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©2013 Cengage Learning. All Rights Reserved.
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3
The World
Marketplace:
Business Without
Borders
LO1
What opportunities exist in the
world economy for businesses?
LO2
Why do nations trade?
LO3
How do we measure trade?
LO4
How do companies reach global
markets?
LO5
What are the barriers to
international trade?
LO6
What are the benefits and
criticisms of the free trade
movement?
2
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Holden Outerwear Global Strategy
Video Here
3
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Gather Around the Water Cooler:
Let’s Talk
•
• What is Holden’s strategy for reaching global
markets?
• What are the benefits of this strategy?
© iStockphoto.com/DNY59
• What risks are involved in the use of this
strategy?
4
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An Unprecedented Opportunity….
“
“A company that keeps its eye on Tom,
Dick and Harry is going to miss Pierre,
Hans, and Yoshio.”
-- Al Ries, marketing strategist and
author
“
©2013 Cengage Learning. All Rights Reserved. May not
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5
be scanned,
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Growing World Population
Source: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html, accessed February 7, 2010, https://www.cia.gov/library/publications/the-worldfactbook/rankorder/2003rank.html, accessed February 7, 2010; https://www.cia.gov/library/publications/the-world-factbook/rankorder/2119rank.html, accessed February 7, 2010.
©2013 Cengage Learning. All Rights Reserved. May not
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6
or
Global Trade Recovery
• The long-term global potential for U.S. business is
enormous
• The global economy contracted in 2009
• But, world GDP turned back around in 2010
• U.S. consumers have money but China and India
represent a bigger opportunity
7
©2013 Cengage Learning. All Rights Reserved. May not
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Unimpressive Scores
• U.S. students ranked 25th among peers from 34 countries on
a math test, and scored average in science and reading
• China, Singapore, and South Korea led
the pack, outpacing American students
• The South Korean government set a curfew
for online games in 2010 because public
school students exhibited signs of addiction
• The U.S. addiction level are equally high as American
students need to increase their academic “game” to
compete globally
©iStockphoto.com/Jesus Jauregui
Source: Singapore Study finds video game addiction exists globally, The Medical News website, January 20, 2011, http://www.news-medical.net/news/20110120/Singapore-study-finds-video-game-addiction-exists-globally.aspx accessed February 14, 2011;
What they’re restricting in South Korea, Time magazine briefing, April 26, 2010; U.S. Teens Lag as China Soars on International Test by John Hechinger, December 7, 2010, Bloomberg website, http://www.bloomberg.com/news/2010-12-07/teens-in-u-srank-25th-on-math-test-trail-in-science-reading.html, accessed February 14, 2010; South Korea Cracks Down on Gaming Addiction by Geoffrey Cain, Time magazine website, April 20, 2010, http://www.time.com/time/world/article/0,8599,1983234,00.html,
accessed February 1, 2010
©2013 Cengage Learning. All Rights Reserved. May not
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8
or
Key Reasons for International Trade
Access to Factors of Production
Reduced Economic Risk
Inflow of Innovation
9
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Key Reasons for International Trade:
Competitive Advantage
Opportunity cost –The cost of giving up the second-best choice when
making a decision
A country has an
absolute advantage when
it can produce more of a
good than other nations,
using the same amount
of resources.
Comparative
advantage is the
benefit a country
has in a given industry if
it can make products at a
lower opportunity
cost.
10
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Cell Phone Subscriptions
Around the World
• In the U.S., Europe, and Japan, cell phones
followed landlines, but many developing nations
“can leapfrog technology.”
• China currently boasts the world’s largest base of
cell phone users—766 million
• India’s current subscriber base is more than 584
million; it has grown explosively in 5 years
© vario images GmbH & Co.KG / Alamy
• In Africa, cell phone penetration rates in 2009
were approximately 21% versus 9% for land lines

