BA 100 Chapter 3

1. ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
CHAPTER 3
Doing
Business in
Global Markets

2. ©McGraw-Hill Education.
LEARNING OBJECTIVES 1 of 2
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. ©McGraw-Hill Education.
LEARNING OBJECTIVES 2 of 2
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.

4. ©McGraw-Hill Education.
LEILA JANAH
Samasource
• Started Samasource to help
people in developing
countries rise out of poverty.
• Janah has been working to
combat world poverty since
she was a teen.
• Employees are carefully
selected and are taught new
skills.
Photocredit:PostcodeLotteryGreenChallenge/CreativeCommons,
https://www.flickr.com/photos/postcodelotterygreenchallenge/8202992042

5. ©McGraw-Hill Education.
NAME that COMPANY
This Swiss-based company has many foreign
subsidiaries including Jenny Craig (weight
management), Ralston Purina, Chef America (maker
of Hot Pockets) and Dreyer’s Ice Cream in the
United States as well as Perrier in France. The
company employs over 328,000 people and has
operations in almost every country in the world.
Name that company!

6. ©McGraw-Hill Education.
BUSINESS in the
GLOBAL MARKET LO 3-1
Over 90% of companies doing business globally
believe it is important for employees to have
international experience.
U.S. organizations are also
expanding abroad.
UPS
MLB
NFL
NBA
Photo credit: © Sang Tan/AP Images

7. ©McGraw-Hill Education.
WORLD POPULATION
by CONTINENT LO 3-1

8. ©McGraw-Hill Education.
WORLD POPULATION
GROWTH LO 3-1

9. ©McGraw-Hill Education.
IMPORTING and EXPORTING LO 3-1
Importing -- Buying products from another country.
Exporting -- Selling products to another country.
The U.S. is the largest importing and the second
largest exporting nation in the world.
Photo credit: © Marmaduke St. John / Alamy Stock Photo

10. ©McGraw-Hill Education.
PLEASURE DOING BUSINESS
Best Countries for Business LO 3-1
2013 Rank Country 2012 Rank
1 Ireland -
2 New Zealand -
3 Hong Kong -
4 Denmark -
5 Sweden 3
6 Finland 2
7 Singapore 1
8 Canada -
9 Norway -
10 Netherlands -
Source: Forbes, www.forbes.com, accessed November 2014.

11. ©McGraw-Hill Education.
CAN YOU SPARE a DIME?
Home Countries for Some of the World’s Billionaires LO 3-1
U.S. – 516 billionaires
China – 136 billionaires
Russia – 88 billionaires
Germany – 82 billionaires
India – 54 billionaires
U.K. – 43 billionaires
Hong Kong – 41 billionaires
Source: Forbes, www.forbes.com, accessed November 2014.
Photo credit: Image Source / Alamy

12. ©McGraw-Hill Education.
TRADING with OTHER NATIONS LO 3-1
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.

13. ©McGraw-Hill Education.
PROS and CONS of FREE TRADE LO 3-1
Jump to Appendix 1 for long image description

14. ©McGraw-Hill Education.
COMPARATIVE and ABSOLUTE
ADVANTAGE LO 3-1
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.

15. ©McGraw-Hill Education.
GOING GLOBAL with a
SMALL BUSINESS LO 3-2
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. Photo credit: Peter Rivera/ Creative Commons, https://www.flickr.com/photos/ riverap1/3258668503

16. ©McGraw-Hill Education.
WHOM DOES the U.S. OWE?
Countries that Own the Most U.S. Debt LO 3-2
Source: Max Fisher, Washington Post, www.washingtonpost.com, accessed November 2014.

17. ©McGraw-Hill Education.
GETTING INVOLVED in
IMPORTING LO 3-2
• 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.
Photo credit: © McGraw-Hill Education/Christopher Kerrigan

18. ©McGraw-Hill Education.
GETTING INVOLVED in
EXPORTING LO 3-2
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.
Photo credit: doug steley/Alamy

19. ©McGraw-Hill Education.
HOW to MEASURE GLOBAL TRADE LO 3-2
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.

20. ©McGraw-Hill Education.
BALANCE of PAYMENTS LO 3-2
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.

21. ©McGraw-Hill Education.
UNFAIR TRADE PRACTICES LO 3-2
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 United States.

