RiceLoose Importance in Japan,” Wall Street Journal, Oct. 11, 1995, p. B1; “Snack Solutions for Guiltless Grazing,” Canadian Grocer,Sept, 1996, pp. 9-19; and Gabriella Stern, “French Add Convenience to Customary Cuisine,” Wall Street Journal, Oct. 11, 1995, pp. B1, B6.GATT and NAFTAGeneral Agreement on Tariffs and Trade (GATT):Trade agreement that provides a forum for tariff negotiations and a place where international trade problems can be discussed/solved. The World Trade Organization (WTO) is responsible for administering GATT.North American Free Trade Agreement (NAFTA):Eliminates most tariffs and trade restrictions on agricultural and manufactured products between Canada, Mexico, and U.S. (1994-2009).4-10Hot Spots in Europe4-11Source: “The Atlantic Century?” Business Week,February 8, 1998Capital Into andOut of Europe4-12Source: “Europe Rising,” Business Week,February 8, 1999, p. 16.U.S. CompaniesAcquiring in EuropeEuropean CompaniesAcquiring in U.S.Billions of Dollars (U.S.)Increasing GlobalInvolvement4-13Multinational CorporationDirect InvestmentJoint VenturesContract ManufacturingLicensingTrading CompaniesExportingThe Fifteen Largest Global Public Corporations4-14Source: “The World Super Fifty,” Forbes,www.forbes.com/forbes/2001/0723/134tab1_print.htmlSolve the Dilemmaa. What are the key issues that need to be considered in determining global expansion?b. What are some of the unique problems that a small business might face in global expansion that larger firms would not?c. Should Audiotech consider a joint venture? Should it hire a sales force of people native to the countries it enters?4-15Explore Your Career OptionsWhat are some of the skills required to be a successful businessperson in the borderless world of the 21st century?4-16Additional Discussion Questions and Exercises1. Look at the “Foreign Exchange” section of the business section of a newspaper. What nation’s currency or exchange rate is listed? If you were traveling to Germany, how many euros would equal one dollar? How many Swiss francs would you need to equal one dollar?2. Assume your firm wishes to do business by selling manufactured products in other countries but does not wish to do actual manufacturing in Canada or the other country. What options are available?4-17aAdditional Discussion Questions and Exercises3. Consider the world situation in general. What are the political hot spots or areas of unrest in which doing business would be risky? What would be the possible advantage for a company setting up a business venture in these areas of unrest at the first sign of political stability?4. What are some of the reasons for the Canadian trade surplus?4-17bChapter 4 Quiz4-18a1. A positive balance of trade occurs when a. a country imports more than it exports. b. a company has a monopoly on the production of a specific resource. c. a country exports more than it imports. d. a country’s currency can be exchanged for another’s currency or gold.2. A partnership between a foreign company and a local partner is called a. a trading company. b. an export agency company. c. a direct investment. d. a joint venture.Chapter 4 Quiz4-18b3. When the United States established a policy forbidding trade with Cuba, this was an example of what type of trade restriction? a. a quota b. an embargo c. a countertrade agreement d. an import tariff4. A comparative advantage exists when a. a firm supplies a product at lower costs. b. a firm is the only supplier of a product. c. a country supplies a product at lower costs. d. a country is the most efficient supplier of an item.