2. Chapter Three
LEARNING GOALS
1. Discuss the importance of the global market and
the roles of comparative advantage and absolute
advantage in global trade.
2. Explain the importance of importing and exporting,
and understand key terms used in global business.
3. Illustrate the strategies used in reaching global
markets and explain the role of multinational
corporations.
3-2
3. Chapter Three
LEARNING GOALS
4. Evaluate the forces that affect trading in global
markets.
5. Debate the advantages and disadvantages of trade
protectionism.
6. Discuss the changing landscape of the global
market and the issue of offshore outsourcing.
3-3
4. Profile
YANG LAN
Co-Founder and Chair of Sun Media Group
• China has the world’s largest
media market, but much
remains controlled by the state.
• Lan attracts 200 million daily
viewers and has interviewed
some of the world’s most
famous people.
• Lan used her media clout to
create a media empire, despite
struggles.
3-4
5. Chapter Three
NAME that COMPANY
We franchise 37,000 of our KFC, Taco Bell and
Pizza Hut restaurants in 109 countries around
the world. We found in Japan that a favorite
pizza enjoyed by our patrons was topped with
squid and sweet mayonnaise. In China it’s a
must to serve a “dragon twister” with our
chicken.
Name that company!
3-5
6. The Dynamic
Global Market BUSINESS in the
LG1
GLOBAL MARKET
• Over 90% of companies
doing business globally
believe it is important
for employees to have
international
experience.
• U.S. organizations (like
UPS, MLB, the NFL and
the NBA) are also
expanding abroad.
3-6
8. The Dynamic
Global Market
IMPORTING and EXPORTING
LG1
• Importing -- Buying products
from another country.
• Exporting -- Selling
products to another country.
• The U.S. is the largest
importing and the third
largest exporting nation in the
world.
3-8
9. The Dynamic
Global Market PLEASURE DOING BUSINESS
Best Countries for Business
LG1
Source: Forbes, September 27, 2010.
3-9
10. The Dynamic
Global Market CAN YOU SPARE a DIME?
Home Countries for Some of the World’s Billionaires
LG1
• U.S. – 412 billionaires
• China – 115 billionaires
• Russia – 101 billionaires
• India – 55 billionaires
• Germany – 52
billionaires
• U.K. – 32 billionaires
• Canada – 22 billionaires
Source: Forbes, www.forbes.com, June 2011.
3-10
11. Why Trade With
Other Nations?
TRADING with OTHER NATIONS
LG1
• Countries with abundant natural resources (like
Venezuela or Russia) need technological
resources from other countries (like Japan).
• Global trade allows countries to produce what
they make best and buy what they need from
others.
• Free Trade -- The movement of goods and
services among nations without political or economic
barriers.
3-11
12. Why Trade With
Other Nations? HOW EXPORTS
LG1 AFFECT the GDP
Source: Bloomberg Businessweek, November 22, 2011.
3-12
13. Why Trade With
Other Nations? HOW EXPORTS
LG1 AFFECT the GDP
Source: Bloomberg Businessweek, November 22, 2011.
3-13
14. Why Trade With
Other Nations? HOW EXPORTS
LG1 AFFECT the GDP
Source: Bloomberg Businessweek, November 22, 2011.
3-14
15. Why Trade With
Other Nations? HOW FREE TRADE
LG1 BENEFITS the WORLD
Global trade has led the world in a new direction:
• Literacy rates worldwide have increased from
56% in 1950 to 89% in 2011.
• Life expectancy in less developed areas rose
from 40.9 years in 1950 to 69 years in 2011.
Source: The World Bank, June 2011.
3-15
16. The Theories of
Comparative and
COMPARATIVE and ABSOLUTE
Absolute Advantage
LG1 ADVANTAGE
• Comparative Advantage -- A country should
sell the products it produces most efficiently and buy
from other countries the products it cannot produce as
efficiently.
