Chapter
Three
Competing in
Global Markets
3-1
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Growing World Population
12
10.8
10
In Billions
8
6.0
6
8.5
6.5
5.3
4
2
0
1990
1998
2010
2030
2060
Source: Population Reference Bureau
3-2
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U. S. Trade in
Goods & Services ($ Billions)
2500
2000
1500
Imports
Exports
1000
500
0
1975
1980
1985
1990
1995
1998
Source: St. Louis Business Monthly, Oct. 1999
3-3
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Company % of Earnings
From Outside U.S.
Pfizer
Microsoft
Intel
Gillette
Coca-Cola
AIG
0%
20%
40%
60%
80%
100%
Source: Investment Advisor, August 2000
3-4
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Why Trade With Other
Nations?

Reasons
 No nation can produce all
its needs
 Mutually beneficial
exchange
 Natural Resources or
Technology- Produce or
Buy?


Free Trade
Theories of Advantage
3-5
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Theories of Advantage
Absolute = Virtual Monopoly
South Africa
Output per
Unit of Input
The Rest of
the World
Diamond Production
3-6
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Theories of Advantage
Comparative
U. S.
China
China
U. S.
Output per
Unit of Input
Software
Clothing
3-7
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Specialize & Trade
Software
Clothing
3-8
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Checklist for Exporters
Analyze your capabilities
 Define export potential of product
 ID best foreign markets for
product
 Use available government
assistance
 Study entry strategies/export
procedures

3-9
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Developing Countries Need
Infrastructure



1.2 billion people lack clean drinking
water
2 billion people lack electricity
3 billion people lack adequate sanitation
Corporate investment in infrastructure rose 10fold in 1990’s
Source: Business Week, May 3, 1999
3-10
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Percentage of
Households With:
Electricity
Automobile
Color TV
U.S.
China
India
Running Water
Refrigerators
Telephones
0%
20%
40%
60%
80%
100%
Source: Gallup India PVT, LTD.
3-11
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China’s Telecom Growth
200
180
160
140
120
100
80
60
40
20
0
Users in millions
Internet Hosts
Business Lines
Residential Lines
1996
1997
1998
1999
2000
Source: Wired, September 2000.
3-12
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Import Goods- Money
Goes Out of Country
3-13
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Export Goods- Money
Comes Into the Country
3-14
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Trade Deficits/SurplusesBalance of Trade(1999)
U. S. Exports to Japan
Food/Beverages
Raw Materials
Chemicals & Pharmaceuticals

$58.6 Billion
Balance of Trade
1999 (cont’d)
Japan
U.S.
Exports to
Computers &
Telecommunications
 Cars/Trucks
 Consumer Products
 Semi-Finished Goods

$113.9
B
3-16
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1999 Balance of Trade
$58.6 B
Goods To Japan
$113.9 B
Goods From Japan
Yen to U.S.
$55.3 B
Dollars to Japan
U.S. Balance of
Payments = Unfavorable
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3-17
Trading in Global Markets:
The U. S. Experience
 U.
S. Never Been Aggressive at
Exporting- intense competition
 U. S. Is World’s Largest
Exporter
 U. S. = Debtor Nation
 Foreign Direct Investment
– Sign of Strength
– “Selling of America”
3-18
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Modes of Entry into
the Global Markets
(Figure 3.4)
3-19
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Strategies for
Reaching Global Markets
Exporting
Joint Ventures &
Strategic
Alliances
Franchising
Subsidiaries
Contract Manu.
Foreign Direct
Investment
Licensing
3-20
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Forces Affecting Trading
in Global Markets
Sociocultural
Economic/Currency
Shifts
Legal/Regulatory
Physical/Environmental
Protectionism
Global E-Commerce
3-21
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Foreign Legal Standards
 Legal
questions
 Foreign
Corrupt
Practices Act of
 Antitrust
1978- U.S.
 Labor Relations
businesses MUST
 Patents, copyrights
follow U.S. law in
 Trade Practices
conducting
 Taxes
business globally
 Product Liability
 No bribes to
 Child Labor
secure contract
 Prison Labor
3-22
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Cultural Differences in
Global Markets

Language

Religion

 Aesthetics
 Materialism
Values &
Attitudes
3-23
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Did You Know?
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.
 In
3-24
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Favorite Campbell
Soups Around the World

Britain - Tomato

Japan - Corn


South America Cream of Asparagus


Hong Kong Watercress & Duck
Gizzard
United States Chicken Noodle,
Cream of Mushroom
Australia- Cream of
Pumpkin
3-25
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Nations That Have Not
Converted to the Metric System
United
States
Brunei
Yemen
Liberia
Myanmar
(Burma)
3-26
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What’ the 2nd Most Valuable
Global Business Language
German
4%
Other
6%
Chinese
11%
Japanese
16%
Spanish
63%
Source: Accountemps Poll
3-27
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Protectionism

Mercantilism

Tariffs
– Protective
– Revenue

Import Quota &
Embargo
3-28
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Trade Agreements/Unions

General Agreement on Tariffs and
Trade (GATT)- WTO

Common Markets/European Union

North American Free Trade
Agreement (NAFTA)
3-29
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Exchange Rates- U. S. Dollars
to Other Currencies

$ Goes DownIncreases Demand
for U. S. Products
– Balance of Trade
Improves

$ Goes UpDecreases Demand
for U. S. Products
– Balance of Trade
Widens
3-30
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Sources of Foreign Direct
Investments In the U.S.
Japan
5%
Canada
11%
Other
4%
Europe
32%
Asia
13%
Latin
America
17%
Britain
18%
Source: U.S. Commerce Dept.
3-31
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Survey of
Country Corruption
Most Corrupt = 1.0
Least Corrupt = 10.0
Nigeria
Indonesia
Colombia
Russia
China
U.S.
Hong Kong
Germany
Canada
Denmark
1
2
3
4
5
6
7
8
9
10
Source: Business Week, June 14, 1999
3-32
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