*

*
*

**

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

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*
*

Growing World Population

In
Billions

Source: Population Reference Bureau

3-3

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*
*

Why Trade With

Other Nations?

No nation can produce all

its needs

Mutually beneficial
exchange

Natural Resources or

Technology- Produce or
Buy?
3-4

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*
*

Theories of Advantage
Comparativ
e

U. S.
China

China

U. S.
Output per
Unit of
Input

Softwar
e

Clothin
g
3-5

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*
*

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

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*
*

Global Trade

Goods & Services

Importing
Exporting

Measuring Trade

Balance of Trade/Payments
Trade Deficit
Dumping
3-8

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*
*

U. S. Trade in
Goods & Services (Billions)
Balance of
Trade

Source: St. Louis Business Monthly, Oct. 1999 & World Trade Organization & Wikipedia

3-9

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*
*

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

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*
*

Strategies for
Reaching Global Markets
Licensing
Joint Ventures &

Strategic Alliances

Exporting

Franchising

Contract
Manufacturing

Joint Ventures

Foreign Direct
Investment

3-11

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*
*

Country Presence
of Well-Known Companies

Source: World Features Syndicate

3-12

*
*
*

Starbucks Expansion
World Locations

Source: Starbucks.com May 2006

3-13

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*
*

Most Spoken Languages

Most Spoken
Languages
in the U.S.

Most Spoken
Languages
in the World

Source: 2005 CIA World Factbook

3-14

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*
*

Foreign Direct
Investments in the U.S.

Source: Bureau of Economic Analysis, 2004

3-15

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*
*

Worlds 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

*
*
*

Whats 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

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*
*

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

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*
*

Did You Know?

In Turkey its rude to cross your arms

while you are facing someone.

In the Arab world the left hand is

considered unclean; dont eat with it!

In India never pat someones head,

its the seat of the soul.

The Chinese associate gifts such as

straw sandals, clocks and
handkerchiefs with funerals.

3-20

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*
*

Economic & Financial

Forces

No Worldwide Currency
Currency Fluctuations
Floating Exchange Rates
Bartering/Countertrading

3-21

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*
*

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

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*
*

Legal & Regulatory

Forces

1. Inconsistent Laws &

Regulations

2. Foreign Corrupt

Practices Act of 1978

3. Local Business Contact

Required

3-24

*
*
*

Developing Countries
Need Infrastructure
1.2 billion people lack clean drinking
water

2 billion people
lack electricity

3 billion people lack adequate

sanitation

3-25

*
*
*

Protectionism

Mercantilism
Tariffs
Protective
Revenue

Import Quota
Embargo
Nontariff Barriers-Keiretsu
3-26

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*
*

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

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*
*

Future Global Trade

Peoples Republic of ChinaPermanent Normal Trade
Relations/Rights

Russia & Others

Internet
Technology- Obstacles/Problems
3-28

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*
*

Pros & Cons of

Offshore Outsourcing
Pros

Cons

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