Global Economy Overview Quiz

Introduction to Global Business - Chapter 2, Part 1: The Evolution of International Business

• International trade is a key factor in raising living standards, creating employment, and providing consumers with a wider variety of goods and services.
• The world is more globalized than ever before.
• Two major forms of global business are trade (imports and exports) and foreign direct investment (FDI).

Major Forms of Global Business

• Trade:

  • Involves the import and export of goods.
  • Includes: goods such as physical products, and services like insurance, maintenance, finance, travel, and transportation.

• Foreign Direct Investment (FDI):

  • Investment made by an individual or corporation in one country into businesses in another country.
  • Involves establishing business operations or acquiring foreign business assets.

Important Terms

• Gross Domestic Product (GDP): The total value of goods and services produced within a country.
• Exports: The value of goods and services sold to another country.
• Imports: The value of goods and services bought from another country.
• Foreign Direct Investment (FDI): Investment made in another country.
• Emerging Economies/Emerging Markets (EM): Countries transitioning from pre-industrial to industrial/knowledge economies. Examples include BRICS (Brazil, Russia, India, Indonesia, and China), and other countries.

Global Business Example - United States

• Exports: Roughly $1-2 trillion/year
• Imports: Roughly $3-4 trillion/year
• GDP: ~$28 trillion
• U.S. investment in foreign countries: ~$5.9 trillion
• Foreign investment in the U.S.: ~$4.5 trillion

Global GDP Growth

• Global GDP has doubled in the last 15 years
• Total global GDP is approximately $110 trillion

Top Economies (2024)

• United States ($28.7 trillion)
• China ($18.5 trillion)
• Other top economies are listed as well, including their approximate GDP, and growth rates.

World Trade Volume (2015-2024)

• World trade volume has increased consistently since 2015, with a recent rise and fluctuations.
• Data suggests the average of exports and imports are up ~15% over the last 10 years.

Trade (% of GDP)

• Trade as a percent of GDP varies widely across regions and countries.
• The world average is approximately 56.53%
• North America shows a comparatively lower percentage of trade relative to GDP
• European Union and other European countries, and some Asian countries show greater percentages related to trade to GDP.

Leading Exporters/Importers (2022 - Goods Only)

• China is the leading exporter of goods.
• The United States is the world's largest importer of goods. A list of the top 10 exporters and importers, with details on their yearly value of trade for goods and dates, is provided.

Net Exporters/Importers (2019 and 2022)

• Data lists countries (with values) that are net exporters or importers for good & services.

Important Exports/Imports by Country

• Example data is provided for significant exports and imports (including amounts) for Texas, and some countries.

Importance of Global Trade to Texas

• In Texas, ~3.62 million jobs are supported by trade – 20.1% of all jobs.
• In 2022, ~39,889 companies exported from Texas, with ~93% being small or medium-sized businesses.

Trade Considerations

• Trade patterns reflect a country's economic strengths and relationships.
• Trade can be used to assess alliances between economies.

North Korea's Trade

• Summarized import and export data is listed for select years.
• Imports and exports are shown (approximately with values in billions).
• Key partner countries are shown for 2017 and 2022.

Type of Global Business

• One type of global business is Trade.

What is being Traded?

• A list of the top 10 most traded goods by market value is provided with their approximate value.

EVs Impacting World Trade

• Sales of EVs increased by about 25% globally in 2024 compared to 2023, with China experiencing a 40% increase.
• Other regions saw growth or decrease in sales of EVs, based on the data provided.
• Graph shows the monthly sales for the different regions for the past couple of years.

Why Europe's Car Industry Is in Crisis

• Europe's carmakers faced significant challenges globally.
• Market share has changed for the three largest economies over time.

Germany Economic Struggles

• Germany is facing economic headwinds. Several factors are contributing to Germany's economic struggles, including the factors shown in the document.

Syrian Civil War Impact

• Syria's economy has dramatically shrunk since the 2011 civil war.
• The impact of the war is indicated (showing data from the previous 20 years).
• Export data is shown (from 2010, and through today)

Gaza GDP Drop

• Summary of the drop in Gaza's GDP in the last quarter of 2023 following attacks - 81% decrease.
• The data is given by millions of dollars (2015 constant values).

Do Politics Influence Economics & Trade

• Yes, global business must understand this relationship.

Benefits of International Trade

• Increased choice of goods and services, lower prices, enhanced quality of life, better communication, access to labor, technologies, and R&D.
• According to the World Bank, extreme poverty fell by 35% since 1990 thanks to trade.

Trade Summary

• Two types of trade (goods, services).
• Trade is highly dominated by Asia, Europe, and the U.S.
• Important to understand intermediate goods in trade.
• Important to distinguish between net exporters and net importers.
• Trends: intermediate goods are important, trade is slowing, and geopolitical issues drive trading dynamics significantly.

Foreign Direct Investment (FDI)

What is FDI

• FDI occurs when a company invests directly in facilities in a foreign country to produce new goods or services.

How FDI Works

• FDI methods including acquisitions, and greenfield investments.

FDI Types

• Greenfield investments: create new facilities (manufacturing plant, factory).
• Mergers & Acquisitions (M&A): buying or merging with companies in another country.

Is this FDI? - Examples of FDI

• Many examples of companies making FDI are provided.

FDI Trends

FDI Benefits/Costs (Considerations)

• Benefits: proximity to customers& suppliers, reduced tension, lower costs, diversification, and acquisition of businesses for quick market access.
• Costs: potential loss of jobs and control, political risks, and governmental risks.

FDI Impacts - Negative Impact Question

• U.S. tech giants are creating data centers in Chile. Locals are protesting because they are concerned about the effects of these data centers on the environment.

U.S. FDI Activities - Trends

• U.S. companies are heavily involved in FDI, with strong interest in some sectors.