1.
ISYS40141 - Global Business Management
Lecture 1 - The global economy and international
business

2.
The global economy and international
business
• The nature of the global economy – „globalisation‟
• Economic trends / indicators
• Scale & nature of international business
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3.
The nature of the global economy

4.
The nature of the global economy
• Globalisation
– What does it mean?
– Who benefits?
– Environmental and social issues – „sustainability‟ – to be covered
in later lectures
• A single definition is too simplistic
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5.
Globalisation – what does it mean?
Everyone around the world will
have a different view and
different experiences of the
opportunities and threats that
global business presents
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6.
Economic trends and indicators

7.
Economic trends and indicators
• Measures of different aspects of the world economy (value and rate
of change)
– GDP
– Population
– Unemployment
– Gini coefficient
• Global trends
• Regional and national / country trends
– What do the different values mean for business & economies?
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8.
Trends are important but…
The earthquake and tsunami
Tensions in North Africa and in Japan cause supply
the Middle East create problems for Japanese based
changes in oil prices and companies (to Apple and
uncertainty about supply. It Toyota for example), and
also constrains the movement shrinks demand for goods and
of labour in those areas. services sold in Japan.
The currency
crises in Greece,
Portugal and
Ireland mean
that public
sector spending
will be lower.
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9.
1. GDP – Gross Domestic Product
• The market value of all final goods and services produced in a
country in a given period.
• GDP simply stated for a country is of limited value – because
countries with larger populations typically have larger GDP values.
• GDP per person / per capita is the most useful comparison.
• GDP can also be expressed as „nominal‟ or „PPP‟ (purchasing power
parity)
– PPP takes into account relative cost of living and inflation, as well
as exchange rates (typically to US dollar)
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10.
Gross Domestic Product – per capita
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11.
GDP per capita (Rmb)
0
10000
15000
20000
25000
30000
5000
1952
1955
1958
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1961
1964
1967
1970
1973
1976
1979
China
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
GDP per capita (real USD, 2005 prices)
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
0
5,000
Changes in GDP – per capita
1950
1954
1958
1962
1966
1970
1974
1978
USA
1982
1986
1990
1994
11
1998
2002
2006
2010

12.
2. Population
• Why might measuring population be important?
• What about changes in population?
– Increasing or decreasing?
– Average age increasing or decreasing?
– Bulges in age groups or gaps?
– Longevity?
– Location? Urban versus rural?
– Gender mix: Are males and females changing at the same rate?
• Link GDP to Population
– Average GDP per capita
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13.
Population – trends #1
The % increase in total population in India has been greater than
for China every year since 1973 – what does this tell us?
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14.
Population – trends #2
% of the total population which is under age 14, for Brazil, Germany
and Egypt – what does this tell us?
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15.
Population – trends #3
% of the total population which lives in urban locations for USA,
Pakistan and China – What does this tell us?
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16.
3. Unemployment
• What is „unemployment‟?
– “The percent of the labour force that is without jobs” (CIA World
Factbook)
– “People without jobs and they have actively looked for work in the
last four weeks” (International Labour Organisation)
– “All persons above a specified age, who are without work, are
currently available for work, and are seeking work” (OECD)
– “Unemployed people are jobless, have been actively seeking work
in the past four weeks, and are available to start work in the next
two weeks; or if they have found a job, and are waiting to start it
in the next two weeks” (UK National Statistics)
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17.
Unemployment - trends
% of the male labour force which is unemployed. Spain is cyclical,
but why is South Africa counter-cyclical and Japan more steady?
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18.
Unemployment – trends #2
% of unemployed females who are long-term unemployed. Why is
Mexico so low and stable, why are UK and Poland converging?
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19.
4. Gini coefficient
Is a
measure of
the
inequality
of
distribution;
0 being
total
equality,
100 being
total
inequality
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20.
Gini coefficient
• When to make use of it?
– To get a sense of the type of market that country may support
• High Gini index (high inequality) – Market for luxury goods?
What about your brand image?
• Low Gini index (low inequality) – Market for commodity /
affordable goods? What about profitability?
– To see how a particular country is trending – more or less income
equality?
• Weaknesses
– It is relative – you cannot compare country to country in detail
– It is a measure of INCOME, not WEALTH
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21.
The scale and nature of international business

22.
Scale and nature of international business
• What does “international business” mean?
• Different definitions of this type of business
– Multinational
– International
– Global
– Transnational
• The role of Governments in international business
– Tariffs, free trade, investment, enterprise support,
• The role of Organisations in international business
– Trade organisations, EU, ASEAN, NAFTA, World Bank, WTO
Covered in more detail in later lectures
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23.
International business
• Business activities that involve the transfer of
resources, goods, services, knowledge, skills, or information across
national borders.
• There can be international trade – where a company exports goods
or services to buyers in another company
• There can be international investment – where a company invests
resources in business activities outside its home country
• World Trade Organisation (WTO) estimate for worldwide total
merchandise exports 2009 is $12,177,642,000,000
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24.
Case study - Tata
• “Anchored in India”
• 57% of total revenues were from outside India
• Each operating company in the Tata group develops its international
business based on the dynamics of that industry sector.
– Some focus on India domestic market, some in „neighbouring markets‟ and
some globally.
• Exports from India remain the cornerstone
• But;
– Greenfield developments in South Africa, Bangladesh, Iran
– Joint Ventures in South Africa, Morocco, China
– Acquisitions in UK (Tetley, Jaguar Land Rover, Corus Steel), South Korea
(Daewoo), Singapore (NatSteel), USA (Tyco, General Chemical)
• Priority markets are; USA, UK, China, Netherlands, Germany, South
Africa, Brazil, Vietnam, Thailand, Sri Lanka, Gulf Cooperation
Council members
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25.
Summary & seminar topic

26.
Summary
• „Globalisation‟ is not a well defined term – it will mean different
things to different people and different nations in different
circumstances.
• High level trends of GDP per person, population, unemployment and
Gini coefficient (amongst others) can provide an initial sense of the
state of a country or of a group of countries.
• Reviewing that data as a trend over time is most important – but
don‟t forget that incidents can occur that will immediately upset the
trend!
• Global business is very large (over $12tn for 2009) and there are
many stakeholders involved in many different ways.
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27.
Seminar topic – Country data and trends
• Go to http://data.worldbank.org/data-catalog?display=graph
• Download the World Development Indicators / Global Development
Finance spreadsheet - it‟s a large MS Excel file called „WDI and GDF
(Excel) – ZIP‟
• For your own country, or a country of your choice, and for the
United Kingdom, compare the following for the years 1999 to 2009;
– GDP per capita, PPP (constant 2005 international $)
– Total unemployment (% of total labour force)
– Population ages 65 and above (% of total)
• What do the 10 year trends for these data sets look like? Can you
think why the two countries may be different or the same? What
does the data tell you if you were an international business?
• There‟s a short „How to‟ guide on NOW for using the WDI GDF spreadsheet if you get stuck.
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