CHAPTER
Competing in Global
Markets
3
MUSOLINO
SUNY CONTEMPOARY BUSINESS PRINCIPLES
1-1 1
The Dynamic Global Market
World Population by continent:
1% 8%
6%
United States
South Am erica
12%
Africa
Europe
As ia
60%
13%
Aus tralia
** The U.S. is the largest importing nation in the World!
2
Growing World Population
12
10.8
10
In Billions
8
6
8.5
5.3
6.0
6.5
1998
2010
4
2
0
1990
2030
2060
Source: Population Reference Bureau
3
Why Trade With
Other Nations?
•
•
•
No nation can produce all
its needs
Mutually beneficial
exchange
Natural Resources or
Technology- Produce or
Buy?
4
Theories of Advantage
Comparative
U. S.
China
China
U. S.
Output per
Unit of Input
Software
Clothing
5
Theories of Advantage
Absolute = Virtual Monopoly
South Africa
Output per
Unit of Input
The Rest of
the World
Diamond Production
6
Global Competitiveness
Country
Strengths
United States
Technology,
R & D Spending
Finland
Univ. Enrollment, Efficient Legal
System, Business Ethics
Taiwan
Cell-phone Ownership,
Tech. Innovation,
Local Firms Competitiveness
Singapore
Savings Rate, Math/Science
Education, Political Trust
Sweden
H.S. Enrollment, Press Freedom,
Phone Access
7
Global Trade

Goods & Services
•Importing
•Exporting
•
Measuring Trade
• Balance of Trade/Payments
•Trade Deficit
•Dumping
8
U. S. Trade in
Goods & Services (Billions)
1600
1400
Balance of
Trade
1200
1000
800
600
400
Exports
200
Imports
0
1975 1980 1985 1990
1995 2000 2002 2005
Source: St. Louis Business Monthly, Oct. 1999 & World Trade Organization & Wikipedia
9
Leading Goods
Exporters/Importers
In Billions $
Country
United States
Germany
Japan
France
United Kingdom
World Total
Exports
928
1016
539
443
374
9,099
Imports
1,476
717
402
420
439
8,823
10
Source: Wikipedia, 2005
Strategies for
Reaching Global Markets
• Licensing
• Exporting
• Franchising
• Joint Ventures &
Strategic Alliances
• Foreign Direct
Investment
• Contract
Manufacturing
• Joint Ventures
11
Country Presence
of Well-Known Companies
Krispy Kreme
7-Eleven
Starbucks
McDonald's
Whirlpool
UPS
FedEx
0
Source: World Features Syndicate
50
100
150
200
250
12
Starbucks’ Expansion
World Locations
29%
71%
International
Source: Starbucks.com May 2006
U.S.
13
Most Spoken Languages
4%3%1%
English
11%
Spanish
Other IndoEuropean
Asian and
Pacific Island
Other
Most Spoken
Languages
in the U.S.
81%
22%
Most Spoken
Languages
in the World
37%
Mandarin
Chinese
Spanish
English
7%
Hindi
8%
Portuguese
13%
13%
Other
14
Foreign Direct
Investments in the U.S.
1200000
1000000
800000
600000
400000
200000
0
Europe
Latin
America
Asia
Canada
Source: Bureau of Economic Analysis, 2004
15
World’s Largest MNCs
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
Wal-Mart Stores
Exxon Mobil
General Motors
BP
Ford Motor
Daimler Chrysler
Royal Dutch/Shell
General Electric
Toyota Motor
Mitsubishi
Source: Business Week; Morgan Stanley Capital International; and S&P Compustat
Revenue ($Billions)
217
213
175
174
162
136
135
125
121
112
16
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
Source: World Features Syndicate
17
Forces Affecting Trading
in Global Markets
• Socio-cultural
• Economic & Financial
• Legal & Regulatory
• Physical & Environmental
18
Cultural Differences
in Global Markets
•
•
•
•
Language
•
Social Structure
Religion
•
Aesthetics
Values &
Attitudes
Personal
Communication
19
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.
20
Economic & Financial Forces
•
No Worldwide Currency
•
Currency Fluctuations
•
Floating Exchange Rates
•
Bartering/Counter trading
21
U.S. Oil Imports
Canada
18%
Mexico
33%
Venezuela
15%
12%
12%
10%
Nigeria
Saudi Arabia
Other
Source: Gibson Consulting 2005
22
Nations That Have Not
Converted to the Metric System
United
States
Liberia
Myanmar
(Burma)
23
Legal & Regulatory Forces
1.
2.
3.
Inconsistent Laws &
Regulations
Foreign Corrupt Practices Act
of 1978
Local Business Contact
Required
24
Developing Countries
Need Infrastructure
•
1.2 billion people lack clean
drinking water
• 2 billion people
lack electricity
•
3 billion people lack adequate
sanitation
25
Protectionism
Mercantilism
 Tariffs

•Protective
•Revenue
Import Quota
 Embargo
 Nontariff Barriers-Keiretsu

26
Trade Agreements




General Agreement on Tariffs & Trade (1948)
Uruguay Round of GATT (1986)
World Trade Organization (1995)
Common Markets
• European Union (EU)


North American Free Trade Agreement (1994)
Central America Free Trade Agreement (2005)
27
Future Global Trade
• People’s Republic of ChinaPermanent Normal Trade
Relations/Rights
• Russia & Others
• Internet
•Technology- Obstacles/Problems
28
Pro’s & Con’s of
Offshore Outsourcing
Pro’s



More focus on areas where
they can excel and grow
Outsourced work creates
efficiencies, resulting in
hiring more workers
Con’s

Jobs lost/wages fall

Reduces product quality

Communication becomes
much more difficult
Fuels global market
growth
29
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