Chapter 3

Report
Business in a
Changing World
Chapter 3
Business in a Borderless
World
McGraw-Hill/Irwin
Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.
3-3
Fresh & Easy Grocery -Shopping for One & All!
Tesco, the UK grocery giant, has developed the
Neighborhood Market that is making its way into
U.S. communities. Affordable and wholesome food
is the core competency for Tesco.
3-4
International Business
We live in a global economy -- consumers around
the world drink Coca-Cola, Pepsi, and eat at
McDonalds. Products you consume today are just
as likely to have been made in China, Korea or
Germany as in the United States.
3-5
International Business
International business – the buying, selling, and
trading of goods and services across national
boundaries.
3-6
International Business
Globalization of business is becoming
increasingly important
Starbucks serves 20 million customers a week at
16,000 shops in 44 countries.
Global marketing requires balancing global
brands with the needs of local consumers.
3-7
Why Nations Trade
International trade allows for the
acquisition of raw materials and goods
at favorable prices.
Absolute advantage – a monopoly that exists
when a country is the only source of an item, the
only producer of an item, or the most efficient
producer of an item.
3-8
Why Nations Trade
International trade allows for the
acquisition of raw materials and goods
at favorable prices.
Comparative advantage – the basis of most
international trade, when a country specializes in
products that it can supply more efficiently or at
a lower cost than it can produce other items.
3-9
Why Nations Trade
International trade allows for the
acquisition of raw materials and goods
at favorable prices.
Outsourcing – the transferring of manufacturing
or other tasks—such as data processing—to
countries where labor and supplies are less
expensive.
3-10
Trade Between Countries
Obtaining needed goods and services
and the funds to pay for them,
requires international trade through
exporting and importing.
Exporting – the sale of goods and services to
foreign markets.
The U.S. exported more than $1.6 trillion in goods and services last year.
3-11
Trade Between Countries
Obtaining needed goods and services
and the funds to pay for them,
requires international trade through
exporting and importing.
Importing – the purchase of goods and services
from foreign sources.
The U.S. imported more than $2.3 trillion in goods/services last year
3-12
Balance of Trade
The difference in the value
between what a nation
exports and imports is its
balance of trade.
U.S. Trade Deficit
1980-2006
(in billions of dollars)
A trade deficit
(shown in the
table) shows that
the U.S. has a
trade deficit – it
imports more
than it exports.
A trade deficit is also called a
nation’s negative balance of
trade.
3-13
Balance of Trade
U.S. Exports to China Increase
Trade deficits are harmful – failure of businesses, loss of jobs, lowered standard of living.
3-14
Balance of Trade
Top 10 Countries Maintaining
Trade Deficits/Surpluses with the U.S.
3-15
International Trade Barriers
A nation’s balance of trade, foreign
investments, foreign aid, loans,
tourists dollars, and military
expenditures comprise its balance of
payments
Balance of payments – the difference between
the flow of money into and out of a country.
3-16
International Trade Barriers
Completely free trade seldom exists.
Barriers to International Trade –
•Economic
•Legal
•Political
•Social
•Cultural
•Technological
3-17
International Trade Barriers
ECONOMIC BARRIERS.
•Economic development
•Infrastructure
•Exchange rates
3-18
International Trade Barriers
Economic Development
LDC’s – less-developed countries
•Low per-capita income
•Less economically advanced
•Potentially huge & profitable markets
3-19
International Trade Barriers
Infrastructure
The physical facilities that support economic
activities, including railroads, highways, ports,
airfields, utilities, power plants, schools,
hospitals, and commercial distribution systems.
3-20
International Trade Barriers
Exchange Rates
The ratio at which one nation’s currency can be
exchanged for another nation’s currency.
3-21
International Trade Barriers
Ethical, Legal, and Political Barriers.
•Complex relationships
•Different laws
•International laws
•Trade restrictions
•Changing political climates
•Different ethical values
3-22
International Trade Barriers
Tariffs & Trade Restrictions
Part of a nation’s legal structure – may be
established or removed for political reasons.
Import Tariff – a tax levied by a nation on goods
imported into the country
3-23
International Trade Barriers
Tariffs & Trade Restrictions
Exchange controls – regulations that restrict the
amount of currency that can be bought or sold
Quota – a restriction on the number of units of a
particular product that can be imported into a
country
3-24
International Trade Barriers
Tariffs & Trade Restrictions
Embargo– a prohibition on trade in a particular
product
Dumping – the act of a country or business selling
products at less than what it costs to produce them
3-25
International Trade Barriers
Political Barriers
•Seldom in writing & change rapidly
•Relative stability of countries is a factor
Cartel – a group of firms or nations that agrees to act as a monopoly and
not compete with each other, in order to generate a competitive
advantage in world markets.