• Absolute Advantage -- A country has a
monopoly on producing a specific product or is able to
produce it more efficiently than all other countries.
3-16
17. Getting Involved
in Global Trade GOING GLOBAL with a
LG2
SMALL BUSINESS
• Small businesses may be the key in global job
growth.
• Only 1% of U.S. small businesses export, yet
they account for 30% of total U.S. exports.
• President Obama
wants small
businesses to help
double exports by
2015.
3-17
18. Getting Involved
in Global Trade WHOM DOES the U.S. OWE?
Countries that Own the Most U.S. Debt
LG2
Source: HuffPost Business, March 2, 2011.
3-18
19. A SMALL BUSINESS
with a BIG VISION
(Spotlight on Small Business)
• Jordan Kassalow visited Mexico and saw how the
lack of eyeglasses affected the local workers.
• He founded VisionSpring, part charity and part
franchisor, with a partner.
• VisionSpring employs mostly women needing
additional income. They buy glasses from
VisionSpring and then sell them to locals.
• This gives eyesight to those who need it and
stimulates the local economy.
3-19
20. Importing Goods
and Services GETTING INVOLVED in
LG2 IMPORTING
• Students attending
schools abroad tend to
notice products that
they’re used to are
unavailable in their new
country.
• By working with producers
in their native country,
some become importers
while still in school.
3-20
21. Exporting Goods
and Services GETTING INVOLVED in
LG2 EXPORTING
• Exporting provides a
great boost to the U.S.
economy.
• It’s estimated every $1
billion in U.S. exports
generate over 7,000
U.S. jobs.
3-21
22. Measuring
Global Trade
HOW to MEASURE GLOBAL TRADE
LG2
• Balance of Trade -- The total value of a
nation’s exports compared to its imports measured
over a particular period.
• Trade Surplus (Favorable) -- When the
value of a country’s exports is more than that of its
imports.
• Trade Deficit (Unfavorable) -- When the
value of a country’s exports is less than that of its
imports. 3-22
23. Measuring
Global Trade BALANCE of PAYMENTS
LG2
• Balance of Payments -- The difference
between money coming into a country (from
exports) and money leaving the country (from
imports) plus other money flows.
• The goal is to have more money flowing into a
country than out – a favorable balance.
• An unfavorable balance is when more money
flows out of a country.
3-23
24. Measuring
Global Trade
UNFAIR TRADE PRACTICES
LG2
• Dumping -- Selling products in a foreign country
at lower prices than those charged in the producing
country.
• Dumping is prohibited.
• China, Brazil and Russia have been penalized
for dumping steel in the U.S.
3-24
25. Progress
Assessment
PROGRESS ASSESSMENT
• What are two of the main arguments favoring
the expansion of U.S. businesses into global
markets?
• What’s comparative advantage, and what are
some examples of this concept at work in global
markets?
• How are a nation’s balance of trade and balance
of payments determined?
• What’s meant by dumping in global trade?
3-25
26. Strategies for
Reaching Global
Markets KEY STRATEGIES for REACHING
LG3 GLOBAL MARKETS
International
Contract Foreign
Licensing Exporting Franchising joint ventures
Manufacturing direct
and strategic
investment
alliances
Least Amount of commitment, control, risk and profit potential Most
3-26
28. Exporting
EXPORT ASSISTANCE CENTERS
LG3 and EXPORT TRADING CENTERS
• EACs provide hands-on exporting assistance
and trade-finance support for small and
medium-sized businesses that wish to directly
export goods and services.
• ETCs help companies engage in indirect
exporting by:
- Matching buyers and sellers.
- Dealing with foreign customs offices,
documentation, and conversions.
3-28
29. Franchising
FRANCHISING
LG3
• Franchising -- A contractual agreement whereby
someone with a good idea for a business sells
others the rights to use the name and sell a
product/service in a given area.
• Franchisors need to be careful to adapt their
product to the countries they serve.
• Yum! Brands, home of KFC, Taco Bell and
Pizza Hut, learned that food preferences differ
all around the world.
