International

Business,
8th Edition
Griffin & Pustay

COPYRIGHT © 2015 PEARSON EDUCATION, INC. Chapter 2-1

Learning Objectives
q Evaluate the impact of the political and economic
characteristics of the world’s various marketplaces
on the opportunities available to international
businesses
q Appreciate the uses of national income data in
making business decisions
q Discuss North America as a major marketplace
and business center in the world
q Describe Western Europe as a major marketplace
and business center in the world economy
q Discuss Asia as a major marketplace and business
center in the world economy
q Assess the development challenges facing African,
Middle Eastern, and South American countries

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The Marketplaces of North America

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The Marketplaces of North America:

The United States

q World’s largest economy

q21% of the world’s GDP in 2011
q Prime Market
qLower-income countries
qHigher-income countries
q U.S. Dollar
qInvoicing currency
qForeign-currency reserve

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The Marketplaces of North America:

The United States
q Political stability and military strength
qFlight Capital
q Foreign Investments
qImportant recipient of long-term foreign
investment
q International Trade
qIncreasingly more important
qRelatively small component of the
U.S. economy
q MNCs
q27% of the world’s 500 largest corporations
are headquartered in the United States

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The Marketplaces of North America:
The United States

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The Marketplaces of North America:

Canada

q Exports
qVital to the Canadian economy: 31% of its
2011 GDP
qRich natural resources: Canada’s most
important exports
qThe United States: The dominant market
for Canadian goods

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The Marketplaces of North America:

Canada

q Foreign Investments
qProximity to the huge U.S. market
qStable political and legal systems
qExcellent infrastructure and educational
systems
qLingering Risk: long-standing conflict
between French-speaking Canadians and
English-speaking Canadians

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The Marketplaces of North America:
Mexico

q The world’s most populous Spanish-

speaking nation
q Open-market system
qReversed economic nationalism policies
qOpened its markets to foreign goods and
investors
qReduced government’s role in its economy
qSinged a series of free trade agreements

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The Marketplaces of North America:

Central America and the Caribbean

q Divided geographically into two groups:

qCentral America
qThe Island States of the Caribbean
q Several island states have achieved high
income status
qVibrant offshore financing or tourism
industries
q Costa Rica and Panama are classified as
upper-middle income

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The Marketplaces of North America:

Central America and the Caribbean (Cont.)

q Political instability
q Chronic U.S. military intervention
q Inadequate educational systems
q Weak middle class
q Poverty
q Import limitations

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The Marketplaces of Western Europe

Western
Europe

Other Western
Members of
European
the EU
Countries

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The Marketplaces of Western Europe:

The EU

q Comprises 28 countries
q Seeks to promote European peace and
prosperity
q One of the world’s richest markets
q Free-market-oriented members
q Parliamentary democracies
q 17 EU members adopted the euro (€)

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The Marketplaces of Western Europe:
Influential Members of the EU

q Economically, Germany is the EU’s most

important member
q Politically, France exerts strong leadership
within the EU
q The United Kingdom has challenged
France’s positions

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The Marketplaces of Western Europe:

Former Soviet Satellite States in the EU

q Restructured their economies from

centrally planned communist systems to
decentralized market systems
q Implemented political, legal, and
institutional reforms
q Some are achieving high-income status

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The Marketplaces of Western Europe:

Other Western European countries

q High Income Countries:

qIceland, Norway, and Switzerland
qSeveral small, “postage stamp” countries
such as Andorra, Monaco, and
Liechtenstein
qAccount for 2 percent of the world’s GDP
q Middle Income Countries:
qThe Balkan countries of Albania, Bosnia
and Herzegovina, Kosovo, Macedonia,
Montenegro, and Serbia
qPost–Cold War economic progress was
slowed by chaos and conflicts
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The Marketplaces of Eastern Europe
and Central Asia

Soviet Union’s
collapse in
1991

Newly
Independent
States (NIS)

Commonwealth
of Independent
States (CIS)
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The Marketplaces of Eastern Europe

and Central Asia: Russia

q Difficult transformation from communism

to a free-market system
q The world’s second largest oil producer
and exporter
q Strong prospects for continued economic
growth

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The Marketplaces of Eastern Europe &

Central Asia: The 5 Central Asian Republics

q Kazakhstan, Uzbekistan, Tajikistan,

Turkmenistan, and Kyrgyzstan
q Common characteristics
qRussian Influence
qLanguage and Religion
qScarce Arable Land
qLow Per Capita Income
qFossil Fuel Reserves

