BUS110 Chap 3 - Doing Business in Global Markets
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*
*Chapter Three
Doing Business in
Global Markets
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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Why Trade with Other Nations?
• No nation can produce all its needs
• Mutually beneficial exchange
• Natural Resources or Technology– Produce or Buy?
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*The Dynamic Global Market
• Importing –
• Buying products from another country.
• Exporting – S
• Selling products to another country.
• The U.S.
• largest in importing
• second largest in exporting
IMPORTING and EXPORTING
LG1
3-3
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*The Theories of Comparative and Absolute Advantage
• Comparative Advantage –
• Selling products produced most efficiently
• Buying products from other countries it cannot produce as efficiently.
• Absolute Advantage –
• Monopoly on producing a specific product
• Able to produce it more efficiently than all other countries.
LG1
COMPARATIVE and ABSOLUTE ADVANTAGE
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Theories 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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Theories of Advantage
AbsoluteAbsolute
Output Output per Unit of per Unit of
InputInput
Copper ProductionCopper Production
ZambiaZambia
The Rest of The Rest of the World the World
== VirtualVirtual MonopolyMonopoly
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*Importing Goods and Services
• Starbucks CEO, Howard Shultz, found his importing opportunity in Italy. He transformed a coffee shop in Seattle to mimic the European cafes.
LG2
GETTING INVOLVED in GLOBAL TRADE
3-7
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*Measuring Global Trade
• Balance of Trade –
• Total value of a nation’s exports compared to its imports measured over time.
• Trade Surplus –
• Exports greater than imports.
• Trade Deficit –
• Exports less than imports.
HOW to
MEASURE
GLOBAL
TRADE
LG2
3-8
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*Strategies for Reaching Global Markets
Least Amount of commitment, control, risk and profit potential Most
Licensing Exporting FranchisingContract
Manufacturing
International joint ventures and strategic
alliances
Foreign direct
investment
LG3
KEY STRATEGIES for REACHING GLOBAL MARKETS
3-9
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*Forces Affecting Trading in Global Markets
LG4
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*Socio-cultural Forces
CULTURAL DIFFERENCES
LG4
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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 jaga
Source: World Features Syndicate
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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.
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*Economic and Financial Forces
EXCHANGE RATES
LG4
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*Legal and Regulatory Forces
LEGAL CONCERNS OVERSEASLG4
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*Trade Protectionism
TRADE PROTECTIONISM
LG5
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*Trade Protectionism
TARIFFS
LG5
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Think Global, Act Local
• McDonald’s in India –– McDonald‘s has a consistent brand image around the
world, but has regionally influenced menus.
• http://video.foxbusiness.com/6873259/mcdonalds-in-india/?category_id=7542224d79feccaf637c186a01204f1ef3c83955
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