111-1

MUSOLINOMUSOLINO SUNY CONTEMPOARY BUSINESS PRINCIPLESSUNY CONTEMPOARY BUSINESS PRINCIPLES

3

CH

AP

TERCompeting in Competing in

Global MarketsGlobal MarketsCompeting in Competing in

Global MarketsGlobal Markets

22

The Dynamic Global MarketThe Dynamic Global Market

World Population by continent:World Population by continent:

** The U.S. is the largest importing nation in the World!** The U.S. is the largest importing nation in the World!

33

Growing World PopulationGrowing World Population

10.8

8.5

6.56.05.3

0

2

4

6

8

10

12

1990 1998 2010 2030 2060

In In BillionsBillions

Source: Source: Population Reference Bureau

44

Why Trade With Why Trade With Other Nations?Other Nations?

• No nation can produce No nation can produce all its needsall its needs

• Mutually beneficial Mutually beneficial exchangeexchange

• Natural Resources or Natural Resources or Technology- Produce or Technology- Produce or Buy?Buy?

55

Theories of AdvantageTheories of Advantage

Output per Output per Unit of Unit of InputInput

ComparativComparativee

U. S.U. S.

ChinaChina

SoftwarSoftwaree

U. S.U. S.

ChinaChina

ClothinClothingg

66

Theories of AdvantageTheories of Advantage

AbsolutAbsolutee

Output Output per Unit of per Unit of

InputInput

Diamond Diamond ProductionProduction

South South AfricaAfrica

The Rest of The Rest of the World the World

== Virtual MonopolyVirtual Monopoly

77

CountryCountry StrengthsStrengthsUnited StatesUnited States Technology,Technology,

R & D SpendingR & D Spending

FinlandFinlandUniv. Enrollment, Efficient Legal Univ. Enrollment, Efficient Legal

System, Business EthicsSystem, Business Ethics

TaiwanTaiwanCell-phone Ownership, Cell-phone Ownership,

Tech. Innovation,Tech. Innovation,

Local Firms CompetitivenessLocal Firms Competitiveness

SingaporeSingapore Savings Rate, Math/Science Savings Rate, Math/Science Education, Political TrustEducation, Political Trust

SwedenSweden H.S. Enrollment, Press Freedom, H.S. Enrollment, Press Freedom, Phone AccessPhone Access

Global CompetitivenessGlobal Competitiveness

88

Global TradeGlobal Trade

Goods & ServicesGoods & Services• ImportingImporting• Exporting Exporting

• Measuring TradeMeasuring Trade• Balance of Trade/PaymentsBalance of Trade/Payments• Trade DeficitTrade Deficit• DumpingDumping

99

U. S. Trade in U. S. Trade in Goods & Services (Billions)Goods & Services (Billions)

0

200

400

600

800

1000

1200

1400

1600

1975 1980 1985 1990 1995 2000 2002 2005

Exports

Imports

Source: St. Louis Business Monthly, Oct. 1999 & World Trade Organization & Wikipedia

Balance of Balance of TradeTrade

1010

Leading Goods Leading Goods Exporters/ImportersExporters/Importers

CountryCountry ExportsExportsImportsImportsUnited StatesUnited States 928928 1,476 1,476GermanyGermany 10161016 717 717JapanJapan 539539 402 402FranceFrance 443443 420 420United KingdomUnited Kingdom 374374 439 439World TotalWorld Total 9,0999,099 8,8238,823

In Billions $In Billions $

Source: Wikipedia, 2005

1111

Strategies for Strategies for Reaching Global MarketsReaching Global Markets

• LicensingLicensing

• ExportingExporting

• FranchisingFranchising

• Contract Contract ManufacturingManufacturing

• Joint VenturesJoint Ventures

• Joint Ventures & Joint Ventures & Strategic AlliancesStrategic Alliances

• Foreign Direct Foreign Direct InvestmentInvestment

1212

Country Presence Country Presence of Well-Known Companiesof Well-Known Companies

0 50 100 150 200 250

FedEx

UPS

Whirlpool

McDonald's

Starbucks

7-Eleven

Krispy Kreme

Source: World Features SyndicateSource: World Features Syndicate

1313

Starbucks’ ExpansionStarbucks’ Expansion

71%

29%

International U.S.

World LocationsWorld Locations

Source: Starbucks.com May 2006

1414

Most Spoken LanguagesMost Spoken Languages

13%13%

8%

7%

22%37%

MandarinChinese

Spanish

English

Hindi

Portuguese

Other

Most Spoken Languages in the U.S.

Most Spoken Languages in the World

4%3%

11%

81%

1%English

Spanish

Other Indo-European

Asian andPacific Island

Other

1515

Foreign Direct Foreign Direct Investments in the U.S.Investments in the U.S.