3-29
30. Franchising
TIME to MAKE the DONUTS…
Dunkin’ Donuts Flavors in Taiwan
LG3
• Sweet Potato
• Honeydew Melon
• Green Apple
• Kiwi Fruit
• Mango
• Pineapple
•
Photo Courtesy of: Dennis Yang
Strawberry
• Corn Crumb Soft Rice Cake
Source: World Features Syndicate.
3-30
31. GOLDEN ARCHES GLOWING
ACROSS the GLOBE
(Reaching Beyond Our Borders)
• McDonald’s has more than 32,000 restaurants in
over 117 countries.
• Maintains varying menus around the world due to
the different preferences of its customers.
• Attracts top-level college
graduates to be trained
for management spots.
• Only 8 of every 1,000
applicants actually
makes it into the
program!
3-31
32. Franchising
THAT’S at MCDONALD’S?
LG3
• M alaysia: Bubur Ayam McD – Chicken strips in
porridge with onions, ginger, and shallots.
• Egypt: Mcarabia – Grilled chicken with tehina sauces,
lettuce, tomato and onion on Arabic bread.
• Japan: Teritama – Teriyaki burger topped with an egg.
• Germany: Want a beer with your burger? You can
order one in the German stores.
• Israel: Operates using Kosher kitchens.
Source: McDonalds, www.mcdonalds.com, June 2011.
3-32
35. International Joint
Ventures and
Strategic Alliances STRATEGIC ALLIANCES
LG3
• Strategic Alliance -- A long-term partnership
between two or more companies established to help
each company build competitive market advantages.
3-35
37. Foreign Direct
Investment MULTINATIONAL CORPORATIONS
LG3
• Multinational Corporation -- A company that
manufactures and markets products in many
different countries and has multinational stock
ownership and management.
• Not all large global businesses are multinational.
• Only firms that have manufacturing capacity or
some other physical presence in different
nations can truly be multinational.
3-37
39. Progress
Assessment PROGRESS ASSESSMENT
• What are the advantages of using licensing as a
method of entry in global markets? What are the
disadvantages?
• What services are usually provided by an export-
trading company?
• What’s the key difference between a joint venture
and a strategic alliance?
• What makes a company a multinational
corporation?
3-39
42. Socio-cultural
Forces LOST in TRANSLATION
Advertisements Gone Wrong
LG4
• Braniff Airlines’ slogan "Fly in leather”
translated in Spanish as "Fly naked.”
• Siri, Apple’s new digital assistant on iPhone 4S,
is a common slang term for “butt” in Japanese.
• In Italy, Schweppes Tonic Water was mistaken
as Schweppes Toilet Water.
• Nokia’s line of Lumia phones is Spanish for
“prostitute.”
3-42
43. Socio-cultural
Forces READY to TRAVEL ABROAD?
Know Your Cultural Differences
LG4
• In Turkey, it’s rude to cross your arms while facing
someone.
• In many Middle Eastern countries, you shouldn’t
eat or shake hands with the left hand because it is
considered unclean.
• In India, you should never pat anyone’s head. It’s
where one’s soul is kept.
• In Brazil, your meeting may not start on time
because punctuality isn’t important to the culture.
3-43
44. Socio-cultural
Forces DO as the GERMANS…
How to Not Embarrass Yourself in Germany
LG4
• Always use titles like Doctor, Frau, or Herr.
• Always provide food and drinks for your birthday.
• Don’t remove your jacket until your host does.
• Wear conservative business attire, anything else is
considered sloppy.
• Never jaywalk.
• Always keep your hands on the table when eating.
3-44
49. Progress
Assessment
PROGRESS ASSESSMENT
• What are four major hurdles to successful global
trade?
• What does ethnocentricity mean and how can it
affect global success?
• How would a low value of the dollar affect U.S.
exports?
• What does the Foreign Corrupt Practices Act
prohibit?
