1. GLOBAL ECONOMYGLOBAL ECONOMY
AN INTERNATIONAL MARKETER’SAN INTERNATIONAL MARKETER’S
MINEFIELDMINEFIELD

2. BASIC THEORIES OF WORLD TRADEBASIC THEORIES OF WORLD TRADE
•ABSOLUTE ADVANTAGE: Vietnam and GermanyABSOLUTE ADVANTAGE: Vietnam and Germany
•COMPARATIVE ADVANTAGE: Few differences inCOMPARATIVE ADVANTAGE: Few differences in
production activitiesproduction activities
•COMPETITIVE ADVANTAGE: Strong local competitionCOMPETITIVE ADVANTAGE: Strong local competition
benefits a national industry.benefits a national industry.
Core businessCore business
Core processCore process
Core competenceCore competence

3. BALANCE OF PAYMENTSBALANCE OF PAYMENTS
•Balance of payments (BOP): an accountingBalance of payments (BOP): an accounting
record of the transactions between the residentsrecord of the transactions between the residents
of one country and the residents of the rest of theof one country and the residents of the rest of the
world over a given period of time.world over a given period of time.
•Current account: A principal part of the balanceCurrent account: A principal part of the balance
of payments statement that includes the key sub-of payments statement that includes the key sub-
accounts ofaccounts of
Goods: physicalGoods: physical
Services: royalties, transportation services…Services: royalties, transportation services…
Unilateral transfers: Donations, personal gifts…Unilateral transfers: Donations, personal gifts…

4. BALANCE OF PAYMENTSBALANCE OF PAYMENTS
• CAPITAL ACCOUNT: Records a country´ sCAPITAL ACCOUNT: Records a country´ s
international financial assets and liabilities overinternational financial assets and liabilities over
the BOP periodthe BOP period
• PORTFOLIO INIVESTMENTS: Investments suchPORTFOLIO INIVESTMENTS: Investments such
as the purchase of stocks and bonds, over whichas the purchase of stocks and bonds, over which
investors assume no direct management control.investors assume no direct management control.
• FOREIGN DIRECT INVESTMENT: InvestmentsFOREIGN DIRECT INVESTMENT: Investments
over which investors assume some if not allover which investors assume some if not all
direct management control.direct management control.

5. EXCHANGE RATESEXCHANGE RATES
• The ration that measures the value of oneThe ration that measures the value of one
currency in terms of another currencycurrency in terms of another currency
• APPRECIATION: An increase in value or price ofAPPRECIATION: An increase in value or price of
a currencya currency
• DEPRECIATION: A decrease in value price of aDEPRECIATION: A decrease in value price of a
currency.currency.

6. CAUSES OF EXCHANGE RATECAUSES OF EXCHANGE RATE
MOVEMENTSMOVEMENTS
•Currency´ s value rises: Domestic businessesCurrency´ s value rises: Domestic businesses
find it more difficult to compete internationallyfind it more difficult to compete internationally
•Currency´ s value falls: foreign goods becomeCurrency´ s value falls: foreign goods become
more expensive, domestically produced goodsmore expensive, domestically produced goods
become cheaper to foreign buyers.become cheaper to foreign buyers.

7. MANAGED CURRENCIESMANAGED CURRENCIES
• FREELY FLOATING CURRENCY: A currencyFREELY FLOATING CURRENCY: A currency
whose exchange rate is determined by thewhose exchange rate is determined by the
market forces of supply and demandmarket forces of supply and demand
• SOFT CURRENCY: A currency that attracts littleSOFT CURRENCY: A currency that attracts little
global demandglobal demand
• PEGGED CURRENCY: A currency whose price isPEGGED CURRENCY: A currency whose price is
fixed by its government to another currency orfixed by its government to another currency or
basket of currencies.basket of currencies.

8. GLOBAL OUTSOURCINGGLOBAL OUTSOURCING
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