© 2013 Cengage Learning. All rights reserved.

CHAPTER 1

GLOBAL2 PENG1

AP

Im

ages

/M.

Spe

ncer

Gre

en

© 2013 Cengage Learning. All rights reserved.

CHAPTER 1 LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Explain the concepts of international business and global business.

2. Give two reasons why it is important to study global business.

3. Articulate the fundamental question that the study of global business seeks to answer and two perspectives from which to answer it.

4. Identify three ways of understanding what globalization is.

5. State the size of the global economy and its broad trends.

2

© 2013 Cengage Learning. All rights reserved.

LO1: INTERNATIONAL BUSINESSAND GLOBAL BUSINESS

3

International business - (1) a business (or firm) that engages in international (cross-border) economic activities or (2) the action of doing business abroad.

Global business - business around the globe including both international (cross-border) activities and domestic business activities.

Multinational enterprise (MNE) – a firm that engages in foreign direct investments.

Foreign direct investment (FDI) – investing in, controlling, and managing value-added activities in other countries.

© 2013 Cengage Learning. All rights reserved.

IMPORTANT ECONOMIC TERMS

4

gross domestic product (GDP) – total market value of all final goods and services produced within a country in a given period of time, usually a calendar year.

gross national income (GNI) – GDP plus income from nonresident sources abroad – the term used by the World Bank and other international organizations to supersede the GNP term.

purchasing power parity (PPP) – adjustments made to the GDP to reflect differences in the cost of living.

© 2013 Cengage Learning. All rights reserved.

LO1: THE CONTRIBUTIONS OF EMERGING ECONOMIES

5

© 2013 Cengage Learning. All rights reserved.

EMERGING ECONOMIES

6

Global business is not limited to firms competing in developed economies.

Emerging economies (emerging markets) – a term that has gradually replaced the term “developing countries” since the 1990s.

Can you name three or four emerging economies?

© 2013 Cengage Learning. All rights reserved.

LO1: EMERGING ECONOMIES IN THE GLOBAL MARKET

7

VIEWING THE GLOBAL ECONOMY

base of the pyramid - vast majority of humanity, about four billion people, live at the base of the pyramid and make less than $2,000 a year

The “Bottom Billion” – concentrated in Africa and Central Asia – 58 small countries, stuck at the bottom in terms of growth, incomes, and human development

EMERGING ECONOMIES KEY TERMS

Triad – North America, Western Europe and Japan

BRIC – acronym for the emerging economies of Brazil, Russia, India, and China

Group of 20 – leaders of 19 major countries + EU who meet on biannual basis to discuss global economic issues

LO2: WHY STUDY GLOBAL BUSINESS?

Employability:Mastering global business knowledge helps advance your employability and career in an increasingly competitive global economy.

Career Advancement:Expertise in global business is often a prerequisite to join the top ranks of firms. In order to set yourself apart as an ideal candidate, you will need a mastery of global business knowledge.

© 2013 Cengage Learning. All rights reserved. 11

WORKING IN A GLOBAL FIRM

expatriate managera manager who works abroad, or “expat”

international premium significant compensation “package” when working overseas

© 2013 Cengage Learning. All rights reserved.

LO4: LESSONS FROM A RECESSION

Risk management – the identification and assessment of risks and the preparation to minimize the impact of high-risk, unfortunate events.

Scenario planning – a technique to prepare and plan for multiple scenarios (either high or low risk).

13

WHAT IS GLOBALIZATION?

globalization close economic integration of countries and peoples of the worlds

semiglobalization Suggests that barriers to market integration at borders are high, but not high enough to completely insulate countries from each other

Total Isolationism

Total Globalization

Semiglobalization

14

© 2013 Cengage Learning. All rights reserved.

LO5: THE GLOBAL ECONOMY

Recent Changes in the Fortune Global 500

15

© 2013 Cengage Learning. All rights reserved.

LO5: THE GLOBAL ECONOMY

Recent Changes in the Fortune Global 500

16

NONGOVERNMENT ORGANIZATIONS (NGOS)

---heterogeneous organizations with numerous classifications:advocacy - environmentalists, human rights activists, consumers, etc. that raise awareness, acceptance and knowledge by lobbying, press work and activist events operational - design and implementation of development-related projects that may stress service delivery or participation; whether religious or secular; whether more public or private-oriented - can be community-based, national or international