22. ©McGraw-Hill Education.
LARGEST EXPORTING NATIONS
and TRADE PARTNERS LO 3-2
Jump to Appendix 2 for long image description

23. ©McGraw-Hill Education.
TEST PREP
1. What are two of the main arguments favoring the
expansion of U.S. businesses into global
markets?
2. What is comparative advantage, and what are
some examples of this concept at work in the
United States?
3. How are a nation’s balance of trade and balance
of payments determined?
4. What is meant by dumping in global trade?

24. ©McGraw-Hill Education.
KEY STRATEGIES for REACHING GLOBAL
MARKETS LO 3-3
Least Amount of commitment, control, risk and profit potential Most
Licensing Exporting Franchising
Contract
Manufacturing
International
joint ventures
and strategic
alliances
Foreign
direct
investment
Jump to Appendix 3 for long image description

25. ©McGraw-Hill Education.
LICENSING LO 3-3
Licensing -- When a firm (licensor) provides the right to
manufacture its product or use its trademark to a foreign
company (licensee) for a fee (royalty).
Licensing can benefit a firm by:
- Gaining revenues it wouldn’t have otherwise
generated.
- Spending little or no money to produce or market
their products.

26. ©McGraw-Hill Education.
EXPORT ASSISTANCE CENTERS
and EXPORT TRADING CENTERS LO 3-3
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.

27. ©McGraw-Hill Education.
FRANCHISING LO 3-3
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.

28. ©McGraw-Hill Education.
TIME to MAKE the DONUTS…
Dunkin’ Donuts Flavors in Taiwan LO 3-3
• Sweet Potato
• Honeydew Melon
• Green Apple
• Kiwi Fruit
• Mango
• Pineapple
• Strawberry
• Corn Crumb Soft Rice Cake
Source: World Features Syndicate.
Photo Credit: Dennis Yang

29. ©McGraw-Hill Education.
MCDONALD’S:
OVER 100 CULTURES SERVED
McDonald’s has more than 34,000 restaurants in over
118 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!
Photo credit: © Andrey Rudakov/Bloomberg/Getty Images

30. ©McGraw-Hill Education.
THAT’S at MCDONALD’S?
Malaysia: 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, accessed November 2014.

31. ©McGraw-Hill Education.
CONTRACT MANUFACTURING LO 3-3
Contract Manufacturing -- A foreign company
produces private-label goods to which a domestic
company then attaches its own brand name or
trademark. A form of outsourcing.
Contract manufacturing can be used to:
• Allow a company to experiment in a new market
without incurring heavy start-up costs such as building
a manufacturing plant.
• Temporarily meet an unexpected increase in orders.

32. ©McGraw-Hill Education.
JOINT VENTURES LO 3-3
Joint Venture -- A partnership in which two or more
companies join to undertake a major project.
The benefits of joint ventures:
• Shared technology and risk.
• Shared marketing and management expertise.
• Entry into markets where foreign companies are
often not allowed unless goods are produced locally.

33. ©McGraw-Hill Education.
STRATEGIC ALLIANCES LO 3-3
Strategic Alliance -- A long-term partnership
between two or more companies established to help
each company build competitive market advantages.
• They don’t typically
share costs, risks,
management or profits.
• Strategic alliances
provide broad access to
markets, capital and
technical expertise. Photo credit: Glow Images

34. ©McGraw-Hill Education.
FOREIGN DIRECT INVESTMENT LO 3-3
Foreign Direct Investment (FDI) -- The buying of
permanent property and businesses in foreign nations.
Foreign Subsidiary -- A company owned in a foreign
country by another company called the parent company.
The most common form of FDI.
Primary Advantage: Parent
company maintains complete
control over its technology or
expertise.
Primary Disadvantage: Must
commit funds and technology
within foreign boundaries.
Photo credit: © imago stock&people/Newscom

35. ©McGraw-Hill Education.
BUYING AMERICAN?
Model
State(s)
manufacturing
% of American
parts
Toyota Camry Kentucky & Indiana 75%
Honda Accord Ohio 70%
Chevrolet Malibu Kansas & Michigan 66%
Nissan Altima Tennessee 60%
Ford Fusion Michigan 30%
LO 3-3

36. ©McGraw-Hill Education.
MULTINATIONAL CORPORATIONS LO 3-3
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.

