chap 3 global context of business
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Copyright ©2003 Prentice Hall, Inc.
Memoona Qadeer
Today’s PlanLet’s improve- quiz
The companyLesson part 1BreakLesson part 1Let’s improve- exercise
The companyForesee: Next class
The Global Context of Business
Chapter 2
Exercise Give me stories of different products and
marketing approaches in other countries, and compare them in Palestine?
What evidence have we seen in the last ten years of growing international business partnership?
Trade agreements- global mergers- joint ventures- licensing
“We are in the midst of
a great transition from
narrow nationalism to
international
partnership.”
~ Lyndon Baines Johnson
Key TopicsThe rise of global businessMajor world marketplaces and Palestine
trading partnersInfluences on international businessInternational business managementThe impact of differences among nations
The key drivers to globalization
Drivers:
Global market
Convergence
Global Competition
GovernmentInfluence
Cost Advantages
GlobalStrategies
Similar customer needs,Global customers, Transferable marketing
Trade policies, TechnicalStandards, host government,
policies
Scale economies,Sourcing efficiencies
Countries costs,High product development costs
Interdependence, Competitors globalHigh exports/imports,
Globalization Is Gaining Speed
The world economy is becoming a single, interdependent system
Export: Domestic product sold abroad
Import:Foreign product sold domestically
Globalization Is Gaining SpeedExample: Asian financial markets in the late
90s directly affects stock markets worldwide.
Discussion: what product from other countries do you use\consume? Why have you chosen it? Why not Palestinian product?
Categorizing Economies
High Income Countries: Per capita income greater than $9,386
Middle Income Countries: Per capita income between $765 and $9,386
Low Income Countries: Per capita income of less than $765
Discussion: what countries fall into each category?
Major World Marketplaces
North America NAFTAEurope EUPacific AsiaDo we have any
economic agreement with other countries. What are they?
The North American Marketplace (NAFTA)
Canada
United States
Mexico
Copyright ©2003 Prentice Hall, Inc. 2 - 13
Europe and the Nations of the European Union
Copyright ©2003 Prentice Hall, Inc. 2 - 14
• Austria
• Belgium
• Denmark
• Finland
• France
• Germany
• Greece
• Ireland
• Italy
• Ireland
• Italy
• Luxembourg
• Netherlands
• Portugal
• Spain
• Sweden
• United Kingdom
The Nations of ASEAN
• Brunei
• Indonesia
• Malaysia
• Philippines
• Singapore
• Thailand
• Vietnam
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Pacific Asia RepresentsEnormous Business Potential
In less than a decade, Asian language speakers on the web will far exceed English speakers
Source: Time Global Business, Nov. 2001
English Japanese Chinese Korean0
50
100150200
250300350
400
450500
415
96
432
34
Projections for 2010 (in millions)
2 - 16
Competitive Advantage Absolute Advantage: when one country can produce a product cheaper and\or higher
quality than any other country. Ex. OPEC Comparative Advantage: when one country can produce certain goods or services more
efficiently and effectively than others. Ex. US software
Competitive advantages When competitive advantage is
materialized?When a firm earns persistently higher rate of
profit over its rivals. Determinants of profit level1- Value of company products in customers’
eyes. 2- Company production cost.
Competitive advantage It can be created in certain industrial field,
through the adoption of low-cost-differentiation strategy. . M. Porter
National Competitive Advantage
Factor conditionsDemand conditionsRelated and
supporting industriesStrategies,
structures, and rivalries
Qui. Evaluate Palestine?
Import/Export Balances
Balance of TradeTrade DeficitsTrade Surpluses
Balance of Payments
The total flow of money into or out of an economy
Exchange RatesHeavily Impact Global Trade
When an economy’s currency is strong:Domestic companies find it harder to export
productsForeign companies find it easier to import
productsDomestic companies may move production
to cheaper sites in foreign countriesImplications for balance of trade?
Exchange RatesHeavily Impact Global Trade
When an economy’s currency is weak:Domestic companies find it easier to export
productsForeign companies find it harder to import
productsForeign companies may invest in production
facilitiesImplications for balance of trade?
The U.S. Economy Has a Growing Trade Deficit
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0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
$400,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
U.S. Trade Deficit(in billions)
78,8
57 28,2
66
35,6
66
68,9
49 97,0
39
95,9
47
102,
113
105,
932
166,
898
255,
971
344,
716
0
200
400
600
800
1000
1200
1400
1600
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Imports Exports
U.S. Imports & Exports(in billions)
Does It Make Sense to Go International?Does It Make Sense to Go International?
Copyright ©2003 Prentice Hall, Inc. 2 - 25
YES
Is there international demand for
the firm’s product?
NO
Stay Domestic
Can the product be
modified to fit a foreign market?
NO
YES
Is the foreign business
climate suited to imports?
NO
Does the firm have or can it get thenecessary skills and
knowledgeto do
business abroad?
YES
NO
YES
Go International
Levels of International Involvement
Importer & Exporter International FirmsMultinational Firms
International Organizational Structures
Foreign Investment
Strategic Alliances
Branch Offices
Licensing Arrangements
Independent Agents
INV
OLV
EM
EN
THIGH
LOW
Barriers to International Trade
Social & Cultural Differences Economic
Differences
Legal & Political Differences
Take Time to Learn the Culture Thoroughly!
Este es nuestro nuevo auto:
el NOVA!
Ha, ha, ha, ha, ha, ha!!!
The Customer’s LanguageA Critical Business Success Factor
In the U.S. alone, 18% of the population does not speak English at home.
Only 48% of the world’s Web users are native English speakers.
Consumers are four times more likely to buy a product on the Internet if the website is in their preferred language.
Source: Time Global Business, Nov. 2001
Economic Differences
To operate effectively in another country, businesses must know when, and to what extent, the government is involved in a given industry.
Legal & Political Differences
Quotas, Tariffs, & SubsidiesProtectionismLocal Content LawsBusiness Practice Laws
Day to day operationsCartelsDumping
Definitions Quota: restriction on the number of certain
type of product that can be imported into a country.
Embargo: complete ban on imports and exports, imposed by a government for political reasons.
Tariff: tax levied on imported products.Subsidy: government payments to help a
domestic business compete with foreign firms.Protectionism: the practice of protecting
domestic business against foreign competition.
Chapter Review
Discuss the rise of international business, describe the major world marketplaces.
Explain how competitive advantage, import-export balances, exchange rates, and foreign competition shape international business strategies.
Chapter ReviewDiscuss what factors influence whether a
company should engage in international business.
Identify different levels of international involvement and international organizational structure.
Describe key barriers to international trade.
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