Global Management
Chapter 5
Mr. Sherpinsky
Business Management Class
Council Rock School District
Goals & Objectives
1. Define global management
2. Compare and contrast
importing and exporting
3. Explain the advantages and
disadvantages of
protectionism
4. Discuss the challenges of
doing business globally
Taco Barn
Warm Up
The World of Work
Customer Service by
Foreign Firms
Page 73 Textbook
Discuss Questions
1-4
Do You Know?
Can you name some brand
names owned by foreign
companies?
Examples of Brand Names Owned
by Foreign Companies
Brand Name
Product
Company
Country
7-Eleven
Convenience stores
Ito-Yokado
Japan
Clearasil
Skincare products
Reckitt Benckiser
Group
United Kingdom
Dannon
Yogurt
Danone
France
Firestone
Tires
Bridgestone Group
Japan
Frigidaire
Home Appliances
AB Electrolux
Sweden
Friskies
Cat Food
Nestle S.A.
Switzerland
LensCrafters
Eyeglasses
Luxottica Group
Italy
PlayStation
Game console
Sony
Japan
Popsicle
Frozen confection
Unilever
United Kingdom
Right Guard
Doedorant
Henkel KGaA
Germany
Global Management
• International Trade
– Exchange of goods and services
by different countries
• Extent of Trade
– In a recent year, world trade in
goods exceeded $12 Trillion
– Most trade occurs in developed
countries
• Examples: Japan, China, North
America, and Western Europe
International Trade
• Defined: Exchange of goods and
services by different countries.
– Today, world totally depends on
international trade
• Necessary to maintain standard of living
– America sells autos, heavy machinery,
clothing, and electronics abroad
– Argentine cattle ranchers ship beef to
consumers in dozens of countries
– Saudi Arabian oil producers supply much of
the world oil
• All these countries in return purchase
goods and services from other countries
U.S. Trading Partners
Imports
Exports
Canada
Mexico
China
Japan
UK
Germany
19.37%
12.21%
6.58%
4.84%
4.33%
4.10%
China
Canada
Mexico
Japan
Germany
Source: CIA World Factbook
19.30%
14.24%
11.12%
6.14%
4.53%
Leading Exporters of Merchandise
Rank
Exporters
Value
Share
1
China
$1,201.53
9.6%
2
Germany
$1,126.38
9.0%
3
United States
$1,056.04
8.5%
4
Japan
$580.72
4.6%
5
Netherlands
$498.33
4.0%
6
France
$484.73
3.9%
7
Italy
$405.78
3.2%
8
Belgium
$369.85
3.0%
9
Korea
$363.53
2.9%
United Kingdom
$352.49
2.8%
10
(Billions of Dollars)
Source: World Trade Organization
Leading Importers of Merchandise
Rank
Exporters
Value
Share
1
United States
$1,605.30
12.7%
2
China
$1,005.69
7.9%
3
Germany
$938.30
7.4%
4
France
$559.82
4.4%
5
Japan
$551.96
4.4%
6
United Kingdom
$481.71
3.8%
7
Netherlands
$445.50
3.5%
8
Italy
$412.72
3.3%
9
Hong Kong, China
$352.24
2.8%
Belgium
$351.95
2.8%
10
(Billions of Dollars)
Source: World Trade Organization
Global Management
• Changes in global
management
– Society Union replaced by 15
independent republics
– EU (European Union) trading bloc
– Southern Common markets
• Brazil, Argentina, Paraguay, &
Uruguay
Global Management
• Changes in global
management-Continued
– ASEAN (Association of Southeast
Asia Nations)
– NAFTA (North American Free-Trade
Agreement)
• U.S., Canada, and Mexico
– BRIC nations
• Brazil, Russia, India, and China
– Future Economic Superpowers
• Management takes on new
meaning
Global Management
• Changes in global
management-Continued
– Opportunities come with risks
• Political instability
• Erratic currency exchange rates
• Global economic interdependence
– Ties once isolated countries more closely
than ever
– Knowing your customer take on a new
meaning
» Cultural impacts on business, people,
laws, and attitudes
Global Management
• New Reality
– Products made in one country
• Purchased in another country
– Serviced in a third country
– Borders are NOW political not economic
• Interdependent global economic systems
Web Quest: Locate Products
Using the Internet, you will find 5 common
products (by categories below) that are made in
foreign countries
• You must include:
– Pictures of the product
– Flag of the country of
origin
– Name of the company who
makes it
– Name of the company who
owns the company that
makes it
• Categories
–
–
–
–
–
–
–
–
Car/Automobile
TV/Radio/PMD
Candy/Snack/Food
Article of Clothing
Household item
Beverage/Drink
Jewelry
Appliance
Global Management
• Absolute advantage
– Ability to produce more of a good than
another producer with the same quantity of
inputs
– i.e., Jamaica’s sugar production
– Absolute advantage is when a country
uses less resources to produce a good.
• Country A can produce one widget using one unit
of labor.
• Country B can produce one widget using two
units of labor.
– Country A has an absolute advantage over
Country B in producing widgets.
Global Management
• Comparative advantage
– Producers should produce the goods they are
most efficient at producing, and import goods
they are less efficient at producing
• Comparative advantage speaks in terms of
opportunity costs.
• A country has a comparative advantage in the
production of a good if it can do it at a LOWER
opportunity cost than another country.
