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Anyone believe It’s not a
Globalized Economy?
Fisher-Price recall
Chinese-made Toys
contaminated with
Lead-based Paint
“Insanity is doing the same thing
over and over again and expecting
different results.” (Albert Einstein)
INTERNATIONAL COMMERCE
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Why are Nike's shoes made in Vietnam
but Toyota's Tundra trucks are
built in San Antonio?
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What is this situation's “net on-shoring/offshoring" result?
Why isn’t everyone in Ohio happy with this?
Would a law taxing foreign-earned Net
Income of US-based companies fix problem?
INTERNATIONAL COMMERCE
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A Global Balance Sheet might show the
US as the World's largest Debtor
(Borrower) and China as the World's
largest Creditor (Lender)
______________________________
How did this happen?
Has this always been the case?
Is it something to worry about?
What should (could) be done about it?
INTERNATIONAL
COMMERCE
INTERNATIONAL COMMERCE
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Where does our oil come from?
What happens if US becomes “energy-independent?”
Crude Oil Imports (Top 10 Countries)
(Thousand Barrels per Day)
Country
Aug-09
Jul-09
YTD 2009
Aug-08
YTD 2008
CANADA
2,007
2,110
1,928
1,873
1,926
MEXICO
1,057
985
1,126
1,292
1,209
VENEZUELA
1,007
865
1,014
1,146
1,049
NIGERIA
877
858
694
1,035
998
SAUDI ARABIA
745
1,137
1,022
1,533
1,537
IRAQ
500
365
459
663
ALGERIA
404
143
253
348
ANGOLA
352
320
484
483
BRAZIL
269
375
332
169
COLOMBIA
260
286
261
247

675 269%
Import
more313
from
Canada
512 than
Saudi
Arabia
217
190
Source: Energy Information Administration, US Dept. of Energy
ENERGY TRIVIA
US is World’s Third largest Oil Producer
(about 10%) but Consumes about 24%
About one-half of Imported Oil comes
from Western Hemisphere Nations
Nearly 50% of Energy is Produced from
Coal and Natural Gas
Nuclear Capacity same as 1996 but
Applications for 26 New Plants pending
Source: Energy Information Administration, US Dept. of Energy
Where are Global Markets: Demographics
Population Growth Rates
Where are Global Markets: Demographics
Fertility Rates
Number of children born to
women aged 15 to 49
INTERNATIONAL COMMERCE
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How do you Compete Internationally?
2008
Chevrolet’s “Trax”
1968
Ford’s “World Car”
 Or does Global Competition offer Unique Market Segments
and Countless Opportunities for Product Differentiation?
 Approaches. (1) Direct (2) Alliances (3) Licensing
INTERNATIONAL COMMERCE
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EXCHANGE RATES
Express Relationship between Currencies of Transacting Countries

2001 (“Strong Dollar”)
$ 1 USD = 1.18€
$ 0.85 USD = 1€
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
2005 (“Weak Dollar”)
$1 USD = 0.86€
$1.17 USD = 1€
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
2008 (“Very Weak Dollar”) $1 USD = 0.67€
$1.48 USD = 1€
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
Nov 2009 (No Change?)
$1 USD = 0.66€
$1.50 USD = 1€
Historical Exchange Rates
Monthly Average Exchange Rates: US Dollars per Euro
Concerns about
Inflation and US
Economy’s Recovery
have weakened Dollar
 Cf.
Textbook, pp. 118-127
INTERNATIONAL COMMERCE
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Exchange Rate Impacts
on Exports and Imports
MSRP
84,475 €
$ 85,000
Cost to Buy in
USA
Germany
2001 (Strong Dollar)
$ 71,804
100,301 €
2005 (Weak Dollar)
$ 98,836
73,100 €
2009 (Very Weak Dollar)
$ 126,713
56,950 €
INTERNATIONAL COMMERCE
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“Germany’s new
finance minister
has echoed
Chinese warnings
about the growing
threat of fresh
global asset price
bubbles, fueled by
low US interest
rates and a weak
dollar.” Financial Times,
Nov. 20, 2009
THE CHINA FACTOR
Did you know China has only one time zone?
Another Perspective on Balance of Trade
How does US/China Relationship look now?
Current Account Balance of Payments
As a Percentage of GDP
Which Countries are Growing? Which are not?
Where are Opportunities?
Growth in GDP per capita
Percentage change, annual rate
INTERNATIONAL COMMERCE
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LEGAL SYSTEM
How does Society redress Inequitable Treatment?
Contract Enforcement: Will
Contracts be consistently Enforced?
Property Rights: Do they include
Intellectual Property?
Product Safety and Liability: Are
there standards? What kind of liability?
INTERNATIONAL COMMERCE
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CULTURE
What are a Society’s Shared and Learned
Values? How does it “Live?”
Ethics and Religion: How do you reconcile
conflicting ethics? Can religion influence
business decisions?
Male/Female Roles and Authority: What
about Cultures where Women don’t (can’t)
exercise authority?
Subtleties of Language, Tone and Manner:
Does it matter how things are said?
INTERNATIONAL COMMERCE
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GLOBALIZED INSTITUTIONS
Laws, Customs and Institutions
(Public/Private) that Manage, Expedite
and Regulate Global Trade
World Trade Organization (WTO)
World Bank
Global-Scale Businesses
United Parcel Service (UPS)
1907: Delivering documents by Bicycle in Seattle
Today: 11th Largest Airline in the World
Processes Daily 2% of the World’s GDP
Ships more than 13.5 Million Packages/Day
Largest User of Wireless Technology:
The Clipboard
Since 1996, spent $1 Billion on Supply Chain
Management Services, including Financing,
that are available to any Business or Person
wanting to be Globalized
INTERNATIONAL COMMERCE
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Motivating Forces of Globalization

Political: Reduced Tariffs
1950
1990
2000
France
18%
5.9%
3.9%
Italy
25%
4.9%
3.9%
USA
14%
4.8%
3.9%
 Technological: Faster, More Reliable
Transportation and Communication
INTERNATIONAL COMMERCE
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INTERNATIONAL COMMERCE
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EUROPEAN UNION (EU)
 Total Population Rate Increase: 4.1%
(Natural: 0.4%; Net Migration: 3.7%)
Natural Increase Rate
Germany
-1.7%
Italy
-0.5%
UK
1.4%
USA
5.7%
India
14.8%
THE CHINA FACTOR
World’s Leading Producer
of Steel, Copper, Coal,
Aluminum and Cement
2005: Second Largest Oil Importer
2006: Second Largest Auto Market
Richmond, VA: $3.42
Guangzhou, China: $1.41
 Positive Economic Benefits
Lower Prices, Job Creation and Economic Growth
 Negative Impacts
Shifting Job Distribution; Diminished Sovereign
Authority; Multiple Tax and Regulatory Standards
Is it worth it? Do Benefits outweigh Costs?
INTERNATIONAL COMMERCE
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"Problem in Australia, chief. Everyone
seems to be asleep."
Cartoon by Leo Cullum