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Nickels Nickels

McHughMcHugh

McHughMcHugh

Nickels Cover

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Chapter

3333 Competing Competing in Global in Global MarketsMarkets

Competing Competing in Global in Global MarketsMarkets

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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

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Company % ofCompany % of Earnings From Outside U.S.Earnings From Outside U.S.

0% 20% 40% 60% 80% 100%

AIG

Coca-Cola

Gillette

Intel

Microsoft

Pfizer

Source: Source: Investment AdvisorInvestment Advisor, August 2000, August 2000

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Leading Leading GoodsGoods Exporters/Importers (2001)Exporters/Importers (2001)

CountryCountry ExportsExports ImportsImportsUnited StatesUnited States 731 731 1,180 1,180GermanyGermany 571 571 493 493JapanJapan 404 404 350 350FranceFrance 322 322 326 326United KingdomUnited Kingdom 273 273 332 332World TotalWorld Total 6,1556,155 6,441 6,441

In Billion $In Billion $

Source: World Trade Organization

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Leading Leading ServicesServices Exporters/Importers (2001)Exporters/Importers (2001)

CountryCountry ExportsExports ImportsImportsUnited StatesUnited States 263 263 188 188GermanyGermany 80 80 133 133JapanJapan 64 64 107 107FranceFrance 80 80 62 62United KingdomUnited Kingdom 108 108 92 92World TotalWorld Total 1,4601,460 1,445 1,445

In Billion $In Billion $

Source: World Trade Organization

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

No nation can produce all No nation can produce all its needsits needs

Mutually beneficial Mutually beneficial exchangeexchange

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

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U.S. Trading PartnersU.S. Trading Partners

RegionRegion ExportsExports ImportsImportsAsiaAsia 26.5% 26.5% 36.3% 36.3%West. EuropeWest. Europe 24.0 24.0 20.8 20.8North AmericaNorth America 22.5 22.5 18.7 18.7Latin AmericaLatin America 21.8 21.8 17.3 17.3Middle EastMiddle East 2.7 2.7 3.3 3.3AfricaAfrica 1.7 1.7 2.3 2.3C./E. Europe/C./E. Europe/ Baltic States/CISBaltic States/CIS 0.9 0.9 1.3 1.3TotalTotal 100% 100% 100% 100%

Source: World Trade Organization, 2001

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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

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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

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Theories of AdvantageTheories of AdvantageAbsolutAbsolutee

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 = Virtual MonopolyMonopoly

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Global TradeGlobal Trade

Goods & ServicesGoods & ServicesImportingImportingExporting Exporting

Measuring TradeMeasuring Trade Balance of Trade/PaymentsBalance of Trade/PaymentsTrade DeficitTrade Deficit

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McDonald’s International MenuMcDonald’s International Menu

PhilippinesPhilippines McSpaghettiMcSpaghetti

GermanyGermany McBeerMcBeer

SwitzerlandSwitzerland Vegi MacVegi Mac

MalaysiaMalaysiaSugar Cane JuiceSugar Cane Juice

NetherlandsNetherlands Cappuccino DonutsCappuccino Donuts

GreeceGreece Shrimp, Veggie Shrimp, Veggie Burgers, & Burgers, & Spring Rolls (sold during Spring Rolls (sold during Lent)Lent)

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Daily Coffee Daily Coffee Consumption per CapitaConsumption per Capita

0 0.5 1 1.5 2 2.5

Finland

Austria

France

Italy

U.S.

U.K.

Source: Business 2.0. July 2002.

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Starbucks Around the WorldStarbucks Around the World

74%

26%

International U.S.

30%

25%15%

1%

6%

23%Japan

U.K.

Taiwan/China

Mid-East

Europe

All Others

World LocationsWorld Locations International LocationsInternational Locations

Source: Business 2.0, July 2002.

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

0

200

400

600

800

1000

1200

1400

1975 1980 1985 1990 1995 2000 2002

Exports

Imports

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

Balance of Balance of TradeTrade

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Sources of U.S. Oil ImportsSources of U.S. Oil Imports

307

471

495

509588

Saudi Arabia

Mexico

Canada

Venezuela

Nigeria

In Millions of Barrels

Source: USA Today

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U.S. Trade ExperienceU.S. Trade Experience

Balance of PaymentsBalance of Payments

Debtor NationDebtor Nation

Foreign Direct InvestmentForeign Direct Investment

DumpingDumping

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Sources of Foreign Sources of Foreign Direct Investments In the U.S.Direct Investments In the U.S.