In Zimbabwe, cell phone penetration grew from
4% in 2008 to about 30% in 2009.
Source: Zimbabwe: Mobile phone penetration linked to GDP growth, October 28, 2010, AllAfrica Global Media website, http://allafrica.com/stories/201011011088.html, accessed February 7, 2010; Mobile Phone Adoption in Developing Countries, WikiInvest website,
http://www.wikinvest.com/concept/Mobile_Phone_Adoption_in_Developing_Countries, accessed February 8, 2011; Cell phones vital in developing world by Malcolm Foster, January 27, 2007, Washington Post website, http://www .washingtonpost.com/wpdyn/content/article/2007/01/27/AR2007012700662.html, accessed January 28, 2009; China’s mobile users top 600 million: govt, July 24, 2008
11
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Global Trade: Taking Measure
• Balance of Trade
Trade Deficit
Trade Surplus
• Balance of Payments
Balance of Payments Deficit
Balance of Payments Surplus
• Exchange Rates
• Countertrade
12
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Global Trade: Exchange Rates
STRONG DOLLAR VS EURO:
(Example: $1.00 = 1.20 euros)
WEAK DOLLAR VS. EURO:
(Example: $1.00 = .60 euros)
U.S. travelers to Europe
European travelers to U.S.
American firms with
European operations
European exporters
European firms with
American operations
American exporters
Source: What is countertrade? By Neha Gupta, Barter News Weekly website, March 11, 2010, http://www.barternewsweekly.com/2010/03/11/what-is-countertrade-1851/, accessed February 10, 2010
13
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The Many Names of Money
China
Yuan
England
Pound
European Union
Euro
India
Rupee
Iran
Rial
Israel
Shekel
Japan
Yen
Mexico
Peso
South Africa
Rand
South Korea
Won
14
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Market Development Options
15
©2013 Cengage Learning. All Rights Reserved. May not
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Strategies for Reaching Global Markets
Foreign Outsourcing/Contract
Manufacturing
Contracting with foreign suppliers to
produce products
Importing
Buying products that have been
produced in foreign nations
16
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© The Studio Dog/Photodisc/Getty Images
Seizing the Opportunity: Strategies
for Reaching Global Markets
• Exporting
Selling domestic products abroad
• Licensing
Authority given for rights to produce/market
product and use trademarks/patents
• Franchising
Providing the right to produce and market
products under its operating requirements
• Direct Investment
Firms acquire businesses or develop new
facilities in foreign countries
© Mystic Arabia / Alamy
• Joint Ventures
Two or more companies joining forces
17
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Chrysler and Fiat
Foreign
acquisition
allows companies
to gain quick
access into new
markets
In the wake of the
Great Recession…
Italian carmaker Fiat
acquired struggling U.S.
auto giant, Chrysler to
leverage the American
market
18
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Barriers to International Trade
• Sociocultural Differences
• Economic Differences
• Political & Legal Differences
© MAO SIQIAN/ XINHUA/XINHUA PRESS/ CORBIS
19
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Veggie Surprise, Anyone?
McDonald’s
• India: Paneer Salsa Wrap: Cottage cheese with
Mexican-Cajun coating
• Australia: Bacon and Egg Roll: “rashers of quality
bacon and fried egg”
• Kumati: Veggie Surprise Burger
• United Kingdom: Five “Toasted Deli” sandwich
options
©Joe Raedle/Getty Images
Pizza Hut
• Japan: Crust stuffed with shrimp nuggets and
mayonnaise
• South Korea: Crust filled with sweet potato mousse
Source: McDonald’s country/market sites, http://www.mcdonalds .com./countries.html, accessed February 10, 2011 . <http://www.dominos.com/Public-EN/Site+Content/Secondary/Inside+Dominos/Pizza+Particulars/International+Speciality+Toppings/;
http://slice.seriouseats.com/archives/2008/02/crazy-weird-asian-pizza-crusts-japanese-korean-hong kong.html; http://recipes.howstuffworks.com/fresh-ideas/dinner-food-facts/favorite-pizza-toppings-in-10-countries .htm;
http://slice.seriouseats.com/archives/2008/02/crazy weird-asian-pizza-crusts-japanese-korean-hong-kong.htm>
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20
or
Barriers to International Trade:
Economic Differences
•
•
•
•
Exchange Rates
Population
Per Capita Income
Infrastructure
 Transportation
 Communication
 Energy
 Finance
Can you profitably provide
your product or service to
meet the needs of the
market?
21
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Barriers to International Trade:
Sociocultural Differences
Social/cultural differences can
rapidly undermine business
relationships
•
•
•
•
•
Nonverbal Communication
Forms of Address
Attitudes toward punctuality
Religious Celebrations
Business Practice/Gifts
22
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Lost in Translation
Video Here
23
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Gather Around the Water Cooler:
Let’s Talk
•
• How are other countries changing because of
globalization?
© iStockphoto.com/DNY59
• How is the United States being impacted by
globalization?
• What is the difference between countries
industrializing now and the fact that the United
States must update its infrastructure?
24
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© The Studio Dog/Photodisc/Getty Images
Barriers to International Trade:
Political and Legal Differences
• Political regimes differ around the world
• Legal Differences

