****** 3-1 1-1 mcgraw-hill/irwin understanding business, 8e © 2008 the mcgraw-hill companies, inc.,...
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1-1McGraw-Hill/IrwinUnderstanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights
Reserved.
Nickels McHugh McHughNickels McHugh McHugh
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3
CH
AP
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Competing Competing in Global in Global MarketsMarkets
Competing Competing in Global in Global MarketsMarkets
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The Dynamic Global MarketThe Dynamic Global Market
World Population by continent:World Population by continent:
** The U.S. is the largest importing nation in the World!** The U.S. is the largest importing nation in the World!
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Growing World PopulationGrowing World Population
10.8
8.5
6.56.05.3
0
2
4
6
8
10
12
1990 1998 2010 2030 2060
In In BillionsBillions
Source: Source: Population Reference Bureau
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Why Trade WithWhy Trade With Other Nations?Other Nations?
• No nation can produce all No nation can produce all its needsits needs
• Mutually beneficial Mutually beneficial exchangeexchange
• Natural Resources or Natural Resources or Technology- Produce or Technology- Produce or Buy?Buy?
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Theories of AdvantageTheories of Advantage
Output per Output per Unit of Unit of InputInput
ComparativComparativee
U. S.U. S.
ChinaChina
SoftwarSoftwaree
U. S.U. S.
ChinaChina
ClothinClothingg
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Theories of AdvantageTheories of Advantage
AbsolutAbsolutee
Output Output per Unit of per Unit of
InputInput
Diamond Diamond ProductionProduction
South South AfricaAfrica
The Rest of The Rest of the World the World
== VirtualVirtual MonopolyMonopoly
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CountryCountry StrengthsStrengthsUnited StatesUnited States Technology,Technology,
R & D SpendingR & D Spending
FinlandFinlandUniv. Enrollment, Efficient Legal Univ. Enrollment, Efficient Legal
System, Business EthicsSystem, Business Ethics
TaiwanTaiwanCell-phone Ownership, Cell-phone Ownership,
Tech. Innovation,Tech. Innovation,
Local Firms CompetitivenessLocal Firms Competitiveness
SingaporeSingapore Savings Rate, Math/Science Savings Rate, Math/Science Education, Political TrustEducation, Political Trust
SwedenSweden H.S. Enrollment, Press Freedom, H.S. Enrollment, Press Freedom, Phone AccessPhone Access
Global CompetitivenessGlobal Competitiveness
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Global TradeGlobal Trade
• Goods & ServicesGoods & Services• ImportingImporting
• Exporting Exporting
• Measuring TradeMeasuring Trade• Balance of Trade/PaymentsBalance of Trade/Payments
• Trade DeficitTrade Deficit
• DumpingDumping
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U. S. Trade inU. S. Trade in Goods & Services (Billions)Goods & Services (Billions)
0
200
400
600
800
1000
1200
1400
1600
1975 1980 1985 1990 1995 2000 2002 2005
Exports
Imports
Source: St. Louis Business Monthly, Oct. 1999 & World Trade Organization & Wikipedia
Balance of Balance of TradeTrade
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Leading GoodsLeading Goods Exporters/ImportersExporters/Importers
CountryCountry ExportsExportsImportsImportsUnited StatesUnited States 928928 1,476 1,476GermanyGermany 10161016 717 717JapanJapan 539539 402 402FranceFrance 443443 420 420United KingdomUnited Kingdom 374374 439 439World TotalWorld Total 9,0999,099 8,823 8,823
In Billions $In Billions $
Source: Wikipedia, 2005
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Strategies forStrategies for Reaching Global MarketsReaching Global Markets
• LicensingLicensing
• ExportingExporting
• FranchisingFranchising
• Contract Contract ManufacturingManufacturing
• Joint VenturesJoint Ventures
• Joint Ventures & Joint Ventures & Strategic AlliancesStrategic Alliances
• Foreign Direct Foreign Direct InvestmentInvestment
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Country PresenceCountry Presence of Well-Known Companiesof Well-Known Companies
0 50 100 150 200 250
FedEx
UPS
Whirlpool
McDonald's
Starbucks
7-Eleven
Krispy Kreme
Source: World Features SyndicateSource: World Features Syndicate
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Starbucks’ ExpansionStarbucks’ Expansion
71%
29%
International U.S.
World LocationsWorld Locations
Source: Starbucks.com May 2006
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Most Spoken LanguagesMost Spoken Languages
13%13%
8%
7%
22%37%
MandarinChinese
Spanish
English
Hindi
Portuguese
Other
Source: 2005 CIA World Factbook
Most Spoken Languages in the U.S.
Most Spoken Languages in the World
4%3%
11%
81%
1%English
Spanish
Other Indo-European
Asian andPacific Island
Other
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Foreign DirectForeign Direct Investments in the U.S.Investments in the U.S.