3-26
International Trade Barriers
Cultural Barriers
Cultural Behavioral Differences
3-27
International Trade Barriers
Technological Barriers
•Technological advances are creating global
marketing opportunities
•10 nations outrank the U.S. in terms of
subscribers to broadband Internet access.
3-28
Trade Agreements, Alliances, & Organizations
GATT
General Agreement on Tariffs and Trade (GATT)
•
•
•
Signed by 23 nations in 1947
Forum for tariff negotiations
Place for international trade issue discussion and
resolution
3-29
Trade Agreements, Alliances, & Organizations
WTO
World Trade Organization (WTO) –
International organization dealing with
the rules of trade between nations.
3-30
Trade Agreements, Alliances, & Organizations
NAFTA
North American Free Trade Agreement (NAFTA)–
agreement that eliminates most tariffs and trade
restriction on agricultural and manufactured
products to encourage trade among Canada, the
U.S., and Mexico.
3-31
Trade Agreements, Alliances, & Organizations
EU
European Union (EU)– a union of European
nations established in 1958 to promote trade
among its members; one of the largest single
markets today.
3-32
Trade Agreements, Alliances, & Organizations
APEC
Asia-Pacific Economic Cooperation (APEC)– an
international trade alliance that promotes open
trade and economic and technical cooperation
among member nations.
3-33
Trade Agreements, Alliances, & Organizations
World Bank
World Bank –
(International Bank for Reconstruction and Development)
Organization established in 1946 by industrialized
nations to loan money to underdeveloped and
developing countries.
3-34
Trade Agreements, Alliances, & Organizations
IMF
International Monetary Fund (IMF)–
Organization established in 1947 to promote
trade among member nations by eliminating
trade barriers and fostering financial
cooperation
3-35
Getting Involved in International Business
Exporting & importing, trading companies,
licensing and franchising, contract
manufacturing, joint ventures, direct
investment, and multinational corporations.
Many companies’ involvement in international
trade begins with importing goods for resale.
3-36
Getting Involved in International Business
Exporting & importing
Exporting can take place through countertrade
agreements – foreign trade agreements that
involve bartering products for other products
instead of for currency.
3-37
Getting Involved in International Business
U.S. Exporters and Value by Company Size
Most U.S.
exporters are
small businesses
and represent
almost 20% of
exports
U.S. Exporting
Companies for
Selected
Countries
3-38
Getting Involved in International Business
Trading Companies
A firm that buys goods in one country and sells
them to buyers in another country is a trading
company.
3-39
Getting Involved in International Business
Licensing & Franchising
A trade agreement in which one company (licensor)
allows another company (licensee) to use its
company name, products, patents, brands,
trademarks, etc. in exchange for a fee or royalty.
3-40
Getting Involved in International Business
Licensing & Franchising
Franchising is a form of licensing where a
company (franchiser) agrees to provide a
franchisee a name, logo, operational
guidelines, products, etc, in return for a
financial commitment and the agreement
to conduct business in accord with the
franchiser’s standard of operations.
3-41
Getting Involved in International Business
Top 10 Global Franchise Operations
3-42
Getting Involved in International Business
Contract manufacturing
Contract Manufacturing -- The hiring of a foreign
company to produce a specified volume of the
initiating company’s product to specification; the
final product carries the domestic firm’s name
3-43
Joint Ventures & Alliances
Joint venture – the sharing of the costs and
operation of a business between a foreign company
and a local partner
Strategic alliance – a partnership formed to create
competitive advantage on a worldwide basis.
Direct investment – the ownership of overseas
facilities
3-44
Getting Involved in International Business
The 10 Largest Global Corporations
MNC – multinational corporation such as IBM, General Motors,
General Electric or ExxonMobil that operates on a worldwide
scale.
3-45
International Business Strategies
Multinational strategy– a plan used by international
companies that involves customizing products,
promotion, and distribution according to cultural
technological, regional and national differences.
Global strategy (globalization)– a strategy that
involves standardizing products (promotion and
distribution) for the whole world as if it were a single
entity.
3-46

similar documents