GLOBAL ECONOMYGLOBAL ECONOMYAN INTERNATIONAL MARKETER’S MINEFIELDAN INTERNATIONAL MARKETER’S MINEFIELD

BASIC THEORIES OF WORLD BASIC THEORIES OF WORLD

TRADETRADE•ABSOLUTE ADVANTAGE: Vietnam and GermanyABSOLUTE ADVANTAGE: Vietnam and Germany

•COMPARATIVE ADVANTAGE: Few differences in COMPARATIVE ADVANTAGE: Few differences in production activitiesproduction activities

•COMPETITIVE ADVANTAGE: Strong local competition COMPETITIVE ADVANTAGE: Strong local competition benefits a national industry.benefits a national industry.

Core business Core business Core process Core process Core competenceCore competence

BALANCE OF PAYMENTSBALANCE OF PAYMENTS

•Balance of payments (BOP): an accounting record of Balance of payments (BOP): an accounting record of the transactions between the residents of one country the transactions between the residents of one country and the residents of the rest of the world over a given and the residents of the rest of the world over a given period of time.period of time.

•Current account: A principal part of the balance of Current account: A principal part of the balance of payments statement that includes the key sub-payments statement that includes the key sub-accounts ofaccounts of

Goods: physical Goods: physical Services: royalties, transportation services…Services: royalties, transportation services…Unilateral transfers: Donations, personal gifts…Unilateral transfers: Donations, personal gifts…

BALANCE OF PAYMENTSBALANCE OF PAYMENTS•CAPITAL ACCOUNT: Records a country´s CAPITAL ACCOUNT: Records a country´s

international financial assets and liabilities over the international financial assets and liabilities over the BOP periodBOP period

•PORTFOLIO INIVESTMENTS: Investments such as the PORTFOLIO INIVESTMENTS: Investments such as the purchase of stocks and bonds, over which investors purchase of stocks and bonds, over which investors assume no direct management control.assume no direct management control.

•FOREIGN DIRECT INVESTMENT: Investments over FOREIGN DIRECT INVESTMENT: Investments over which investors assume some if not all direct which investors assume some if not all direct management control.management control.

EXCHANGE RATESEXCHANGE RATES•The ration that measures the value of one currency in The ration that measures the value of one currency in

terms of another currencyterms of another currency

•APPRECIATION: An increase in value or price of a APPRECIATION: An increase in value or price of a currencycurrency

•DEPRECIATION: A decrease in value price of a DEPRECIATION: A decrease in value price of a currency.currency.

CAUSES OF EXCHANGE RATE CAUSES OF EXCHANGE RATE

MOVEMENTSMOVEMENTS

•Currency´s value rises: Domestic businesses find it Currency´s value rises: Domestic businesses find it more difficult to compete internationallymore difficult to compete internationally

•Currency´s value falls: foreign goods become more Currency´s value falls: foreign goods become more expensive, domestically produced goods become expensive, domestically produced goods become cheaper to foreign buyers.cheaper to foreign buyers.

MANAGED CURRENCIESMANAGED CURRENCIES

•FREELY FLOATING CURRENCY: A currency whose FREELY FLOATING CURRENCY: A currency whose exchange rate is determined by the market forces of exchange rate is determined by the market forces of supply and demandsupply and demand

•SOFT CURRENCY: A currency that attracts little SOFT CURRENCY: A currency that attracts little global demandglobal demand

•PEGGED CURRENCY: A currency whose price is fixed PEGGED CURRENCY: A currency whose price is fixed by its government to another currency or basket of by its government to another currency or basket of currencies.currencies.

GLOBAL OUTSOURCINGGLOBAL OUTSOURCING

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