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The Marketplaces of Asia

q Source of both high-quality and low-quality

products
q Source of both skilled and unskilled labor.
q Major destination for foreign investments
by MNCs
q Major supplier of capital to non-Asian
countries.
q Aggressive and efficient entrepreneurs

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The Marketplaces of Asia:

Japan

q One of the world’s economic superpowers

q Japan’s economic success
qPartnership between MITI and Keiretsu
qSogo shosha
q Japan’s challenges
qSlow economic growth in the 1990s
qTrade practices
qGrowing demographic crisis

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The Marketplaces of Asia

AUSTRALIA NEW ZEALAND

qRich in natural qGreater reliance on

resources market-based policies
qRelatively small
workforce qExports
qMerchandise exports q24% of its 2011 GDP
q20% of its 2011 GDP qExtensive pasture
qNatural resource lands
industries
qLand-intensive
agricultural goods

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The Marketplaces of Asia:
The Four Tigers

q Pacific Asia is one of the world’s most

rapidly industrializing regions
q South Korea, Taiwan, Singapore, and Hong
Kong
qThe “Four Tigers”
qThe newly industrialized countries (NICs)
qThe newly industrialized economies (NIEs)
q“Emerging Markets”

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The Marketplaces of Asia:

The Four Tigers: South Korea

q One of the world’s fastest-growing

economies
q Merchandise exports accounted for 50% of
its 2011 GDP
q Tight cooperation between the government
and large conglomerates
q Chaebol: Samsung, Hyundai, Daewoo
Group, and LG

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The Marketplaces of Asia:

The Four Tigers: Taiwan

q One of the world’s fastest-growing

economies
q Reliance on family-owned private
businesses
q Reliance on export-oriented trade policies
q Exports accounted for 67% of its 2011
GDP

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The Marketplaces of Asia:
The Four Tigers: Singapore

q Thrives on reexporting
qExports accounted for 171% of its 2011
GDP
qExcellent port facilities
q Center for oil refining
q Sophisticated communications and
financial services
q High-technology center

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The Marketplaces of Asia:

The Four Tigers: Hong Kong

q Enjoys a fair degree of autonomy

q Attractive to international businesses
qDeep, sheltered harbor
qEntry point to mainland China
qHighly educated, highly productive labor
qBanking and financial services
q Reexporter
qExports accounted for 183% of its 2011
GDP

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The Marketplaces of Asia:

China

q Mixed system
qCommunist Party-led state
qMarket-oriented economic policies
q Vibrant economy
qGrew 10.8% a year from 2003 to 2011
qFDI in China has exploded since 1992
qUrbanization
qChina’s outbound FDI has skyrocketed
since 2005

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The Marketplaces of Asia:
China

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The Marketplaces of Asia:

India

q One of the poorest countries

q British Influence
q 1991 market-opening reforms
qReduced trade barriers,
qOpened the doors to increased FDI,
qModernized the country’s financial sector
q Challenges
qCorruption is widespread
qInfrastructure is overburdened
qRed Tape

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The Marketplaces of Asia:

Southeast Asian Countries

q Promising records of economic

development
q Thailand, Malaysia, and Indonesia
qLow labor costs
qRecipients of significant FDI
q Vietnam
qBecoming important to MNCs

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The Marketplaces of Africa & the
Middle East: Africa

q European Colonial influence

q Commodities
q Agriculture
q South Africa: The continent’s growth
engine

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The Marketplaces of Africa & the

Middle East: Middle East

q “Cradle of Civilization”
q History of conflict and political unrest
q Home to many oil-rich countries
q Diversification: “Life After Oil”

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The Marketplaces of Africa & the Middle

East: Middle East

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The Marketplaces of South America

q Common political, social, and economic

history
q Huge income disparities
q Widespread poverty
q Political instability
q Destructive import substitution policies
q Reversed import substitution policies in the
late 1980s
q Economic boom during the 1990s
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The Marketplaces of South America

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Review Questions
q Describe the U.S. role in the world economy.
q How do differences in income levels and income
distribution among countries affect international
businesses?
q What role did MITI serve in the Japanese economy?
q What is a keiretsu?
q Who are the Four Tigers? Why are they important to
international businesses?
q What is a chaebol?
q Discuss the role of natural resources and agriculture in
Africa’s economy.
q How did import substitution policies affect the
economies of Brazil and Argentina?

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