CHAPTER 11

GLOBAL MARKETPLACES AND BUSINESS CENTERS

MGT 361: CHAPTER 11_FPP UITM

 LEARNING OBJECTIVES:

1. Discuss North America as a major marketplace and

business center in the world economy.
2. Describe Western Europe as a major marketplace and
business center in the world economy.
3. Analyze the role of Eastern Europe and Central Asia in the
world economy.
4. Discuss Asia as a major marketplace and business center
in the world economy.
5. Assess the development challenges facing African and
Middle Eastern countries.
6. Evaluate the economic prospects of the South American
countries.

MGT 361: CHAPTER 11_FPP UITM

Figure 11.1 The World Economy 1970 and 2017
The Marketplaces of North America

2017 GDP
Population (billions of GDP per capita
Country (millions) U.S. dollars) (in U.S. dollars)
Canada 37 $1,653 $45,032

United States 326 $19,391 $59,532

Mexico 129 $1,150 $8,903

Central America 48 $258 $5,357

Caribbean 45 $466 $10,325

The Marketplaces of North America: The
United States (1 of 2)
◼ World’s largest economy
◼ 24% of the world’s GD P in 2017
◼ One-tenth of world exports of goods and services
◼ About one-eighth of world imports of goods and
services
◼ Prime market for
◼ Lower-income countries
◼ Higher-income countries
◼ U.S. Dollar
◼ Invoicing currency
◼ Foreign-currency reserve
The Marketplaces of North America: The United States
(2 of 2)

Political stability and Foreign Investments International Trade MNCs

military strength

Flight Capital Important recipient of Increasingly more 27% of the world’s 500
long-term foreign important largest corporations are
investment Relatively small headquartered in the
component of the U.S. United States
economy
Figure 11.2 Headquarters of the World’s 500 Largest
Corporations in 2017 by Country

Source: Based on data from [Link], accessed July 30, 2018.

The Marketplaces of North America: Canada (1 of
2)

◼ Exports
◼ Vital to the Canadian economy: 31% of its 2017 GDP of $1.7 trillion
◼ Rich natural resources: Canada’s most important exports
◼ The United States: The dominant market for Canadian goods
◼ US-Canada two-way trade is one of the largest bilateral trading relationships
in the world
The Marketplaces of North America: Canada (2 of
2)

◼ Foreign Investments
◼ Proximity to the huge U.S. market
◼ Stable political and legal systems
◼ Excellent infrastructure and educational systems
◼ Lingering Risk: long-standing conflict between French-speaking
Canadians and English-speaking Canadians
The Marketplaces of North America: Mexico

The world’s most populous Spanish-speaking nation

Open-market system

• Reversed economic nationalism policies

• Opened its markets to foreign goods and investors
• Reduced government’s role in its economy
• Signed a series of free trade agreements
The Marketplaces of North
America: Central America and
the Caribbean (1 of 2)

◼ Divided geographically into two groups:

◼ Central America
◼ The Island States of the Caribbean
◼ Several island states have achieved high-income status
◼ Vibrant offshore financing or tourism industries
◼ Costa Rica and Panama are classified as upper-middle
income
The Marketplaces of North America: Central America and
the Caribbean (2 of 2)
Political instability
Chronic U.S. military intervention
Inadequate educational systems
Weak middle class
Poverty
Import limitations
The Marketplaces of Western
Europe

◼ Western Europe
◼ Members of the EU
◼ Other Western European Countries
Map 11.2 Western Europe
The Marketplaces of Western Europe: The EU
Comprises 28 countries
• 27 after Brexit

Seeks to promote European peace and prosperity

One of the world’s richest markets

Free-market-oriented members

Parliamentary democracies

19 E U members adopted the euro (€)

The Marketplaces of Western
Europe: Influential Members of
the EU
◼ Economically, Germany is the E U’s most
important member
◼ Germany’s strict anti-inflation policies
◼ Politically, France exerts strong leadership within
the EU
◼ French protectionist tendencies
◼ The United Kingdom has challenged France’s
positions
◼ British exiting the EU (Brexit)
The Marketplaces of Western Europe: Newest EU
Members

Restructured their economies

Were either part of the Soviet
from centrally planned
Union or allied with the Soviet
communist systems to
Union
decentralized market systems

Implemented political, legal, Some are achieving

and institutional reforms high-income status
The Marketplaces of Western Europe: Other
Western European Countries
High Income Countries:

• Iceland, Norway, and Switzerland

• Several small, “postage stamp” countries such as Andorra,
Monaco, and Liechtenstein
• Account for 2 percent of the world’s G D P

Middle Income Countries:

• The Balkan countries of Albania, Bosnia and Herzegovina,

Kosovo, Macedonia, Montenegro, and Serbia
• Post–Cold War economic progress was slowed by chaos and
conflicts
The Marketplaces of Eastern Europe and Central Asia
◼ Soviet Union’s collapse in 1991
◼ Newly Independent States (NIS)
◼ Commonwealth of Independent States (CIS)
The Marketplaces of Eastern Europe and Central Asia:
Russia

◼ Difficult transformation from communism to a free-market system

◼ The world’s second-largest oil producer and exporter
◼ Collapse of Oil price in the 2010s: Slow GDP growth
The Marketplaces of Eastern Europe & Central Asia: The 5
Central Asian Republics

Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan, and

Kyrgyzstan

Common characteristics
Language:
Religion: Scarce Arable Low Per Capita Fossil Fuel
Russian Influence Turkic/Persian
Dominantly Islam Land Income Reserves
roots
The Marketplaces of Asia (1 of 2)

Source of both high-quality and low-quality products

Source of both skilled and unskilled labor
Major destination for foreign investments by M N C s
Major supplier of capital to non-Asian countries
Aggressive and efficient entrepreneurs
The Marketplaces of Asia: Japan

One of the world’s economic Japan’s economic success Japan’s challenges

superpowers
Partnership between M I T I and Slow economic growth in the
Keiretsu 1990s
Sogo shosha Adjustments to changes in the the
world economy
Trade practices
Growing demographic crisis
The Marketplaces of Asia (2 of 2)
Australia New Zealand

◼ Rich in natural resources ◼ Greater reliance on market-based

policies
◼ Relatively small workforce
◼ Exports
◼ Merchandise exports ◼ 18% of its 2017 GDP
◼ 17% of its 2017 GDP ◼ Extensive pasture lands

◼ Natural resource industries

◼ Land-intensive agricultural goods
The Marketplaces of Asia: The Four Tigers

Pacific Asia is one of the world’s most South Korea, Taiwan, Singapore, and
rapidly industrializing regions Hong Kong

The “Four Tigers”

The newly industrialized countries (NICs)
The newly industrialized economies (NIEs)
“Emerging Markets”
The Marketplaces of Asia: The
Four Tigers: South Korea
◼ One of the world’s fastest-growing economies
◼ Merchandise exports accounted for 37% of its
2017 GDP
◼ Tight cooperation between the government and
large conglomerates
◼ Chaebol: Samsung, Hyundai, Daewoo Group, and
LG
THE MARKETPLACES OF ASIA: THE FOUR TIGERS:
TAIWAN

◼ One of the world’s fastest-growing economies

◼ Reliance on family-owned private businesses
◼ Reliance on export-oriented trade policies
◼ Exports accounted for 63% of its 2017 GD P
The Marketplaces of Asia: The Four Tigers: Singapore

◼ Thrives on reexporting
◼ Exports accounted for 166% of its 2017 GDP
◼ Excellent port facilities
◼ Center for oil refining
◼ Sophisticated communications and financial services
◼ High-technology center
The Marketplaces of Asia: The Four Tigers: Hong
Kong

Enjoys a fair degree of autonomy Attractive to international Reexporter

businesses
Deep, sheltered harbor Exports accounted for 161% of its
Entry point to mainland China 2017 G D P
Highly educated, highly productive
labor
Banking and financial services
The Marketplaces of Asia: China (1
of 2)

◼ Mixed system
◼ Communist Party-led state
◼ Market-oriented economic policies
◼ Vibrant economy
◼ Grew 10.9% a year from 2000 to 2009
◼ FDI in China has exploded since 1992
◼ Urbanization
◼ China’s outbound FDI has skyrocketed since
2005
The Marketplaces of Asia: China (2 of 2)
Figure 11.3 China’s Inward and Outward Foreign Direct Investment Flows,
Annual, 1980–2017

Source: Based on United Nations Conference for Trade and Development Database.
The Marketplaces of Asia: India

◼ One of the poorest countries

◼ British Influence
◼ 1991 market-opening reforms
◼ Reduced trade barriers
◼ Opened the doors to increased F D I
◼ Modernized the country’s financial sector
◼ Challenges
◼ Corruption is widespread
◼ Infrastructure is overburdened
◼ Red Tape
The Marketplaces of Asia:
Southeast Asian Countries

◼ Promising records of economic development

◼ Thailand, Malaysia, and Indonesia
◼ Low labor costs
◼ Recipients of significant F D I
◼ Vietnam
◼ Becoming important to MNCs
◼ Inexpensive, young, and trainable workforce
The Marketplaces of Africa & the Middle East: Africa

◼ European Colonial influence

◼ Commodities
◼ Agriculture
◼ South Africa: The continent’s growth engine
The Marketplaces of Africa & the
Middle East: Middle East (1 of 2)

◼ “Cradle of Civilization”
◼ History of conflict and political unrest
◼ Home to many oil-rich countries
◼ Diversification: “Life After Oil”
The Marketplaces of Africa & the Middle East:
Middle East (2 of 2)
Map 11.7 The Middle East
The Marketplaces of South America
(1 of 2)

◼ Common political, social, and economic history

◼ Huge income disparities
◼ Widespread poverty
◼ Political instability
◼ Destructive import substitution policies
◼ Reversed import substitution policies in the late 1980s
◼ Economic boom during the 1990s
The Marketplaces of South America (2 of 2)

Map 11.8 South America

Review Questions
◼ Describe how the Mexican economy has developed in this millennium.

◼ How do differences in income levels and income distribution among countries affect international
businesses?

◼ What role did MITI serve in the Japanese economy?

◼ What is a keiretsu?

◼ What role has re-exporting played in the economies of Singapore and Hong Kong?

◼ Explain the terms glasnost and perestroika.

◼ Discuss the role of the canals of commerce in international trade.

◼ What are the consequences of South American countries’ dependence on commodities and raw
materials?
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END OF SLIDE

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MGT 361: CHAPTER 11_FPP UITM