Download LG3 \KEY STRATEGIES for REACHING GLOBAL MARKETS

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Chapter Three
*
Doing
Business in
Global
Markets
McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
IMPORTING and EXPORTING
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The Dynamic
Global Market
LG1
*
• Importing -- Buying products
from another country.
• Exporting -- Selling products
to another country.
• The U.S. is the largest
importing and the second
largest exporting nation in the
world.
3-2
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COMPARATIVE and ABSOLUTE
ADVANTAGE
The Theories of
Comparative and
Absolute Advantage
LG1
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• Comparative Advantage -- A country should sell
the products it produces most efficiently and buy
from other countries the products it cannot produce
as efficiently.
• Absolute Advantage -- A country has a monopoly
on producing a specific product or is able to produce
it more efficiently than all other countries.
3-3
GETTING INVOLVED in
GLOBAL TRADE
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Importing Goods
and Services
LG2
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• Starbucks CEO, Howard
Shultz, found his
importing opportunity in
Italy. He transformed a
coffee shop in Seattle to
mimic the European
cafes.
3-4
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HOW to MEASURE GLOBAL TRADE
Measuring
Global Trade
LG2
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• Balance of Trade -- The total value of a nation’s
exports compared to its imports measured over
time.
• Trade Surplus -- When the value of a country’s
exports is more than that of its imports.
• Trade Deficit -- When the value of a country’s
exports is less than that of its imports.
3-5
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\KEY STRATEGIES for REACHING
GLOBAL MARKETS
Licensing
Least
Exporting
Franchising
Contract
Manufacturing
International
joint ventures
and strategic
alliances
Amount of commitment, control, risk and profit potential
Strategies for
Reaching Global
Markets
LG3
*
Foreign
direct
investment
Most
3-6
FORCES AFFECTING
GLOBAL TRADE
*
Forces Affecting
Trading in Global
Markets
LG4
*
• Sociocultural
• Economic and Financial
• Legal and Regulatory
• Physical and Environmental
3-7
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CULTURAL DIFFERENCES
Socio-cultural
Forces
LG4
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• To be involved in global trade, you must be
aware of the cultural differences among nations
including:
-
Social Structures
Religion
Manners
Values
Language
Personal
Communication
3-8
EXCHANGE RATES
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Economic and
Financial Forces
LG4
*
• Exchange Rate -- The value of one nation’s
currency relative to the currencies of other
countries.
• High value of the dollar – Dollar is trading for more
foreign currency; foreign goods are less expensive.
• Low value of the dollar – Dollar is trading for less
foreign currency; foreign goods are more expensive.
• Currencies float in value depending on the supply
and demand for them in the global market.
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DEVALUATION and
COUNTERTRADING
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Economic and
Financial Forces
LG4
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• Devaluation -- Lowers the value of a nation’s
currency relative to others.
• Countertrading -- Complex form of bartering
in which several countries each trade goods
or services for other goods or services.
3-10
LEGAL CONCERNS OVERSEAS
*Legal and
Regulatory
Forces
LG4
• There’s no global system of laws.
*
• Laws may be inconsistent.
• U.S. businesses must follow U.S. laws while
conducting global business.
• The Organization for Economic Cooperation and
Development (OECD) and Transparency
International fight to end corruption and bribery
in foreign markets and have had limited
success.
3-11
TRADE PROTECTIONISM
*
Trade
Protectionism
LG5
*
• Trade Protectionism -- The use of government
regulations to limit the import of goods and services.
• Advocates of protectionism believe it allows
domestic producers to survive, grow and produce
jobs.
3-12
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TARIFFS
Trade
Protectionism
LG5
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• Tariffs -- Taxes on imports.
• Two kinds of tariffs:
-
-
Protective – Raise the
retail price of imports so
domestic goods are
competitively priced.
Revenue – Raise money
for governments.
3-13