1. Chapter 2
The Global Context of Business

2. Sr. Chapter Chapter Heading
No.No.
1. 3 Understanding the Global context of business (031012)
2. 4 Conducting Business Ethically and Responsibly
3. 6 Organizing the Business Enterprise
4. 7 Understanding Entrepreneurship and Small Business
5. 8 Managing Human Resources
6. 9 Understanding Employee Motivating, Satisfying and Leadership
7. 11 Understanding Marketing Processes and Consumer Behavior
8. 16 Managing Quality and Productivity
9. 17 Managing Information Systems and Communication Technology
10. 19 Understanding Money and Banking
11. 20 Intermediate Term and Lease Financing

3. Marks Distribution
50 Terminal Examination
20 Mid Term Examination
15 Quizzes
15 Final Assignment
3

4. “We are in the midst of a
great transition from narrow
nationalism to international
partnership.”
~ Lyndon Baines Johnson

5. Chapter Review
 Discuss the rise of international business,
describe the major world marketplaces.
 Explain how competitive advantage, import-
export balances, exchange rates, and foreign
competition shape international business
strategies.

6. Chapter Review
 Discuss what factors influence whether a
company should engage in international business.
 Identify different levels of international
involvement and international organizational
structure.
 Describe key barriers to international trade.

7. Key Topics
 The rise of global business
 Major world marketplaces and trading
partners
 Influences on international business
 International business management
 The impact of differences among
nations

8. Definitions
 Quota: restriction on the number of certain type
of product that can be imported into a country.
 Embargo: complete ban on imports and exports,
imposed by a government for political reasons.
 Tariff: tax levied on imported products.
 Subsidy: government payments to help a
domestic business compete with foreign firms.
 Protectionism: the practice of protecting
domestic business against foreign competition.

9. Definitions
Gross domestic product (GDP) is one the primary indicators used to
gauge the health of a country's economy. It represents the total dollar
value of all goods and services produced over a specific time period
Or
The monetary value of all the finished goods and services produced within
a country's borders in a specific time period, though GDP is usually
calculated on an annual basis. It includes all of private and
public consumption, government outlays, investments and exports less
imports that occur within a defined territory.
Per capita income or income per person is a measure of mean income
within an economic aggregate, such as a country or city. It is
calculated by taking a measure of all sources of income in the
aggregate (such as GDP or Gross National Income) and dividing it by
the total population. It does not attempt to reflect the distribution of
income or wealth
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10. 1. The key drivers to globalization
Global
market
Drivers: Convergence
Similar customer needs,
Global customers, Transferable marketing
Trade policies, Technical Scale economies,
GovernmentStandards, host government, Global Sourcing efficiencies Cost
Influence policies Strategies Countries costs,
Advantages
High product development costs
Interdependence, Competitors global
High exports/imports,
Global
Competition

11. a. Globalization Is Gaining Speed
The world economy is
becoming a single,
interdependent system
Export:
Domestic product sold
abroad
Import:
Foreign product sold
domestically

12. b. Globalization Is Gaining
Speed
 Example: Asian financial markets in the
late 90s directly affects stock markets
worldwide.
 Discussion: what product from other
countries do you useconsume? Why
have you chosen it?

13. c. Categorizing Economies
High Income Countries:
Per capita income greater than $9,386
Middle Income Countries:
Per capita income between $765 and $9,386
Low Income Countries:
Per capita income of less than $765
Discussion: what countries fall into each category?

14. d. Major World Marketplaces
 North America NAFTA
 Europe EU
 Pacific Asia
 Do we have any economic
agreement with other
countries. What are they?

15. The North American Marketplace (NAFTA)
Canada
United States
Mexico
Copyright ©2003 Prentice Hall, Inc. 2 - 15

16. Europe and the Nations of the European Union
• Austria • Luxembourg • Portugal • Sweden
• Belgium • Netherlands • Spain • United Kingdom
• Denmark
• Finland
• France
• Germany
• Greece
• Ireland
• Italy
• Ireland
• Italy
Copyright ©2003 Prentice Hall, Inc. 2 - 16

17. The Nations of ASEAN
• Brunei
• Indonesia
• Malaysia
• Philippines
• Singapore
• Thailand
• Vietnam
Copyright ©2003 Prentice Hall, Inc. 2 - 17

18. Pacific Asia Represents
Enormous Business Potential
Projections for 2010 (in millions)
500
In less than a 450
decade, Asian 400 415 432
language 350
speakers on 300
the web will 250
far exceed 200
English 150
speakers 100
96
50
34
0
English Japanese Chinese Korean
Source: Time Global Business, Nov. 2001
2 - 18

19. 2. Competitive Advantage
 Absolute Advantage:
 when one country can produce a product cheaper andor higher
quality than any other country. Ex. OPEC
 Comparative Advantage:
 when one country can produce certain goods or services more
efficiently and effectively than others. Ex. US software

20. Competitive advantages
 When competitive advantage is materialized?
When a firm earns persistently higher rate of profit over
its rivals.
 Determinants of profit level
1- Value of company products in customers’ eyes.
2- Company production cost.