3-49
59. Progress
Assessment
PROGRESS ASSESSMENT
• What are the advantages and disadvantages of
trade protectionism and of tariffs?
• What’s the primary purpose of the WTO?
• What’s the key objective of a common market like
the EU?
• Which three nations comprise NAFTA?
3-59
62. SEE the SIGHTS,
MEET the DOCTORS
(Making Ethical Decisions)
• Some insurance companies
encourage patients to seek
medical care in foreign
countries.
• Procedures are cheaper and
involve top-flight doctors at
state-of-the-art facilities.
• Would it be ethical to force
patients to travel to other
countries to save money?
3-62
64. Progress
Assessment
PROGRESS ASSESSMENT
• What are the major threats to doing business in
global markets?
• What key challenges must India and Russia face
before becoming global economic leaders?
• What does the acronym BRIC stand for?
• What are the two primary concerns about
offshore outsourcing?
3-64
Hinweis der Redaktion
Company: Yum! Brands
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. 1. The U.S. is a market of over 310 million potential customers, but the world market is over 6.9 billion. 2. It is easy for students in the United States to lose sight of the importance of the global market. This slide helps them see that the international marketplace offers businesses opportunities due to the size of the market. Companies like Procter & Gamble and Wal-Mart have found the international market offers opportunities for additional revenue growth.
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade.
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. The U.S. follows China and Germany in exports.
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Forbes’s ranking was determined by the business climate, red tape, corruption, property rights, and innovation of 128 nations. This slide shows the top 10 of their study. Notice that the United States slipped from number 2 to number 9, citing high tax rates and poor trade showings. It might also be helpful to point out to students that none of the 10 top countries experienced any GDP growth in 2009. Number 1, Denmark, registered 4.7%, number 6, Ireland, 7.6%, and number 9, the United States, 2.6%.
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Can You Spare a Dime? The United States has the most billionaires in the world. Ask students: Why does the United States have more billionaires than any other country in the world? (There are many reasons why this is true. We have a larger population than some of the other countries on the slide, so it would stand to reason that we would have more billionaires than those countries. However, some of the countries listed have a larger population than the United States, namely India and China. In the United States there is less regulation on businesses and wages/salaries are much higher.)
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. No nation can produce all the products its people want and need.
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. How Exports Affect the GDP Often it is difficult for students to see how trade affects nations. This slide illustrates how much world trade accounts for a country ’s GDP. The U.S. is a largely domestic economy (exporting 11.1% of GDP), whereas Singapore (not illustrated) exports 156.4%. Singapore imports some resources then exports them right back out.
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. How Exports Affect the GDP Often it is difficult for students to see how trade affects nations. This slide illustrates how much world trade accounts for a country ’s GDP. The U.S. is a largely domestic economy (exporting 11.1% of GDP), whereas Singapore (not illustrated) exports 156.4%. Singapore imports some resources then exports them right back out.
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. How Exports Affect the GDP Often it is difficult for students to see how trade affects nations. This slide illustrates how much world trade accounts for a country ’s GDP. The U.S. is a largely domestic economy (exporting 11.1% of GDP), whereas Singapore (not illustrated) exports 156.4%. Singapore imports some resources then exports them right back out.
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. How Free Trade Benefits the World Often it is difficult for students to see how world trade has improved the living conditions of millions of the world ’s poorest individuals. This slide shows some of the improvement in literacy rates and life expectancy since 1950. These improvements in the standard of living can be somewhat attributed to free trade. From The Economist, January 26, 2008, print edition: Twenty-five years ago two-thirds of the population or 600 million people were living in extreme poverty (on less than $1 a day). Now, the number living on $1 a day is below 180 million and yet the world ’s population has increased. To start a discussion ask the students: Why has China been able to improve the living conditions of so many of its citizens in the last twenty-five years? ( More liberal economic policies have led to greater economic growth and an increase in the standard of living for individuals.)