0

200000

400000

600000

800000

1000000

1200000

Europe LatinAmerica

Asia Canada

Source: Bureau of Economic Analysis, 2004

1616

World’s Largest MNCsWorld’s Largest MNCs

Revenue Revenue ($Billions)($Billions)

1)1) Wal-Mart StoresWal-Mart Stores   2172172)2) Exxon MobilExxon Mobil   2132133)3) General MotorsGeneral Motors   1751754)4) BPBP   1741745)5) Ford MotorFord Motor   1621626)6) Daimler ChryslerDaimler Chrysler   1361367)7) Royal Dutch/Shell Royal Dutch/Shell 1351358)8) General ElectricGeneral Electric   1251259)9) Toyota MotorToyota Motor   12112110)10) MitsubishiMitsubishi 112112Source: Business Week; Morgan Stanley Capital International; and S&P Compustat

1717

What’s On Your PizzaWhat’s On Your Pizza

• Costa Rica - CoconutCosta Rica - Coconut• France - Bacon, onion and fresh creamFrance - Bacon, onion and fresh cream• India - Pickled ginger, minced mutton and India - Pickled ginger, minced mutton and

tofutofu• Australia - Shrimp and pineappleAustralia - Shrimp and pineapple• Pakistan - CurryPakistan - Curry• Brazil - Green peasBrazil - Green peas• Japan - Squid and mayo Japan - Squid and mayo

Source: World Features Syndicate

1818

Forces Affecting Trading Forces Affecting Trading in Global Marketsin Global Markets

• Socio-culturalSocio-cultural

• Economic & FinancialEconomic & Financial

• Legal & RegulatoryLegal & Regulatory

• Physical & EnvironmentalPhysical & Environmental

1919

Cultural Differences Cultural Differences in Global Marketsin Global Markets

• LanguageLanguage

• ReligionReligion

• Values & Values & AttitudesAttitudes

• Personal Personal CommunicationCommunication

• Social Social StructureStructure

• AestheticsAesthetics

2020

Did You Know?Did You Know?• In Turkey it’s In Turkey it’s ruderude to cross your arms to cross your arms

while you are facing someone.while you are facing someone.

• In the Arab world the left hand is In the Arab world the left hand is considered unclean; considered unclean; don’t eat with it!don’t eat with it!

• In India never pat someone’s head, In India never pat someone’s head, it’s the it’s the seat of the soul.seat of the soul.

• The Chinese associate gifts such as The Chinese associate gifts such as straw sandals, clocks and straw sandals, clocks and handkerchiefs with handkerchiefs with funerals.funerals.

2121

Economic & Financial ForcesEconomic & Financial Forces

• No Worldwide CurrencyNo Worldwide Currency

• Currency FluctuationsCurrency Fluctuations

• Floating Exchange RatesFloating Exchange Rates

• Bartering/Counter tradingBartering/Counter trading

2222

U.S. Oil ImportsU.S. Oil Imports

Source: Gibson Consulting 2005

18%

15%

10%12%12%

33%

Canada

Mexico

Venezuela

Nigeria

Saudi Arabia

Other

2323

Nations That Have NotNations That Have Not Converted to the Metric System Converted to the Metric System

United States

Liberia

Myanmar

(Burma)

2424

Legal & Regulatory ForcesLegal & Regulatory Forces

1.1. Inconsistent Laws & Inconsistent Laws & RegulationsRegulations

2.2. Foreign Corrupt Practices Foreign Corrupt Practices Act of 1978Act of 1978

3.3. Local Business Contact Local Business Contact RequiredRequired

2525

Developing Countries Developing Countries Need InfrastructureNeed Infrastructure

• 1.2 billion people lack 1.2 billion people lack clean drinking waterclean drinking water

• 3 billion people lack 3 billion people lack adequate sanitationadequate sanitation

• 2 billion people 2 billion people lack electricitylack electricity

2626

ProtectionismProtectionism

MercantilismMercantilism TariffsTariffs

•ProtectiveProtective•RevenueRevenue

Import QuotaImport Quota EmbargoEmbargo Nontariff Barriers-KeiretsuNontariff Barriers-Keiretsu

2727

Trade AgreementsTrade Agreements

General Agreement on Tariffs & Trade (1948)General Agreement on Tariffs & Trade (1948) Uruguay Round of GATT (1986)Uruguay Round of GATT (1986) World Trade Organization (1995)World Trade Organization (1995) Common MarketsCommon Markets

• European Union (EU)European Union (EU) North American Free Trade Agreement (1994)North American Free Trade Agreement (1994) Central America Free Trade Agreement (2005)Central America Free Trade Agreement (2005)

2828

Future Global TradeFuture Global Trade

• People’s Republic of China- People’s Republic of China- Permanent Normal Trade Permanent Normal Trade Relations/RightsRelations/Rights

• Russia & OthersRussia & Others

• InternetInternet

•Technology- Obstacles/ProblemsTechnology- Obstacles/Problems

2929

Pro’s & Con’s of Pro’s & Con’s of Offshore OutsourcingOffshore Outsourcing

Pro’sPro’s

More focus on areas More focus on areas where they can excel where they can excel and growand grow

Outsourced work Outsourced work creates efficiencies, creates efficiencies, resulting in hiring more resulting in hiring more workersworkers

Fuels global market Fuels global market growthgrowth

Con’sCon’s

Jobs lost/wages fallJobs lost/wages fall

Reduces product Reduces product qualityquality

Communication Communication becomes much more becomes much more difficultdifficult