Download ppt - International Business 7.1 International Trade 7.2 The Global Economy

International Business

7.1 International Trade7.2 The Global Economy

Why is this important?

Purpose – Understand the Global Economy and why companies conduct business internationally – the opportunities and obstacles!

Your Role!

Learn as much as you can about international business

Ask questions Share your opinions

International Business – Chapter 7

We need to understand:– Why do countries trade?– Why do countries import and export

goods?– How do countries restrict trade?– What strategies do companies use to

compete in the global economy?

7.1 Concepts and Terms

International Trade – exchange of goods and services between countries– Next time you buy clothing – check out the labels

to determine where clothes were made!– Other examples are cars, beef, coffee, chocolate,

electronics


Countries have the “absolute advantage” when they can produce more goods or services than other countries because they have the required natural resources, labor force, and capital.


“Law of comparative advantage” states producers should produce goods that can be produced efficiently and purchase other goods

Is competition a factor in deciding what to produce and what to buy?– Have you heard about “Outsourcing”?

Exporting – 7.1 Concepts and Terms

Exporting is selling goods and services to other countries.

Why would I want to export my goods if I have a successful business in my own country?

– Increase Sales!– Diversify sales from multiple markets!

China is one of the hottest markets in the world! What does the United States export?

Food, Technology, Cars

Importing – 7.1 Concepts and Terms

“Importing” is purchasing goods and services from other countries.

Why would companies want to import goods or services? – Law of “comparative advantage”– Cost of goods – competition!– Resale goods– Quality of goods– Availability of goods and services

Importing – 7.1 Concepts and Terms

Can you name brands of goods that are imported?

Cars, Clothes - How about J. Crew? Energy, Electronics, TV’s Raw Materials? What happens when we import more than we

export? Trade Imbalance

Government’s Role in International Trade

Provides companies a resource to evaluate markets Unique Laws Trade restrictions Export Documentation Packaging, Labeling – hazardous chemicals International Trade Administration (U.S. Dept. of

Commerce) Embassies and Consulates C.I.A.

7.1 International Trade Considerations

Foreign Exchange and Currency Conversion Tariffs and Tax Laws – import taxes and VAT (value

added tax) In-Country Presence Time Zones, Holidays Cultural differences Language – translation services Quotas – import restrictions – impact price Embargos – ban on imports – usually political

7.2 The Global Economy

Objectives:– Understand impact of NAFTA on trade in North

America– How Managers decide to enter into the Global

economy– Challenges working in a different culture

North America Region

CaribbeanAnd LatinAmerica

EuropeMiddle East

AfricaAsia

Pacific

International Regions


Political changes beginning in the 1980s across many countries – China, Russia, United States

Created by countries opening their borders to foreign companies

Free Trade Areas eliminated restrictions - NAFTA

Influenced by technology and the Internet


Free Trade Areas eliminated restrictions – 1994 North America Free Trade Agreement

United States, Mexico, and Canada free to trade with minimal restrictions or tariffs

USA – increased imports of clothes and exports of food and cars

Mexico and Canada – lower labor costs (Outsourcing jobs from USA)

Fact: Chrysler has factories in Canada and Mexico


Companies are going Global because:– Expands sales opportunities– Provides protection from economic slowdown in a

single market– Reduce costs – manufacturing, salaries, materials– Competition

Is quality of goods always part of buying decision?


Forms of International Operations– Foreign Intermediary is a wholesaler or agent

marketing a foreign companies products – common in Poland and Russia

– Licensing Agreements used to partner with a foreign company to sell another companies goods and services.

Many restaurants use License Agreements (TGIF)


Forms of International Operations (cont.)– Strategic Alliances used to pool resources and

skills with a foreign company.– Used to enter new markets – Leverage another companies name or reputation– Share research, technology, and knowledge of

market and culture– Expand product portfolio – Daimler Chrysler


Multinational Corporations establish a presence in foreign countries– Manufacturing and distribution facilities

Most major corporations are now considered multinational!

Expand markets and reduce costs!

7.2 Case of Lucent Technologies

Manufacturing arm of AT&T – one of the last Monopolies Spun off as a separate company in 1996 Owned factories all across USA Most customers were in USA USA Markets slowed down and competition increased –

expanded internationally 1. Factories were consolidated to reduce costs2. Contract manufacturers were hired and moved factories to

Mexico and Canada3. Integration centers opened in South America, Ireland, Poland,

and China How do you think the economy of the USA was affected?

7.2 Challenges of working Internationally

Understanding local laws Respecting local customs and religions Time Zones, Holidays, Travel Cultural differences – role of women, rank

within company Business Customs – dress codes, Boss vs.

Coach, Gifts vs. Bribes

The Bottom-line!

International Business is a fact of life! Grow sales by expanding into new markets –

raise stock price! Reduce costs to beat the competition! Diversify into new markets to minimize

impact of economic slowdown

The China Project

We need a meeting set up between our St. Louis office and a China office to discuss a major event occurring in 2008.

The attendees will participate from their respective cities.

Our company has $1M USD budgeted to promote our product (Sports Hat) for this event.

Be prepared to present your recommendation!