See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. David Ricardo expanded on Adam Smith ’s theory of absolute advantage with the theory of comparative advantage. This theory can be difficult for students to grasp. A country should produce only what it can produce efficiently, buying what it cannot produce as efficiently. This theory of international trade, along with Adam Smith’s Theory of Absolute Advantage, has been a guiding tenet of international trade since the late 1700s.
See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business.
See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. Whom Does the U.S. Owe? 1. As the world ’s largest debtor nation the United States relies on other countries purchasing its debt as an investment. 2. OPEC Nations include: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, U.A.E., Venezuela. 3. Ask students: What are the ramifications of U.S. indebtedness on its population ? (Answers to this question will vary but may include: lost sovereignty, weakening of the U.S. dollar and a loss of purchasing power as import prices rise, inflation and an increase in taxes.)
See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. VisionSpring is still growing, but it operates at a loss. Donations are still essential to maintain operations.
See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. Starbucks CEO, Howard Shultz, found his importing opportunity in Italy. He transformed a coffee shop in Seattle to mimic the European cafes.
See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. One website that can enliven a lecture on exporting is http://tse.export.gov . The TradeStats Express website is presented by the U.S. Commerce Department and gives students a look at any number of statistics on exporting. One example that may surprise students is that snow plows/blowers have been sold in Middle Eastern countries, like Saudi Arabia. They are used to clear sand from driveways.
See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business.
See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. Since 1975, the U.S. has bought more goods from other nations than it has sold and thus has a trade deficit.
See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business.
One major argument favoring the expansion of U.S. business is that the sheer size of the global market (6.9 billion people) is too large to ignore. Plus it ’ s difficult for an economy, even one as large as the U.S. economy, to produce all the goods and services its citizens desire. 2) Comparative advantage theory was proposed by David Ricardo and simply states that a country should sell to other countries those products it produces most effectively and efficiently, and buy from other countries those products it cannot produce as effectively and efficiently. Examples include the U.S. producing goods and services such as software and engineering services and buying goods, such as coffee and shoes, from other nations. 3) The balance of trade is the difference in the total value of a nation ’ s exports compared to its imports. The balance of payments is the difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows coming into or leaving a country from other factors such as tourism, foreign aid, military expenditures, and foreign investment. 4) Dumping is the selling of products in foreign countries at lower prices than those charged in the producing country. This tactic is sometimes used to reduce surplus products in foreign markets or gain a foothold in a new market.
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. When senior management elects to expand internationally, they have a wide range of options available to them. Such options range from licensing with the least risk all the way to foreign direct investment with the most risk. A few examples to be shared during this portion of the lecture include: Coca-Cola ’s use of licensing, McDonald’s use of franchising, Nike’s use of contract manufacturing, Volkswagen’s joint venture in China and Toyota’s foreign direct investment in the United States.
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. Coca-Cola has entered into licensing agreements with over 300 licensees that have extended into long-term service contracts that sell over $1 billion of the company ’s products each year.
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets.
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. Links on the slide take you to KFC-Japan, Taco Bell-India and Pizza Hut-Hong Kong. The next few slides offer specific examples of how franchisors have adapted their products for various countries.
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. What ’s in Your Donuts Students should enjoy this slide. It shows the cultural influence with donuts preferences. Ask the students: What type of donuts do you enjoy? Would your prefer sweet potato, or green apple, or mango in your donuts? Ask the students: What modifications do companies need to make when you go to different countries like the ones shown in this slide? (Students should point out the need to understand and research the market and cultural/customer preferences and then offer what the customers want.)
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. Students may find it interesting that McDonald’s Hamburger University is more selective than Harvard (62 out of 1,000 applicants make it in).
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. McDonald ’s Items Worldwide McDonald ’s is a leader in franchising and the company operates in 117 different countries. This slide gives students an insight into some of the changes McDonald ’s has made to its menu when operating in the world market. Ask students: Why does the leading provider of American style fast-food adopt different menu items? (Like all successful companies, McDonald ’s adapts its menu to meet the different needs of its customers worldwide.)