37. ©McGraw-Hill Education.
LARGEST MULTINATIONAL
CORPORATIONS LO 3-3
Company Home Country
1 Royal Dutch Shell Netherlands
2 Walmart Stores United States
3 ExxonMobil United States
4 Sinopec Group China
5 China National Petroleum China
6 BP United Kingdom
7 State Grid China
8 Toyota Motor Japan
9 Japan Post Holdings Japan
10 Chevron United States

38. ©McGraw-Hill Education.
SOVEREIGN WEALTH FUNDS LO 3-3
Sovereign Wealth Funds (SWFs) -- Funds controlled
by governments holding investment stakes in foreign
companies.
The size of the funds and the fact that they are
government-owned make some fear they might be
used for:
- Geopolitical objectives.
- Gaining control of strategic natural resources.
- Obtaining sensitive technologies.
- Undermining the management of the companies in
which they invest.

39. ©McGraw-Hill Education.
TEST PREP 1 of 4
1. What are the advantages of using licensing as a
method of entry in global markets? What are the
disadvantages?
2. What services are usually provided by an export-
trading company?
3. What is the key difference between a joint
venture and a strategic alliance?
4. What makes a company a multinational
corporation?

40. ©McGraw-Hill Education.
FORCES AFFECTING
GLOBAL TRADE LO 3-4
• Sociocultural
• Economic and
Financial
• Legal and
Regulatory
• Physical and
Environmental Photo credit: Shutterstock/ImageFlow

41. ©McGraw-Hill Education.
CULTURAL DIFFERENCES LO 3-4
To be involved in global trade, you must be aware of
the cultural differences among nations including:
Social Structures
Religion
Manners
Values
Language
Personal Communication

42. ©McGraw-Hill Education.
LOST in TRANSLATION
Advertisements Gone Wrong LO 3-4
Braniff Airlines’ slogan "Fly in leather” translated in
Spanish as "Fly naked.”
Siri, Apple’s digital assistant on iPhone, 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.”

43. ©McGraw-Hill Education.
FROM SETTING PICKS to
PICKING GRAPES
• When Yao Ming was facing
retirement, he moved on to
other ventures.
• Yao has set himself apart
from others by opening high-
end winery.
• His cheapest bottles go for
about $87!
Photo credit: Courtesy of Yao Family Winery, © George Rose Photography

44. ©McGraw-Hill Education.
READY to TRAVEL ABROAD?
Know Your Cultural Differences LO 3-4
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.

45. ©McGraw-Hill Education.
DO as the GERMANS…
How to Not Embarrass Yourself in Germany LO 3-4
• 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.

46. ©McGraw-Hill Education.
EXCHANGE RATES LO 3-4
Exchange Rate -- The value of one nation’s currency
relative to the currencies of other countries.
High value of the dollar – Dollar is trading for more
foreign currency; foreign goods are less expensive.
Low value of the dollar – Dollar is trading for less
foreign currency; foreign goods are more expensive.
Currencies float in value depending on the supply and
demand for them in the global market.

47. ©McGraw-Hill Education.
DEVALUATION and
COUNTERTRADING LO 3-4
• Devaluation -- Lowers
the value of a nation’s
currency relative to others.
• Countertrading --
Complex form of bartering
in which several countries
each trade goods or
services for other goods or
services. Photo credit: © Eyecandy Images/age fotostock RF

48. ©McGraw-Hill Education.
LEGAL and
REGULATORY FORCES LO 3-4
There’s no global system of laws.
Laws may be inconsistent.
U.S. businesses must follow U.S. laws while
conducting global business.
Organization for Economic Cooperation and
Development and Transparency International fight to
end corruption and bribery in foreign markets and
have had limited success.

49. ©McGraw-Hill Education.
ENVIRONMENTAL FORCES LO 3-4
Developing countries have
transportation and storage
systems that make international
distribution difficult or
impossible.
Often, technological capabilities
are far from those in the U.S.
which make for a tough
business environment. Photo credit: Harin Ullal/NREL

50. ©McGraw-Hill Education.
TEST PREP 2 of 4
1. What are four major hurdles to successful global
trade?
2. What does ethnocentricity mean and how can it
affect global success?
3. How would a low value of the dollar affect U.S.
exports?
4. What does the Foreign Corrupt Practices Act
prohibit?

