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  • 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.

Transcript

  • 1. Chapter 03 Doing Business in Global MarketsMcGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 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 DynamicGlobal 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
  • 7. The DynamicGlobal Market WORLD POPULATION LG1 by CONTINENT 3-7
  • 8. The DynamicGlobal 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 DynamicGlobal Market PLEASURE DOING BUSINESS Best Countries for Business LG1 Source: Forbes, September 27, 2010. 3-9
  • 10. The DynamicGlobal 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 WithOther 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 WithOther Nations? HOW EXPORTS LG1 AFFECT the GDP Source: Bloomberg Businessweek, November 22, 2011. 3-12
  • 13. Why Trade WithOther Nations? HOW EXPORTS LG1 AFFECT the GDP Source: Bloomberg Businessweek, November 22, 2011. 3-13
  • 14. Why Trade WithOther Nations? HOW EXPORTS LG1 AFFECT the GDP Source: Bloomberg Businessweek, November 22, 2011. 3-14
  • 15. Why Trade WithOther 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 ofComparative and COMPARATIVE and ABSOLUTEAbsolute 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 Involvedin 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 Involvedin 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 Goodsand 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 Goodsand 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. MeasuringGlobal 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. MeasuringGlobal 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. MeasuringGlobal 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. ProgressAssessment 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 forReaching GlobalMarkets 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
  • 27. Licensing LICENSING LG3 3-27
  • 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
  • 33. ContractManufacturing CONTRACT MANUFACTURING 3-33
  • 34. International JointVentures andStrategic Alliances JOINT VENTURES LG3 3-34
  • 35. International JointVentures andStrategic 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
  • 36. Foreign DirectInvestment FOREIGN DIRECT INVESTMENT LG3 3-36
  • 37. Foreign DirectInvestment 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
  • 38. Foreign DirectInvestment SOVEREIGN WEALTH FUNDS LG3 3-38
  • 39. ProgressAssessment 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
  • 40. Forces AffectingTrading in GlobalMarkets LG4 3-40
  • 41. Socio-culturalForces CULTURAL DIFFERENCES LG4 3-41
  • 42. Socio-culturalForces 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-culturalForces 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-culturalForces 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
  • 45. Economic andFinancial Forces EXCHANGE RATES LG4 3-45
  • 46. Economic andFinancial Forces DEVALUATION and LG4 COUNTERTRADING 3-46
  • 47. Legal andRegulatoryForces LEGAL CONCERNS OVERSEAS LG4 3-47
  • 48. Physical andEnvironmentalForces ENVIRONMENTAL FORCES LG4 3-48
  • 49. ProgressAssessment 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
  • 50. TradeProtectionism TRADE PROTECTIONISM LG5 3-50
  • 51. TradeProtectionism TARIFFS LG5 3-51
  • 52. TradeProtectionism IMPORT QUOTAS and EMBARGOS LG5 3-52
  • 53. The World TradeOrganization WORLD TRADE ORGANIZATION LG5 3-53
  • 54. CommonMarkets COMMON MARKETS LG5 3-54
  • 55. CommonMarkets EU MEMBERS LG5 3-55
  • 56. The NorthAmerican andCentral AmericanFree TradeAgreements NAFTA LG5 3-56
  • 57. The NorthAmerican andCentral AmericanFree Trade CAFTAAgreements LG5 3-57
  • 58. The NorthAmerican andCentral AmericanFree Trade NEW FREEAgreements LG5 TRADE AGREEMENTS 3-58
  • 59. ProgressAssessment 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
  • 60. The Future ofGlobal Trade FUTURE of GLOBAL TRADE LG6 3-60
  • 61. The Challengeof OffshoreOutsourcing OUTSOURCING LG6 Photo Courtesy of: Vitor Lima 3-61
  • 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
  • 63. Globalizationand Your Future LG6 3-63
  • 64. ProgressAssessment 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