Chapter 3: Business In The Global Marketplace - PDF

Developing a Business Mindset Chapter 3 Business in The Global Action 8e Marketplace Bovée/Thill  Learning Objectives 1. Explain why nations trade, and describe how international trade is measured. 2. Discuss the nature of conflicts in global business, in...

Developing a Business Mindset Chapter 3 Business in The Global Action 8e Marketplace Bovée/Thill  Learning Objectives 1. Explain why nations trade, and describe how international trade is measured. 2. Discuss the nature of conflicts in global business, including free trade and government interventions in international trade. 3. Identify the major organizations that facilitate international trade and the major trading blocs around the world. Copyright © 2017 Pearson Education, Inc. 3-2  Learning Objectives (cont.) 4. Discuss the importance of understanding cultural and legal differences in the global business environment. 5. Define the major forms of international business activity. 6. Discuss the strategic choices that must be considered before entering international markets. Copyright © 2017 Pearson Education, Inc. 3-3  The World’s Most Exhibit 3.1 Competitive Countries Copyright © 2017 Pearson Education, Inc. 3-4  Why Nations Trade Economic globalization  The increasing integration and interdependence of national economies around the world Copyright © 2017 Pearson Education, Inc. 3-5  Why Nations Trade (cont.) Focusing on relative strengths (Comparative Cost Advantage) Expanding markets Pursuing economies of scale Acquiring materials, goods, and services Keeping up with customers Keeping up with competitors Copyright © 2017 Pearson Education, Inc. 3-6  How International Trade is Measured Trade deficit  An unfavorable trade balance is created when a country imports more than it exports. Balance of payments  The sum of all payments a country receives from other countries minus the sum of all payments it makes to the other countries, over some specified period of time Copyright © 2017 Pearson Education, Inc. 3-7 Exhibit 3.2 U.S. Exports and Imports Since 1990 Copyright © 2017 Pearson Education, Inc. 3-8 Exhibit 3.2 U.S. Exports and Imports Since 1990 (cont.) Copyright © 2017 Pearson Education, Inc. 3-9 Exhibit 3.2 U.S. Exports and Imports Since 1990 (cont.) Copyright © 2017 Pearson Education, Inc. 3-10  Foreign Exchange Rates and Currency Valuations Exchange rate  The rate at which the money of one country is traded for the money of another Copyright © 2017 Pearson Education, Inc. 3-11  Strong and Weak Currencies: Exhibit 3.3 Who Gains? Who Loses? Copyright © 2017 Pearson Education, Inc. 3-12  Strong and Weak Currencies: Exhibit 3.3 Who Gains? Who Loses? A currency is called strong relative to another when its exchange rate is higher than what is considered normal. It has increased in value relative to another currency – it can therefore buy more of the other currency than before. It is called weak when its rate is lower than normal. It has decreased in value relative to another currency – it can therefore buy less of the other currency than before. Copyright © 2017 Pearson Education, Inc. 3-13  Strong and Weak Currencies: Exhibit 3.3 Who Gains? Who Loses? Exchange rates can dramatically affect a company’s financial results by: raising or lowering the cost of supplies it imports and raising or lowering the price of goods it exports. Copyright © 2017 Pearson Education, Inc. 3-14  Free Trade Free trade  International trade unencumbered (not impeded) by restrictive measures Supporters of free trade generally acknowledge that it produces winners and losers but that the winners gain more than the losers lose, so the net effect is positive Copyright © 2017 Pearson Education, Inc. 3-15  Government Intervention in International Trade Protectionism  Government policies aimed at shielding a country’s industries from foreign competition Tariffs  Taxes levied on imports Copyright © 2017 Pearson Education, Inc. 3-16  Government Intervention in International Trade (cont.) Import quotas  Limits placed on the quantity of imports a nation will allow for a specific product Embargo  A total ban on trade with a particular nation (a sanction) or of a particular product Copyright © 2017 Pearson Education, Inc. 3-17  Government Intervention in International Trade (cont.) Export subsidies  A form of financial assistance in which producers receive enough money from the government to allow them to lower their prices in order to compete more effectively in the global market Copyright © 2017 Pearson Education, Inc. 3-18  Government Intervention in International Trade (cont.) Dumping  Charging less than the actual cost or less than the home-country price for goods sold in other countries Sanctions  Politically motivated embargoes that revoke a country’s normal trade relations status  Often used as forceful alternatives short of war Copyright © 2017 Pearson Education, Inc. 3-19  International Trade Organizations World Trade Organization (WTO)  Permanent forum for negotiating, implementing, and monitoring international trade procedures, and for mediating trade disputes among the150 member countries Copyright © 2017 Pearson Education, Inc. 3-20  International Trade Organizations (cont.) International Monetary Fund (IMF)  Formed to monitor global financial developments, provide technical advice and training, provide short-term loans to countries that are unable to meet their financial obligations, and work to alleviate poverty in developing