51. ©McGraw-Hill Education.
TRADE PROTECTIONISM LO 3-5
Trade Protectionism -- The use of government
regulations to limit the import of goods and services.
Advocates of protectionism believe it allows
domestic producers to survive, grow and produce
jobs.
Photocredit:©TomWilliams/RollCall/GettyImages

52. ©McGraw-Hill Education.
TARIFFS LO 3-5
Tariffs -- Taxes on imports,
making imported goods more
expensive.
Two kinds of tariffs:
Protective – Raise the
retail price of imports so
domestic goods are
competitively priced.
Revenue – Raise money
for governments.
Photo credit: ©Space Images/Blend Images

53. ©McGraw-Hill Education.
IMPORT QUOTAS and EMBARGOS LO 3-5
Import Quota -- Limits the number of products in
certain categories a nation can import.
Embargo -- A complete ban on the import or export of a
certain product or the stopping of all trade with a
particular country.
Political disagreements can lead to embargos, like
the U.S. embargos against Cuba, Iran and North
Korea.

54. ©McGraw-Hill Education.
WORLD TRADE ORGANIZATION LO 3-5
General Agreement on Tariffs and Trade (GATT) --
A global forum for reducing trade restrictions on goods,
services, ideas and cultural problems.
World Trade Organization (WTO) -- Headquartered in
Geneva, the WTO is an independent entity of 159
member nations whose purpose is to oversee cross-
border trade issues and global business practices.

55. ©McGraw-Hill Education.
COMMON MARKETS LO 3-5
Common Market -- A regional group of countries
with a common external tariff, no internal tariffs and
coordinated laws to facilitate exchange among
members.
Some common markets are:
European Union (EU)
Mercosur
ASEAN
COMESA

56. ©McGraw-Hill Education.
EU MEMBERS LO 3-5
Jump to Appendix 4 for long image description
Current EU members are highlighted in yellow, countries that have applied for
membership are in orange.

57. ©McGraw-Hill Education.
NAFTA and CAFTA LO 3-5
North American Free Trade Agreement -- Ratified
in 1994, created a free-trade area among the United
States, Canada and Mexico.
Central American Free Trade Agreement -- Passed
in 2005, created a free-trade zone with Costa Rica,
Dominican Republic, El Salvador, Guatemala, Honduras
and Nicaragua.

58. ©McGraw-Hill Education.
NAFTA OBJECTIVES LO 3-5
1. Eliminate trade barriers and facilitate cross-
border movement of goods and services.
2. Promote conditions of fair competition.
3. Increase investment opportunities.
4. Provide effective protection and enforcement of
intellectual property rights.
5. Establish a framework for further regional trade
cooperation.
6. Improve working conditions in North America.

59. ©McGraw-Hill Education.
NEW FREE
TRADE AGREEMENTS LO 3-5
• Today, free trade
agreements are being
negotiated Colombia
and Panama.
• The U.S. is considering
an agreement with a
nine-nation free trade
bloc called the Trans-
Pacific Partnership.
Photo credit: Image Source

60. ©McGraw-Hill Education.
TEST PREP 3 of 4
1. What are the advantages and disadvantages of
trade protectionism and of tariffs?
2. What is the primary purpose of the WTO?
3. What is the key objective of a common market
like the EU?
4. Which three nations comprise NAFTA?

61. ©McGraw-Hill Education.
FUTURE of GLOBAL TRADE LO 3-6
Brazil is expected to be one of the wealthier
economies by 2030.
Russia is a large oil producing country with many
multinationals interested in developing there.
India has seen huge growth in information
technology, pharmaceuticals and biotechnology.
With over 1.3 billion people, China has transformed
the world economic map. Many multinationals invest
heavily in China.

62. ©McGraw-Hill Education.
OUTSOURCING LO 3-6
Outsourcing -- Process by which a firm contracts with
other companies to do some or all of its functions.
U.S. firms have outsourced payroll functions, accounting
and manufacturing for years.
With the growth of global
markets, companies have
been shifting to offshore
outsourcing – outsourcing
with other countries.
Photo Credit: Vitor Lima

63. ©McGraw-Hill Education.
OFFSHORE OUTSOURCING LO 3-6
Jump to Appendix 5 for long image description

64. ©McGraw-Hill Education.
PLAN for YOUR GLOBAL CAREER LO 3-6
• Study foreign
languages.
• Learn about
foreign cultures.
• Take global
business courses.
Photo credit: ©Ariel Skelley/Blend Images LLC

