International Business Environment

Globalization involves the creation of linkages or interconnections between nations. It is usually understood as a process in which barriers (physical, political, economic, cultural) separating different regions of the world are reduced or removed, thereby stimulating excchanges in goods, services, money, and people. Removal of these barriers is called liberalization. Advantages: new markets, a wider choice of suppliers for good and services, lower prices, cheaper locations for investment, less costly labour. Disavantages: events in foreign countries, socio-cultural issues(Corruption), technological issues, political issues, Government regulation(Tariffs and Subsidies, Controls on Capital, Public Procurement, Border and Immigration Controls, Technological), legal enviornment issues, financial framework issues, ecological issues.

The Global Economy

Measuring the Size of the Global Economy:

GDP = Gross Domestic Product (Market value of total output of goods and services produced within a nation, by residents and non residents, over a period of time/year/average level of income) if not recorded “shadow economy”

Indicate a countries international purchasing power but doesnt adequately reflect living standards. GDP is unevenly distributed.

Most things espacially the basics of food, transport, and housing tend to be cheaper in low income countries than in high income countries.

Better indicator of living standard can be achieved by calculating GDP by what is known as the purchasing power partity (PPP) method.(What you can buy with a unit of a countrys currency)

World Bank using Gross National Income = GDP + net income flows from abraod

Human Development Index (HDI): life expectancy + education (adult literacy and average years of schooling) + standard of living (PPP per capita income)

Economic Growth is a key objective for all national governments as it is fundamental to raising standards of living. Measured by the annaual percentage change in a nations...