Other4%

Japan5%

Canada11%

Asia13%

Latin America

17%Britain

18%

Europe minus Britain

32%

Source: U.S. Commerce Dept.

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Strategies forStrategies for Reaching Global MarketsReaching Global Markets

LicensingLicensing

ExportingExporting

FranchisingFranchising

Contract ManufacturingContract Manufacturing

Joint VenturesJoint Ventures

Strategic AlliancesStrategic Alliances

Subsidiaries-MNCsSubsidiaries-MNCs

Foreign Direct Foreign Direct

InvestmentInvestment

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World’s LargestWorld’s Largest MNCs- 2002MNCs- 2002

Revenue ($Billions)Revenue ($Billions)1)1) Wal-Mart Stores Wal-Mart Stores  2172172)2) Exxon Mobil Exxon Mobil  2132133)3) General Motors General Motors  1751754)4) BP BP  1741745)5) Ford Motor Ford Motor  1621626)6) Daimler Chrysler Daimler Chrysler  1361367)7) Royal Dutch/Shell Group Royal Dutch/Shell Group  1351358)8) General Electric General Electric  1251259)9) Toyota Motor Toyota Motor  12112110)10)MitsubishiMitsubishi 112112

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Forces Affecting TradingForces Affecting Trading in Global Marketsin Global Markets

Socio-culturalSocio-cultural

Economic & FinancialEconomic & Financial

Legal & RegulatoryLegal & Regulatory

Physical & EnvironmentalPhysical & Environmental

Trade ProtectionismTrade Protectionism

Global E-Commerce-FutureGlobal E-Commerce-Future

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Days of Annual VacationDays of Annual Vacation

0 5 10 15 20 25 30 35 40 45

Italy

France

Germany

Brazil

United Kingdom

Canada

Korea

Japan

U.S.

Source: AAA World

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Cultural DifferencesCultural Differences in Global Marketsin Global Markets

LanguageLanguage

ReligionReligion

Values & Values & AttitudesAttitudes

AestheticsAesthetics

MaterialismMaterialism

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

you are facing someone.you are facing someone.

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

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

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

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What’s the 2What’s the 2ndnd Most Valuable Most Valuable Global Business Language?Global Business Language?

Other6%

German4%

Chinese11%

Japanese16%

Spanish63%

Source: Accountemps Poll

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Favorite CampbellFavorite Campbell Soups Around the WorldSoups Around the World

Hong Kong - Hong Kong - Watercress & Duck Watercress & Duck GizzardGizzard

United States - United States - Chicken Noodle, Chicken Noodle, Cream of Cream of MushroomMushroom

Britain - TomatoBritain - Tomato

Japan - CornJapan - Corn

South America - South America - Cream of Cream of AsparagusAsparagus

Australia- Cream of Australia- Cream of PumpkinPumpkin

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

United States

Liberia

Yemen

Myanmar

(Burma)

Brunei

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Economic & Economic & Financial ForcesFinancial Forces

No Worldwide CurrencyNo Worldwide Currency

Currency FluctuationsCurrency Fluctuations

Floating Exchange RatesFloating Exchange Rates

Bartering/CountertradingBartering/Countertrading

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Developing CountriesDeveloping Countries Need InfrastructureNeed Infrastructure

1.2 billion people lack clean 1.2 billion people lack clean drinking waterdrinking water

3 billion people lack adequate 3 billion people lack adequate sanitationsanitation

2 billion people 2 billion people lack electricitylack electricity

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Legal &Legal & Regulatory ForcesRegulatory 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

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ProtectionismProtectionism

MercantilismMercantilismTariffsTariffs

ProtectiveProtectiveRevenueRevenue

Import QuotaImport QuotaEmbargoEmbargoNontariff Barriers-KeiretsuNontariff Barriers-Keiretsu

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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)• Lower TariffsLower Tariffs

• Extend RulesExtend Rules

• World Trade Organization (1995)World Trade Organization (1995)

• Common MarketsCommon Markets• European Union (EU)European Union (EU)

• MercosurMercosur

• North American Free Trade Agreement (1994)North American Free Trade Agreement (1994)

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Future Global TradeFuture Global Trade

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

o Russia & OthersRussia & Others

o InternetInternet

oTechnology- Obstacles/ProblemsTechnology- Obstacles/Problems