65. ©McGraw-Hill Education.
MAKING YOUR OPERATION
YOUR VACATION
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?
Photo credit: Purestock/SuperStock

66. ©McGraw-Hill Education.
COSTS of MEDICAL
PROCEDURES ABROAD
Angioplasty
Gastric
Bypass
Heart
Bypass
Hip
Replacement
Nose
Job
Tummy
Tuck
United
States
$47,000 $18,000 $88,000 $33,000 $6,200 $6,400
United
Kingdom
$8,000 $16,500 $13,921 $23,500 $3,500 $4,810
Mexico $15,000 $13,800 $37,800 $11,500 $2,800 $3,000
India $11,000 $6,800 $14,400 $8,000 $2,800 $2,900
Costa
Rica
$13,000 $11,200 $31,500 $14,500 $3,400 $5,300
Source: AARP Magazine, November 2014.

67. ©McGraw-Hill Education.
TEST PREP 4 of 4
1. What are the major threats to doing business in
global markets?
2. What key challenges must India and Russia face
before becoming global economic leaders?
3. What does the acronym BRIC stand for?
4. What are the two primary concerns about
offshore outsourcing?

68. ©McGraw-Hill Education.
Appendix 1: PROS and CONS of FREE TRADE
Pros of free trade:
• The global market contains over 7 billion potential customers for goods and services.
• Productivity grows when countries produce goods and services in which they have a
comparative advantage.
• Global competition and less-costly imports keep prices down, so inflation does not
curtail economic growth.
• Free trade inspires innovation for new products and keeps firms competitively
challenged.
• Uninterrupted flow of capital gives countries access to foreign investments, which
help keep interest rates low.
Cons of free trade:
• Domestic workers (particularly in manufacturing-based jobs) can lose their jobs due
to increased imports or production shifts to low-wage global markets.
• Workers may be forced to accept pay cuts from employers, who can threaten to
move their jobs to lower-cost global markets.
• Moving operations overseas because of intense competitive pressure often means
the loss of service jobs and growing numbers of white-collar jobs.
• Domestic companies can lose their comparative advantage when competitors build
advanced production operations in low-wage countries.
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69. ©McGraw-Hill Education.
Appendix 2: LARGEST EXPORTING NATIONS
and TRADE PARTNERS
World’s Largest Exporting Nations: United
States, Russia and Italy
Top U.S. Trading Partners: Canada, Mexico,
Brazil, and Saudi Arabia
Both: United Kingdom, Netherlands, France,
Germany, China, Japan, and South Korea
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70. ©McGraw-Hill Education.
Appendix 3: KEY STRATEGIES for REACHING
GLOBAL MARKETS
The strategies for reaching global markets are shown on a
continuum from least to most based on the amount of
commitment, control, risk and profit potential required by
each. The strategies are listed in the following order:
• licensing
• exporting
• franchising
• contract manufacturing
• international joint ventures and strategic alliances
• foreign direct investment
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71. ©McGraw-Hill Education.
Appendix 4: EU MEMBERS
Current EU Member Nations:
Sweden, Finland, Denmark, Ireland, Great Britain, Poland,
Germany, France, Spain, Portugal, Andorra, Netherlands,
Belgium, Luxembourg, Estonia, Latvia, Lithuania, Czech
Republic, Slovakia, Austria, Hungary, Romania, Croatia,
Slovenia, Italy, Bulgaria, Greece, Cyprus
Countries That Have Applied for Membership:
Serbia, Macedonia, Montenegro, Albania, Turkey
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72. ©McGraw-Hill Education.
Appendix 5: OFFSHORE OUTSOURCING
Pros of offshore outsourcing:
• Less-strategic tasks can be outsourced globally so that companies can
focus on areas in which they can excel and grow.
• Outsourced work allows companies to create efficiencies that in fact let
them hire more workers.
• Consumers benefit from lower prices generated by effective use of global
resources and developing nations grow, thus fueling global economic
growth.
Cons of offshore outsourcing:
• Jobs may be lost permanently and wages fall due to low-cost competition
offshore.
• Offshore outsourcing may reduce product quality and can therefore cause
permanent damage to a company’s reputation.
• Communication among company members, with suppliers, and with
customers becomes much more difficult.
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