Lack of Enforcement

Bribery
• Political Climate

Stability

Violence
• Piracy and intellectual property is a problem in
several foreign nations.
25
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Global Greening?
The world community must take dramatic steps to combat global warming.
• Change won’t be easy and coordination is vital
• The United Nations is sponsoring an international Climate Change
Conference in Copenhagen.
Consider these questions about the conference:
1. Did a treaty emerge? How many nations signed? Did any of the
participants surprise you? How?
2. Do you think the conferences and treaties will yield results? Why or
why not?
3. What role did the United States play? Do you believe that the role was
appropriate? Why or why not?
26
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Protectionism
Reasons to Create Trade
Restrictions
Reasons to Eliminate Trade
Restrictions
Protect domestic industry
Reduce prices and increase
choices for consumers
Protect domestic jobs in key
industries
Increase domestic jobs
Retaliate against countries who
have engaged in unfair trade
practices
Build exporting opportunities
Pressure other countries
Use world resources more
efficiently
27
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International Trade Restrictions
• Tariffs
• Quotas
• Voluntary Export Restrictions
• Embargo
28
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Free Trade: The Movement Gains
Momentum
There has been a global move toward
free trade – the unrestricted
movement of good and services across
borders.
29
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GATT and the World Trade Organization
(WTO)
• General Agreement on Tariffs &
Trade (GATT)
 Established in 1948
 125 Nations
 Slashed tariffs by about 30%
• World Trade Organization (WTO)
 Promote International Trade
 Settle Trade Disputes
30
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GATT and the World Trade Organization
(WTO)
• The World Bank




187 Member Countries
Reduce World Poverty in Developing World
Influence Global Economy
Provide Financial Assistance
• The International Monetary
Fund
AP Images/J. Scott Applewhite





Support Stable Exchange Rates
Facilitate International Payments
Adopt Economic Policies
Promote Trade
Lends money to member nations
31
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Trading Blocs and Common Markets
Groups of countries promoting the free flow of goods and services
• The North American Free Trade Agreement
(NAFTA)
 The largest trading bloc
 United States, Canada and Mexico
 Critics for job loss
• European Union (EU)
 The largest common market
 27 nations; combined GDP of $15 Trillion
 Goal is to bolster Europe’s trade position
©2013 Cengage Learning. All Rights Reserved. May not
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32
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Foreigners Flocking to America for
Bargains
• The weak dollar is enticing global shoppers
• The down dollar is a discount to tourists
• Foreign travelers are lured to the U.S. where they
get a bigger bang for their euro, franc, yen….
• Demand for U.S. hotels is up
• Tourism has been an economic boost representing
10% of jobs added in the first part of 2011
33
http://www.alaskadispatch.com/article/foreigners-flocking-america-bargains
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Reality TV: Start-up Junkies
Video Here
34
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Gather Around the Water Cooler:
Let’s Talk
• Why• does Earth Class Mail have an
unprecedented opportunity for impact on
conventional postal mail delivery?
© iStockphoto.com/DNY59
• Which reasons for engaging in international trade
seem to be relevant to Earth Class Mail’s
demonstration at the International Trade Show
for Postal Executives? Explain your answer.
• Which strategy for reaching global markets does
Earth Class Mail seem to be employing?
35
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3
Looking Back
• What opportunities exist in the world economy for businesses?
• Why do nations trade?
• How do we measure trade?
• How do companies reach global markets?
• What are the barriers to international trade?
• What are the benefits and criticisms of the free trade movement?
36
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