0
200000
400000
600000
800000
1000000
1200000
Europe LatinAmerica
Asia Canada
Source: Bureau of Economic Analysis, 2004
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World’s Largest MNCsWorld’s Largest MNCs
Revenue ($Billions)Revenue ($Billions)1)1) Wal-Mart Stores Wal-Mart Stores 2172172)2) Exxon Mobil Exxon Mobil 2132133)3) General Motors General Motors 1751754)4) BP BP 1741745)5) Ford Motor Ford Motor 1621626)6) Daimler Chrysler Daimler Chrysler 1361367)7) Royal Dutch/Shell Royal Dutch/Shell 1351358)8) General Electric General Electric 1251259)9) Toyota Motor Toyota Motor 12112110)10)MitsubishiMitsubishi 112112Source: Business Week; Morgan Stanley Capital International; and S&P Compustat
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What’s On Your PizzaWhat’s On Your Pizza
• Costa Rica - CoconutCosta Rica - Coconut
• France - Bacon, onion and fresh creamFrance - Bacon, onion and fresh cream
• India - Pickled ginger, minced mutton and tofuIndia - Pickled ginger, minced mutton and tofu
• Australia - Shrimp and pineappleAustralia - Shrimp and pineapple
• Pakistan - CurryPakistan - Curry
• Brazil - Green peasBrazil - Green peas
• Japan - Squid and mayo jagaJapan - Squid and mayo jaga
Source: World Features Syndicate
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Forces Affecting TradingForces Affecting Trading in Global Marketsin Global Markets
• Socio-culturalSocio-cultural
• Economic & FinancialEconomic & Financial
• Legal & RegulatoryLegal & Regulatory
• Physical & EnvironmentalPhysical & Environmental
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Cultural Differences Cultural Differences in Global Marketsin Global Markets
• LanguageLanguage
• ReligionReligion
• Values & Values & AttitudesAttitudes
• Personal Personal CommunicationCommunication
• Social Social StructureStructure
• AestheticsAesthetics
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Did You Know?Did You Know?• In Turkey it’s In Turkey it’s ruderude to cross your arms to cross your arms
while you are facing someone.while you are facing someone.
• In the Arab world the left hand is In the Arab world the left hand is considered unclean; considered unclean; don’t eat with it!don’t eat with it!
• In India never pat someone’s head, In India never pat someone’s head, it’s the it’s the seat of the soul.seat of the soul.
• The Chinese associate gifts such as The Chinese associate gifts such as straw sandals, clocks and straw sandals, clocks and handkerchiefs with handkerchiefs with funerals.funerals.
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Economic & Financial ForcesEconomic & Financial Forces
• No Worldwide CurrencyNo Worldwide Currency
• Currency FluctuationsCurrency Fluctuations
• Floating Exchange RatesFloating Exchange Rates
• Bartering/CountertradingBartering/Countertrading
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U.S. Oil ImportsU.S. Oil Imports
Source: Gibson Consulting 2005
18%
15%
10%12%12%
33%
Canada
Mexico
Venezuela
Nigeria
Saudi Arabia
Other
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Nations That Have NotNations That Have Not Converted to the Metric System Converted to the Metric System
United States
Liberia
Myanmar
(Burma)
Source: 2005 Yourunits.com
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Legal & Regulatory Legal & Regulatory ForcesForces
1.1. Inconsistent Laws & Inconsistent Laws & RegulationsRegulations
2.2. Foreign Corrupt Foreign Corrupt Practices Act of 1978Practices Act of 1978
3.3. Local Business Contact Local Business Contact RequiredRequired
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Developing CountriesDeveloping Countries Need InfrastructureNeed Infrastructure
• 1.2 billion people lack clean 1.2 billion people lack clean drinking waterdrinking water
• 3 billion people lack adequate 3 billion people lack adequate sanitationsanitation
• 2 billion people 2 billion people lack electricitylack electricity
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ProtectionismProtectionism
• MercantilismMercantilism
• TariffsTariffs• ProtectiveProtective
• RevenueRevenue
• Import QuotaImport Quota
• EmbargoEmbargo
• Nontariff Barriers-KeiretsuNontariff Barriers-Keiretsu
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Trade AgreementsTrade Agreements
• General Agreement on Tariffs & Trade (1948)General Agreement on Tariffs & Trade (1948)
• Uruguay Round of GATT (1986)Uruguay Round of GATT (1986)
• World Trade Organization (1995)World Trade Organization (1995)
• Common MarketsCommon Markets• European Union (EU)European Union (EU)
• MercosurMercosur
• North American Free Trade Agreement (1994)North American Free Trade Agreement (1994)
• Central America Free Trade Agreement Central America Free Trade Agreement (2005)(2005)
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Future Global TradeFuture Global Trade
• People’s Republic of China- People’s Republic of China- Permanent Normal Trade Permanent Normal Trade Relations/RightsRelations/Rights
• Russia & OthersRussia & Others
• InternetInternet
•Technology- Obstacles/ProblemsTechnology- Obstacles/Problems
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Pro’s & Con’s of Pro’s & Con’s of Offshore OutsourcingOffshore Outsourcing
Pro’sPro’s
• More focus on areas More focus on areas where they can excel and where they can excel and growgrow
• Outsourced work creates Outsourced work creates efficiencies, resulting in efficiencies, resulting in hiring more workershiring more workers
• Fuels global market Fuels global market growthgrowth
Con’sCon’s
• Jobs lost/wages fallJobs lost/wages fall
• Reduces product qualityReduces product quality
• Communication Communication becomes much more becomes much more difficultdifficult