21. Competitive advantage
 It can be created in certain industrial
field, through the adoption of low-cost-
differentiation strategy. M. Porter

22. National Competitive Advantage
 Factor conditions
 Demand conditions
 Related and supporting
industries
 Strategies, structures,
and rivalries

23. 3. Import/Export Balances
 Balance of Trade
 Trade Deficits
 Trade Surpluses
 Balance of Payments
The total flow of money into or out of an
economy

24. 3a. Exchange Rates
Heavily Impact Global Trade
 When an economy’s currency is strong:
 Domestic companies find it harder to
export products
 Foreign companies find it easier to import
products
 Domestic companies may move production
to cheaper sites in foreign countries
 Implications for balance of trade?

25. Exchange Rates
Heavily Impact Global Trade
 When an economy’s currency is weak:
 Domestic companies find it easier to export
products
 Foreign companies find it harder to import
products
 Foreign companies may invest in
production facilities
 Implications for balance of trade?

26. The U.S. Economy Has a Growing Trade Deficit
U.S. Imports & Exports U.S. Trade Deficit
(in billions) (in billions)
1600 $400,000
1400 350,000
344,716
1200 300,000
1000 250,000
255,971
800
200,000
600
150,000
166,898
400
100,000
35,666
105,932
102,113
200
28,266
95,947
97,039
78,857
50,000
68,949
0
0
1990
1991
1992
1993
1994
1995
1996
1997
1999
2000
1998
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Imports Exports
Copyright ©2003 Prentice Hall, Inc. 2 - 26

27. Is there Can the
Is the foreign Does the
international product be
business firm have or
demand for YES modified to fit YES YES
climate suited can it get the
the firm’s a foreign
to imports? necessary
product? market?
skills and
NO NO NO knowledge
to do
business
NO abroad?
YES
Stay Domestic Go International
Copyright ©2003 Prentice Hall, Inc. 2 - 27

28. 4. Levels of International Involvement
 Importer & Exporter
 International Firms
 Multinational Firms

29. International Organizational
Structures
HIGH
INVOLVEMENT  Foreign Investment
 Private capital investment by firms of one country
into those of another.
 Strategic Alliances
 a relationship between two or more parties to pursue
a set of agreed upon goals or to meet a critical
business need while remaining independent
organizations
 Branch Offices
 Licensing Arrangements
 Independent Agents
LOW

30. 5.Barriers to International Trade
Legal & Political
Social & Cultural Differences
Differences Economic
Differences

31. Take Time to Learn the Culture Thoroughly!
Este es nuestro
nuevo auto: Ha, ha, ha, ha,
el NOVA! ha, ha!!!

32. The Customer’s Language
A Critical Business Success Factor
 In the U.S. alone, 18% of the population
does not speak English at home.
 Only 48% of the world’s Web users are
native English speakers.
 Consumers are four times more likely to
buy a product on the Internet if the
website is in their preferred language.
Source: Time Global Business, Nov. 2001

33. Economic Differences
To operate effectively in another
country, businesses must know when,
and to what extent, the government is
involved in a given industry.

34. Legal & Political Differences
 Quotas, Tariffs, & Subsidies
 Protectionism
 Local Content Laws
 Business Practice Laws
 Day to day operations
 Cartels
 Dumping

35. Relate to Pakistan
35

36. 36

37. 37

38. 38

39. 39

40. Potentials
 Population – 170 million
 Growing consumption
 Cheap labor
 According to approximations, labor in Pakistan is $ 0.36 an
hour; in India, it is $ 0.58 an hour and in China, it is $ 0.70
an hour
 Feasible regulatory conditions
 As compared to india
 Minerals
 Coal, Copper, Gold, Silver, Dolomite, Gypsum, Lime stone,
Natural Gas, Iron core, Rock salt, Bauxite, Marble, Gems,
China Clay, Zinc, Lead and Chromite are some of Pakistan’s
potential 40

41. Macro
Potentials
economic
indicators
Large
More jobs scale job
creation
 Coal reserves, iron and gems
 Agriculture
 Pakistan is the 4th largest producer of milk
Increased
manufactu
Improving
purchasin
ring g power
 Fruit and agriculture processing
Greater
demand of Lower
good and poverty
services
Greater
consumpti
on
41

42. Snapshot of Sessional marks
Introduction CHAPTER NO 3
NAME COMPANY NO. 4-2-12 11-2-12
Aruba 1 1
Lunba 1 1
Ayesha 1 1
Faria 2 1
Safia Tabassum 2 1
Mashal 3 1
Namreen 3 1
Asma 3 1
Umair Iqbal 4 1
Shiraz Qureshi 4 1
Ismail 4 1
Anus 4 1
Mir 5 1
Saad 5 1
Najeeb Aslam 5 1
M. Ejaz 5 1
42