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Chapter3Business
- 1. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
- 2. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The World Marketplace: Business Without Borders 2 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?
- 3. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Holden Outerwear Global Strategy Video HereVideo Here 3
- 4. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Gather Around the Water Cooler: Let’s Talk • 4 ©iStockphoto.com/DNY59 • What is Holden’s strategy for reaching global markets? • What are the benefits of this strategy? • What risks are involved in the use of this strategy?
- 5. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. An Unprecedented Opportunity…. 5 “ “ “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
- 6. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Growing World Population 6 Source: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html, accessed February 7, 2010, https://www.cia.gov/library/publications/the-world- factbook/rankorder/2003rank.html, accessed February 7, 2010; https://www.cia.gov/library/publications/the-world-factbook/rankorder/2119rank.html, accessed February 7, 2010.
- 7. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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
- 8. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 8 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-s-rank- 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 ©iStockphoto.com/Jesus Jauregui
- 9. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Reasons for International Trade 9 Access to Factors of Production Reduced Economic Risk Inflow of Innovation
- 10. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Reasons for International Trade: Competitive Advantage 10 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. Opportunity cost –The cost of giving up the second-best choice when making a decision
- 11. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 • 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. 11 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/wp- dyn/content/article/2007/01/27/AR2007012700662.html, accessed January 28, 2009; China’s mobile users top 600 million: govt, July 24, 2008 © vario images GmbH & Co.KG / Alamy
- 12. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global Trade: Taking Measure 12 • Balance of Trade Trade Deficit Trade Surplus • Balance of Payments Balance of Payments Deficit Balance of Payments Surplus • Exchange Rates • Countertrade
- 13. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global Trade: Exchange Rates 13 Source: What is countertrade? By Neha Gupta, Barter News Weekly website, March 11, 2010, http://www.barternewsweekly.com/2010/03/11/what-is-counter- trade-1851/, accessed February 10, 2010
- 14. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Many Names of Money 14 China England European Union India Iran Israel Japan Mexico South Africa South Korea Yuan Pound Euro Rupee Rial Shekel Yen Peso Rand Won
- 15. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Market Development Options 15
- 16. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Strategies for Reaching Global Markets 16 Foreign Outsourcing/Contract Manufacturing Contracting with foreign suppliers to produce products Importing Buying products that have been produced in foreign nations
- 17. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Seizing the Opportunity: Strategies for Reaching Global Markets 17 • 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 • Joint Ventures Two or more companies joining forces ©TheStudioDog/Photodisc/GettyImages © Mystic Arabia / Alamy
- 18. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chrysler and Fiat 18 Foreign acquisition allows companies to gain quick access into new markets 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
- 19. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Barriers to International Trade 19 • Sociocultural Differences • Economic Differences • Political & Legal Differences © MAO SIQIAN/ XINHUA/XINHUA PRESS/ CORBIS
- 20. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 Pizza Hut • Japan: Crust stuffed with shrimp nuggets and mayonnaise • South Korea: Crust filled with sweet potato mousse 20 ©Joe Raedle/Getty Images 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>
- 21. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Barriers to International Trade: Economic Differences 21 • 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?
- 22. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Barriers to International Trade: Sociocultural Differences 22 • Nonverbal Communication • Forms of Address • Attitudes toward punctuality • Religious Celebrations • Business Practice/Gifts Social/cultural differences can rapidly undermine business relationships
- 23. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Lost in Translation Video HereVideo Here 23
- 24. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Gather Around the Water Cooler: Let’s Talk • 24 ©iStockphoto.com/DNY59 • How are other countries changing because of globalization? • 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?
- 25. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 ©TheStudioDog/Photodisc/GettyImages
- 26. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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
- 27. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Protectionism 27 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
- 28. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Trade Restrictions 28 • Tariffs • Quotas • Voluntary Export Restrictions • Embargo
- 29. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Free Trade: The Movement Gains Momentum 29 There has been a global move toward free trade – the unrestricted movement of good and services across borders.
- 30. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. GATT and the World Trade Organization (WTO) 30 • 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
- 31. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. GATT and the World Trade Organization (WTO) 31 • The World Bank 187 Member Countries Reduce World Poverty in Developing World Influence Global Economy Provide Financial Assistance • The International Monetary Fund Support Stable Exchange Rates Facilitate International Payments Adopt Economic Policies Promote Trade Lends money to member nations AP Images/J. Scott Applewhite
- 32. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Trading Blocs and Common Markets 32 • 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 Groups of countries promoting the free flow of goods and services
- 33. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 33http://www.alaskadispatch.com/article/foreigners-flocking-america-bargains
- 34. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Reality TV: Start-up Junkies Video HereVideo Here 34
- 35. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Gather Around the Water Cooler: Let’s Talk • 35 ©iStockphoto.com/DNY59 • Why does Earth Class Mail have an unprecedented opportunity for impact on conventional postal mail delivery? • 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?
- 36. ©2013 Cengage Learning.All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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