Analyzing Global Business
Murdick, Moor, Babson & Tomlinson
Sixth Edition, 2000

Global Opportunities
 Benefits of Global Investments
•Leaping over trade barriers
•Transportation Efficiencies
•Global Integration

Theories of International
Business
 The Theory of Comparative Advantage
 The Imperfect Markets Theory
 The Product Life Cycle

Approaches to Global Business
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Exporting and Importing goods & services
Licensing and Franchising
Piggybacking/ Strategic Alliances
Joint Ventures (IJVs)
Foreign Direct Investments and
Acquisitions
Mergers

Barriers To Globalization
 Tariffs
 Quotas
 Export, Import, and Investment Laws
 Local Content Laws

Barriers To Globalization
 Dumping and Price Control Laws
 Bribery Laws
 Labor Usage Laws
 Foreign Exchange Restrictions

Barriers To Globalization
 Government Monopolies
 Enforcement of Laws
 Government Purchasing Policies
 Threat of Nationalization and Expropriation

Currency Issues
 Changes in the value of the dollar affect:
– Exports
– Imports
– International Investment

Currency Issues
 Factors that influence exchange rates
– Inflation Rates
– Interest Rates
– Income Levels
– Government Controls
– Expectations

Transaction Effect
 Period A
German Product
Euros 4,000
Exchange Rate
$1=EU 4
Effect: U.S. buyer pays $1000
 Period B
German Product
Euros 4,000
Exchange Rate
$1=EU 2
Effect: U.S. buyer pays $2000

Methods to Avoid Currency Risk
 International Loans
 Forward Market
 Currency Options
 Natural Hedging
“Firms, Funds Pay to Hedge Vs. Argentina
Devaluation”, www.reuters.com
, October 4, 2001.

Global Strategy
 Global product or multi-domestic product?
– Global products are basically the same product produced and sold all over the world. Examples include petrochemical refining, pharmaceutical drugs, and airplanes.
– Multidomestic products are tailored for each country market.

Going to Market
 Define the concept, then do research, as international arena varies.
 Marketing Mix
– Product/service
– Promotion
– Price
– Distribution

Examples
 Nova - car in South America
 Gerber’s baby food in Africa
 Coca Cola in China
 Got milk?