Challenge: Advantage
• Complete the
worksheet
calculating
advantage.
– Use a calculator!
Importing and Exporting
• Exports
– Goods and
services produced
at home and sold
abroad
• Imports
– Goods and
services that are
produced overseas
and purchased at
home
Importing and Exporting
• Identifying export
markets
– Analysis of demographics,
economic data, country
reports, consumer tastes
and competition
– Need to know what
restrictions they face,
such as packaging
restrictions, labeling and
product safety
Importing and Exporting
• Why exporting?
– 95% of all consumers
live outside US
– Increased sales
– Diversification
– Engage in a variety of
operations so that
sluggish sales in one
market can be offset
by high sales in
another market
Importing and Exporting
• Why importing?
– Lower costs
– Availability of
specialized goods or
unique services
– Want
Importing and Exporting
• Material importing
– Importing raw materials needed
to produce a product
– Perhaps not available or too
expensive in the home country
• Consumer goods importing
– Some goods are also imported
as a complete product, which
can also be sold in their own
countries
Importing and Exporting
• Balance of trade
– Trade surplus
• Occurs when a country exports
more than it imports
– Trade deficit
• Occurs when a country imports
more than it exports
• Foreign exchange
– Exchange rates are the value of
one currency in terms of another
– Fluctuate from day to day
– Can have an effect on profits
Work Packet Time
• Use this time to
complete your
work packets for
Chapter 5 Global
Management
Engaging in Foreign Trade
• Treaties on trade and investment
– WTO (World Trade Organization)
creates and enforces the rules
governing trade among countries
• Treaties have led to cuts in tariffs
– Boosted exports and imports in 150 countries
– Trading Bloc: Two or more countries
that agree to remove restrictions
between themselves
Protectionism
• The practice of trying to
protect home markets
from foreign
competitors
– Tariffs
– Quotas
– Embargoes
– Dumping
– Sanctions
Protectionism
• Tariffs
– A tax charged on a imported
good
– Purpose is to raise the price of
foreign goods to allow domestic
producers to compete
– Specific tariff is levied per unit
– Ad valorem tariff is levied as a
percentage of the value of the
goods
Protectionism
• Quotas
– A restriction on the
quantity of goods that
can enter a country
• Embargos
– A total pan on the
import of a good from a
particular country
– Political reasons rather
than economic
Protectionism
• Dumping
– Refers to the practice of
selling goods in foreign
markets at below cost or
below what it sells at home
• Sanctions
– A mild form of embargo that
bans specific business ties
with a foreign country
• Example: Illegal to sell nuclear
technology to Pakistan, which
tested atomic bombs in 1998.
Protectionism
• Free Trade area
– A region where trade
restrictions are reduced or
eliminated
• NAFTA
– Signed in 1994
– USA, Mexico and Canada with
no major trade restrictions
– Advantages and disadvantages
• Increased sales
• Possible job losses as factories
have moved to Mexico
Protectionism
• The EU
– Signed in 1993
– 27 European countries
– 22% of the world’s
GDP
– 16 of the countries
have a single GDP
Web Research: Challenge EU
• Complete the handout!
– Using the Internet, research
the European Union (EU) and
answer the questions on the
handout.
Doing Business Globally
• Foreign intermediaries
– Wholesaler or agent that
markets products for
companies wanting to do
business abroad
• Licensing agreements
– Agreement that permits one
company to sell another
company’s products abroad in
return for a percentage of
revenues
Doing Business Globally
• Strategic alliances
– A pooling of resources and skills
to achieve common goals
• Multinational corporation
– A business that maintains a
presence in two or more
countries and has a considerable
portion of assets invested in
international activities
Doing Business Globally
• Home Country
– Country in which business has its
headquarters
• Host Country
– Foreign location where business has
its facilities
• Parent Firm
– Company headquarters
• Subsidiaries
– Foreign branches, usually
independently registered as legal
entity
International Cultures
• Cultures
– Must understand
foreign cultures
and customs
• Refers to customs,
values, beliefs,
and patterns of
behavior
High-context cultures
Communication through nonverbal
– Dress, language
signs/indirect suggestions
and ways of doing
Examples: Japan, Saudi Arabia
things
Low-context cultures
Communication direct and explicitly
– English is the
suggestions
language of
Examples: United States
business
International Cultures
• Political changes
– Political challenges caused by
governments or upheaval is a
concern for international
managers
• Nationalism
• When the government takes over or
solely runs a business
– US Postal Service
– Amtrak
• Argentina, Nationalized Oil
Companies in May 2012
International Cultures
• Human rights and ethics
– Norms of business ethics vary
greatly
– Understanding human rights
laws and ethics is essential to
the international manager
Web Research: Impact of Culture
on Business
Take a Trip!
Today is your chance to explore a foreign land. You will have
the chance to learn about the economy, the culture, the
society, and the people of a far away land. Sound enchanting?
I hope so!
1.
2.
3.
4.
5.
Choose a country (MUST be approved by teacher)
Using the Internet, research the required
information
Load data into a PowerPoint
Add pictures, graphs, and other visual
components
Be ready to present!
The reason that you are completing this project is so that you can see
that not all countries are the same, which means they do not all do
business the same way.
Each person will be responsible for presenting their country to the
class.