*

*Chapter Three

Doing Business in

Global Markets

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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Why Trade with Other Nations?

• No nation can produce all its needs

• Mutually beneficial exchange

• Natural Resources or Technology– Produce or Buy?

*

*The Dynamic Global Market

• Importing –

• Buying products from another country.

• Exporting – S

• Selling products to another country.

• The U.S.

• largest in importing

• second largest in exporting

IMPORTING and EXPORTING

LG1

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*

*The Theories of Comparative and Absolute Advantage

• Comparative Advantage –

• Selling products produced most efficiently

• Buying products from other countries it cannot produce as efficiently.

• Absolute Advantage –

• Monopoly on producing a specific product

• Able to produce it more efficiently than all other countries.

LG1

COMPARATIVE and ABSOLUTE ADVANTAGE

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3-5

Theories of Advantage

Output per Output per Unit of Unit of InputInput

ComparativComparativee

U. S.U. S.

ChinaChina

SoftwarSoftwaree

U. S.U. S.

ChinaChina

ClothinClothingg

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Theories of Advantage

AbsoluteAbsolute

Output Output per Unit of per Unit of

InputInput

Copper ProductionCopper Production

ZambiaZambia

The Rest of The Rest of the World the World

== VirtualVirtual MonopolyMonopoly

*

*Importing Goods and Services

• Starbucks CEO, Howard Shultz, found his importing opportunity in Italy. He transformed a coffee shop in Seattle to mimic the European cafes.

LG2

GETTING INVOLVED in GLOBAL TRADE

3-7

*

*Measuring Global Trade

• Balance of Trade –

• Total value of a nation’s exports compared to its imports measured over time.

• Trade Surplus –

• Exports greater than imports.

• Trade Deficit –

• Exports less than imports.

HOW to

MEASURE

GLOBAL

TRADE

LG2

3-8

*

*Strategies for Reaching Global Markets

Least Amount of commitment, control, risk and profit potential Most

Licensing Exporting FranchisingContract

Manufacturing

International joint ventures and strategic

alliances

Foreign direct

investment

LG3

KEY STRATEGIES for REACHING GLOBAL MARKETS

3-9

*

*Forces Affecting Trading in Global Markets

LG4

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*

*Socio-cultural Forces

CULTURAL DIFFERENCES

LG4

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3-12

What’s On Your Pizza

• Costa Rica - Coconut• France - Bacon, onion and fresh cream• India - Pickled ginger, minced mutton and tofu• Australia - Shrimp and pineapple• Pakistan - Curry• Brazil - Green peas• Japan - Squid and mayo jaga

Source: World Features Syndicate

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Did You Know?

• In 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.

*

*Economic and Financial Forces

EXCHANGE RATES

LG4

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*

*Legal and Regulatory Forces

LEGAL CONCERNS OVERSEASLG4

3-15

*

*Trade Protectionism

TRADE PROTECTIONISM

LG5

3-16

*

*Trade Protectionism

TARIFFS

LG5

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Think Global, Act Local

• McDonald’s in India –– McDonald‘s has a consistent brand image around the

world, but has regionally influenced menus.

• http://video.foxbusiness.com/6873259/mcdonalds-in-india/?category_id=7542224d79feccaf637c186a01204f1ef3c83955

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