Global ManagementChapter 5

Mr. SherpinskyBusiness Management ClassCouncil 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

The World of WorkCustomer Service by Foreign Firms

Page 73 TextbookDiscuss Questions

1-4

Warm Up

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

ExportsCanadaMexicoChinaJapanUKGermany

19.37%12.21%6.58%4.84%4.33%4.10%

ImportsChinaCanadaMexicoJapanGermany

19.30%14.24%11.12%6.14%4.53%

Source: CIA World Factbook

Leading Exporters of Merchandise

(Billions of Dollars)Source: World Trade Organization

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%

10 United Kingdom $352.49 2.8%

Leading Importers of Merchandise

(Billions of Dollars)Source: World Trade Organization

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%

10 Belgium $351.95 2.8%

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

• 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

Using the Internet, you will find 5 common products (by categories below) that are

made in foreign countries

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

– Dress, language and ways of doing things

– English is the language of business

High-context culturesCommunication through nonverbal signs/indirect suggestionsExamples: Japan, Saudi ArabiaLow-context culturesCommunication direct and explicitly suggestionsExamples: United States

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. Choose a country (MUST be approved by teacher)2. Using the Internet, research the required

information3. Load data into a PowerPoint 4. Add pictures, graphs, and other visual

components5. 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.