* * * ** CHAPTER Competing* in Global Markets Nickels * McHugh McGraw-Hill/Irwin Understanding Business, 8e * McHugh 1-1 3-1 © 2008 The McGraw-Hill Companies, Inc., All Rights * * * The Dynamic Global Market World Population by continent: ** The U.S is the largest importing nation in the World! 3-2 * * * Growing World Population In Billions Source: Population Reference Bureau 3-3 * * * Why Trade With Other Nations? • No nation can produce all its needs • Mutually beneficial exchange • Natural Resources or Technology- Produce or Buy? 3-4 * * * Theories of Advantage Comparativ e U S China China U S Output per Unit of Input Softwar e Clothin g 3-5 * * * Theories of Advantage Absolut = Virtual e SouthMonopoly Africa Output per Unit of Input The Rest of the World Diamond Production 3-6 * * * Global Competitiveness Country Strengths United States Technology, R & D Spending Finland Univ Enrollment, Efficient Legal System, Business Ethics Taiwan Cell-phone Ownership, Tech Innovation, Local Firms Competitiveness Singapore Savings Rate, Math/Science Education, Political Trust Sweden H.S Enrollment, Press Freedom, Phone Access 3-7 * * * Global Trade • Goods & Services • Importing • Exporting • Measuring Trade • Balance of Trade/Payments • Trade Deficit • Dumping 3-8 * * * U S Trade in Goods & Services (Billions) Balance of Trade Source: St Louis Business Monthly, Oct 1999 & World Trade Organization & Wikipedia 3-9 * * * Leading Goods Exporters/Importers In Billions $ Country United States Germany Japan France United Kingdom World Total Source: Wikipedia, 2005 Exports 928 1016 539 443 374 9,099 Imports 1,476 717 402 420 439 8,823 3-10 * * * Foreign Direct Investments in the U.S Source: Bureau of Economic Analysis, 2004 3-15 * * * World’s Largest MNCs 1) Wal-Mart Stores  2) Exxon Mobil  3) General Motors  4) BP  5) Ford Motor  6) Daimler Chrysler  7) Royal Dutch/Shell 8) General Electric  9) Toyota Motor  10)Mitsubishi Revenue ($Billions) 217 213 175 174 162 136 135 125 121 112 Source: Business Week; Morgan Stanley Capital International; and S&P Compustat 3-16 * * * What’s On Your Pizza • • • • • • • Costa Rica - Coconut France - Bacon, onion and fresh cream India - Pickled ginger, minced mutton and tofu Australia - Shrimp and pineapple Pakistan - Curry Brazil - Green peas Japan - Squid and mayo jaga Source: World Features Syndicate 3-17 * * * Forces Affecting Trading in Global Markets • Socio-cultural • Economic & Financial • Legal & Regulatory • Physical & Environmental 3-18 * * * Cultural Differences in Global Markets • • • Language Religion Values & Attitudes • Social Structure • Aesthetics • Personal Communication 3-19 * * * Did You Know? • In Turkey it’s rude to cross your arms while you are facing someone • In the Arab world the left hand is considered unclean; don’t eat with it! • In India never pat someone’s head, it’s the seat of the soul • The Chinese associate gifts such as straw sandals, clocks and handkerchiefs with funerals 3-20 * * * Economic & Financial Forces • No Worldwide Currency • Currency Fluctuations • Floating Exchange Rates • Bartering/Countertrading 3-21 * * * U.S Oil Imports Source: Gibson Consulting 2005 3-22 * Nations That Have Not * * Converted to the Metric System United States Liberi a Source: 2005 Yourunits.com Myanma r (Burma) 3-23 * * * Legal & Regulatory Forces Inconsistent Laws & Regulations Foreign Corrupt Practices Act of 1978 Local Business Contact Required 3-24 * * * Developing Countries Need Infrastructure • 1.2 billion people lack clean drinking water • billion people lack electricity • billion people lack adequate sanitation 3-25 * * * Protectionism • Mercantilism • Tariffs • Protective • Revenue • Import Quota • Embargo • Nontariff Barriers-Keiretsu 3-26 * * * Trade Agreements • • • • • • General Agreement on Tariffs & Trade (1948) Uruguay Round of GATT (1986) World Trade Organization (1995) Common Markets • • European Union (EU) Mercosur North American Free Trade Agreement (1994) Central America Free Trade Agreement (2005) 3-27 * * * Future Global Trade • People’s Republic of ChinaPermanent Normal Trade Relations/Rights • Russia & Others • Internet •Technology- Obstacles/Problems 3-28 * * * Pro’s & Con’s of Offshore Outsourcing Pro’s Con’s • More focus on areas where they can excel and grow • Jobs lost/wages fall • Reduces product quality • Outsourced work creates efficiencies, resulting in hiring more workers • Communication becomes much more difficult • Fuels global market growth 3-29 ...* * * The Dynamic Global Market World Population by continent: ** The U.S is the largest importing nation in the World! 3-2 * * * Growing World Population... Strengths United States Technology, R & D Spending Finland Univ Enrollment, Efficient Legal System, Business Ethics Taiwan Cell-phone Ownership, Tech Innovation, Local Firms Competitiveness Singapore... • Dumping 3-8 * * * U S Trade in Goods & Services (Billions) Balance of Trade Source: St Louis Business Monthly, Oct 1999 & World Trade Organization & Wikipedia 3-9 * * * Leading Goods Exporters/Importers