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. The worldwide contract manufacturing business is estimated to be a $250 billion industry that ’s expected to grow to $325 billion by 2013.
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. Joint ventures can also have drawbacks: (1) One partner can learn the other ’s practices then use the knowledge to its own advantage; (2) A shared technology may become obsolete; (3) The joint venture may become too large to be as flexible as needed.
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets.
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets.
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets.
See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets.
The key advantages of using licensing as a method of entry into global markets are: (a) a firm can often gain revenues in a market it would not have generated in its home market; (b) licensees must purchase start-up supplies and consulting services from the licensing firm; and c) licensors spend little or no money to produce and market their products. Disadvantages to licensing include: (a) if a product is extremely successful in another market, the licensor does not receive the bulk of the revenues and (b) if the foreign licensee learns the company ’ s technology and product secrets, it may break the agreement and begin producing similar products on its own. 2) Export trading companies provide such services as assistance in associating and establishing the desired trading relationships, matching buyers and sellers from different countries, and help dealing with foreign customs offices, documentation, and weights and measures. 3) A joint venture is a partnership between two or more companies whereby they undertake a major project. Joint ventures generally involve: (a) sharing technology and risk; (b) sharing marketing and management expertise; (c) entry into markets where foreign companies are often not allowed unless goods are produced locally. In a strategic alliance partners do not share costs, risks, management, or even profits. The purpose is to gain advantages in building competitive market advantages. 4) A multinational corporation manufactures and markets products in many different countries and has multinational stock ownership and management. Only firms that have manufacturing capacity or other physical presence in other countries can be called multinational.
See Learning Goal 4: Evaluate the forces that affect trading in global markets. What makes operating in the international environment more complex than operating only in the domestic market is the addition of new uncontrollable forces. Examples of these forces include: sociocultural, economic, financial, legal, regulatory, physical and environmental.
See Learning Goal 4: Evaluate the forces that affect trading in global markets. A lack of cultural understanding can create problems when working in the international market. Even the color or type of flower can have a different meaning. One book that provides numerous examples to share with students is entitled Kiss, Bow or Shake Hands: How to Do Business in Sixty Countries . Never assume what works in one country will work in another.
See Learning Goal 4: Evaluate the forces that affect trading in global markets. Lost In Translation 1. Culture refers to the set of values, beliefs, rules, and institutions held by a specific group of people. 2. One of the basic elements of culture is language and language delineates cultures. To operate successfully in the international marketplace, a company must never assume what works in one country will work in another. To avoid the funny and sometimes disastrous advertisements listed above, shrewd marketers must use back translations. Back translation is a process in which the first translation is made by a bilingual native, after which the work will then be translated back by a bilingual foreigner to see how it compares with the original.
See Learning Goal 4: Evaluate the forces that affect trading in global markets. Ready to Travel Abroad ? 1. Some very fascinating cultural and social differences exist in other nations. 2. Discuss the following interesting points: A smile in Japan can mean that a person is uncomfortable or sad. When traveling to Sweden, make appointments two weeks in advance. Lack of punctuality is a fact of life in Brazil. Become accustomed to waiting. 3. Review the following helpful hints when dealing globally: a. Be culturally savvy. Learn about the culture, language, and dress code. b. Recognize the importance of dealing with cultural differences and consequences of taking no action. c. Manage and learn to appreciate various cultures. d. Build a database of information about each country where you have business relationships.
See Learning Goal 4: Evaluate the forces that affect trading in global markets.
See Learning Goal 4: Evaluate the forces that affect trading in global markets. The floating exchange rate system creates transaction risk. If the U.S. dollar is trading for more foreign currency, it is said to be getting stronger. When the U.S. dollar is trading for less foreign currency, it is said to be getting weaker. Since the breakdown of the Bretton Woods agreement in 1971, the value of the U.S. currency has generally trended downward versus major world currencies.
