BUS 200 Lecture 5: 5- Global Context to Business
8 Dec 2017
School
Department
Course
Professor
Globalization- the process by which the world economy is becoming a single interdependent system-
how we rely on each other
• Integration of markets globally
• The world is becoming a single interdependent system
• Benefits to countries and investors
• Technology makes it easy to communicate
The Major World Marketplaces
Distinctions Based on Wealth
• The World Bank, an agency of the UN, uses per-capita income (average income per person) to
make distinctions among countries
o High income countries- annual per capita income higher than $12746USD
▪ Canada, United States, European Countries, Australia, Japan, South Korea,
Israel, Kuwait, United Arab Emirates, Oman
o Upper middle income countries- between $4126 and $12745USD
▪ China, Colombia, Lebanon, Turkey, Argentina, South Africa
o Low middle income countries- $1046-$4125USD
▪ Ukraine, Philippines, Armenia, Guatemala, Vietnam
o Low income countries- less than $1045USD
▪ Malawi, Bangladesh, Haiti, Afghanistan
▪ Low literacy, weak infrastructure, unstable governments
▪ Not attractive to international business
Geographic Clusters
• World economy revolves around three marketplaces: North America, Europe and Asia
o North America
▪ Dominated by the United States
▪ Mexico does a lot of manufacturing
▪ States and Canada are large trading partners and competitors
o Europe
▪ Divided into Western and Eastern Europe
▪ Western dominated by Germany, UK, France, Spain, Italy
• Used to be primarily Communist
• Marketplace and producer
▪ Has been replaced by the European Union
o Asia Pacific
▪ Japan, China, Thailand, Malaysia, Singapore, Indonesia, South Korea, Taiwan,
Philippines, Vietnam, Australia
▪ Automobile, electronics, banking
• Mainly upper middle and high income nations
• Largest economies, biggest corporations, influential financial markets, highest income
consumers
Emerging Markets
BRICS
• Brazil, Russia, India, China, South Africa
o Brazil- commodities and agricultures
o Russia- energy supplier
o China- manufacturing
o India- service provider (call centres to engineering)
o South Africa- minerals and resources
• Act as a unit, hold summits and discuss strategies
• Will be opening the New Development Bank to rival the World Bank
South Korea, Thailand, Indonesia, Ukraine are other emerging nations
Forms of Competitive Advantage
Importing and exporting is done based on what the country can and cannot produce, but it is also done
based on other advantages
Absolute Advantage
• The ability to produce something more efficiently than any another country
• Larger output with fewer input
• Countries should export what they have an absolute advantage in, and import things they don’t
produce as efficiently as other nations
Comparative Advantage
• Ability to produce some products more efficiently than others
• Example: farming. One nation can produce a few types of crop really efficiently but other types
of crops cannot be produced efficiently
Developing countries have a comparative advantage in making products that require low cost labour
• Developed countries will get products made in the country with the lowest wages. This shifts as
one country (China) gets too popular and wages increase
• Working conditions aren’t always safe
National Competitive Advantage
• International competitive advantage stemming form a combination of factor conditions;
demand conditions; related and supporting industries; and firm strategies, structures and
rivalries
o Factor Conditions- factors of production (labour, capital, entrepreneurs, natural
resources, information)
o Demand Conditions- domestic consumer base looking for innovative products
o Related and Supporting industries- local or regional suppliers and industrial customers
o Strategies, Structures and rivalries- cost reduction, product quality, higher productivity,
innovative new products
• International competitiveness- competitive marketing of domestic products against foreign
products
o A country’s ability to generate more wealth than its competitors in world markets
Document Summary
Globalization- the process by which the world economy is becoming a single interdependent system- how we rely on each other. Integration of markets globally: the world is becoming a single interdependent system, benefits to countries and investors, technology makes it easy to communicate. Japan, china, thailand, malaysia, singapore, indonesia, south korea, taiwan, Philippines, vietnam, australia: automobile, electronics, banking, mainly upper middle and high income nations. Largest economies, biggest corporations, influential financial markets, highest income consumers. Brics: brazil, russia, india, china, south africa, brazil- commodities and agricultures, russia- energy supplier, china- manufacturing, south africa- minerals and resources. India- service provider (call centres to engineering: act as a unit, hold summits and discuss strategies, will be opening the new development bank to rival the world bank. South korea, thailand, indonesia, ukraine are other emerging nations. Importing and exporting is done based on what the country can and cannot produce, but it is also done based on other advantages.