See Learning Goal 4: Evaluate the forces that affect trading in global markets. It ’s estimated that countertrading accounts for over 20% of all global exchanges, especially in developing countries. One famous example of countertrading involved Pepsi and Russian vodka. Pepsi received the right to market Russian vodka in the United States as payment for Pepsi sold in Russia. More information on countertrading can be found at www.londoncountertrade.org.
See Learning Goal 4: Evaluate the forces that affect trading in global markets.
See Learning Goal 4: Evaluate the forces that affect trading in global markets.
Four major hurdles to successful global trade are: sociocultural forces, economic and financial forces, legal and regulatory forces, and physical and environmental forces. 2) Ethnocentricity is an attitude that your nation ’s culture is superior to other cultures. It can affect global trade because all nations are proud of their cultures and do not aspire to be like other countries. Thus it’s easy to offend potential customers by being ethnocentric. 3) A low value of the dollar would make U.S. exports cheaper in foreign markets and may lead to higher demand for U.S. products. 4) The Foreign Corrupt Practices Act prohibits “questionable” or “dubious” payments to foreign officials to secure business contracts. Other nations do not have to follow this law causing some disadvantages for U.S. businesses.
See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. The Great Depression was exacerbated by the passage of the Glass-Steagall Act. The Glass-Steagall Act of 1933 raised the tariff rates on thousand of products imported into the United States. This led to other nations enacting similar protectionist measures effectively shutting down world trade. Many fear that the economic contraction the world is currently experiencing will lead to similar laws.
See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. While a tariff may end up raising revenue for the government, it ultimately costs consumers more money in the long run. Due to tariff rates on the importation of sugar, consumers in the United States end up paying close to 50 percent more for sugar than the rest of the world.
See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism.
See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism.
See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism.
See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism.
See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism.
See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. Free traders hope CAFTA will lead to the creation of a Free Trade Area of the Americas (FTAA).
See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism.
Trade protectionism is the use of government regulations to limit the import of goods and services. It can be a barrier to global trade. Trade protectionism often involves the use of tariffs or taxes on imported goods that makes them more expensive to buy. Protective tariffs can be an advantage to workers in certain industries since it makes the products they produce more cost competitive with imported products. American labor unions have sought certain protective tariffs. Revenue tariffs are designed as a source of revenue for the government. Most economists do not favor the use of tariffs; instead they are in favor of free trade. 2) The World Trade Organization (WTO) was established to mediate trade disputes among nations. 3) The purpose of a common market like the EU is to have common external tariffs, no internal tariff, and coordinated laws to facilitate exchange between member nations. This enables smaller nations to compete as a group against large economies like the United States, China, and Japan. 4) NAFTA is comprised of the United States, Canada and Mexico.
See Learning Goal 6: Discuss the changing landscape of the global market and the issue of offshore outsourcing. BRIC has been an acronym for these countries. However, BRIC nations are not the only areas of opportunity. Other countries to look at include: Indonesia, Thailand, Singapore, the Philippines, South Korea, Malaysia and Vietnam.
See Learning Goal 6: Discuss the changing landscape of the global market and the issue of offshore outsourcing.
See Learning Goal 6: Discuss the changing landscape of the global market and the issue of offshore outsourcing.
See Learning Goal 6: Discuss the changing landscape of the global market and the issue of offshore outsourcing.
The major threats to doing business in global markets are: terrorism, nuclear proliferation, rogue states, and other issues. 2) India must relax its difficult trade laws and inflexible bureaucracy. Russia is plagued by political, currency, corruption, and social problems. 3) BRIC stands for Brazil, Russia, India, and China. 4) The key concern about offshore outsourcing is the loss of jobs. Today such loss includes professional services as well as production jobs. Questions also linger about outsourcing sensitive products like airline maintenance and medical devices. Consumer s’ fears about quality and product safety keep the issue center stage.