economies Copyright © 2017 Pearson Education, Inc. 3-21  International Trade Organizations (cont.) World Bank  Founded to finance reconstruction after World War II and is now involved in hundreds of projects around the world aimed at addressing poverty, health, education, and other concerns in developing countries  Is a United Nations agency owned by its 187 member nations Copyright © 2017 Pearson Education, Inc. 3-22  Trading Blocs Trading blocs  Organizations of nations that remove trade barriers among their member countries and establish uniform barriers to trade with non- member nations Copyright © 2017 Pearson Education, Inc. 3-23  Trading Blocs (cont.) North American Free Trade Agreement (NAFTA)  Formed by the United States, Canada, and Mexico to pave the way for the free flow of goods, services, and capital within the bloc through the phased elimination of tariffs and quotas Copyright © 2017 Pearson Education, Inc. 3-24  Trading Blocs (cont.) European Union (EU)  Constitutes more than two dozen countries and a half billion people  Now accounts for the world’s largest economy EU nations have eliminated hundreds of local regulations, variations in product standards, and protectionist measures that once limited trade among member countries Copyright © 2017 Pearson Education, Inc. 3-25  Trading Blocs (cont.) Asia-Pacific Economic Cooperation (APEC)  An organization of 21 countries working to liberalize trade in the Pacific Rim  Has a long-term goal of liberalizing and simplifying trade and investment among member countries and helping the region as a whole achieve sustainable economic growth Copyright © 2017 Pearson Education, Inc. 3-26  Members of Major Exhibit 3.4 Trading Blocs Copyright © 2017 Pearson Education, Inc. 3-27  Members of Major Exhibit 3.4 Trading Blocs (cont.) Copyright © 2017 Pearson Education, Inc. 3-28  The Global Business Environment Culture  A shared system of symbols, beliefs, attitudes, values, expectations, and norms for behavior Copyright © 2017 Pearson Education, Inc. 3-29  The Global Business Environment (cont.) Stereotyping  Assigning a wide range of generalized attributes, which are often superficial or even false, to an individual based on his or her membership to a particular culture or social group Ethnocentrism  Judging all other groups according to the standards, behaviors, and customs of one’s own group Copyright © 2017 Pearson Education, Inc. 3-30 The Global Business Environment (cont.) Successful global business leaders recognize and respect differences in language, social values, ideas of status, decision-making habits, attitudes toward time, use of space, body language, manners, religions, and ethical standards Copyright © 2017 Pearson Education, Inc. 3-31  Improving Communication with a Person from Another Culture Be alert to the other person’s customs. Deal with the individual. Clarify your intent and meaning. Adapt your style to that of the other person. Show respect. Copyright © 2017 Pearson Education, Inc. 3-32  Legal Differences in the Global Business Environment Tax haven  A country whose favorable banking laws and low tax rates give companies the opportunity to shield some of their income from higher tax rates in their home countries or other countries where they do business Copyright © 2017 Pearson Education, Inc. 3-33  Forms of International Exhibit 3.6 Business Activity Copyright © 2017 Pearson Education, Inc. 3-34  Forms of International Business Activity Importing Exporting  Purchasing goods  Selling and or services from shipping goods or another country and services to another bringing them into country one’s own country Copyright © 2017 Pearson Education, Inc. 3-35  Forms of International Business Activity (cont.) Licensing  Agreement to produce and market another company’s product in exchange for a royalty or fee Copyright © 2017 Pearson Education, Inc. 3-36  Forms of International Business Activity (cont.) Foreign direct investment (FDI)  Investment of money by foreign companies in domestic business enterprises Multinational corporations (MNCs)  Companies with operations in more than one country Copyright © 2017 Pearson Education, Inc. 3-37  Strategic Approaches to International Markets Multidomestic strategy  A decentralized approach to international expansion in which a company creates highly independent operating units in each new country Copyright © 2017 Pearson Education, Inc. 3-38  Strategic Approaches to International Markets (cont.) Global strategy Transnational  A highly centralized strategy approach to  A hybrid approach international that attempts to expansion, with reap the benefits of headquarters in the international scale home country while being making all major responsive to local decisions market dynamics Copyright © 2017 Pearson Education, Inc. 3-39  Product Strategies for International Strategies Products Customer support Promotion Pricing Staffing Copyright © 2017 Pearson Education, Inc. 3-40  Applying What You’ve Learned 1. Explain why nations trade, and describe how international trade is measured. 2. Discuss the nature of conflicts in global business, including free trade and government interventions in international trade. 3. Identify the major organizations that facilitate international trade and the major trading blocs around the world. Copyright © 2017 Pearson Education, Inc. 3-41  Applying What You’ve Learned (cont.) 4. Discuss the importance of understanding cultural and legal differences in the global business environment. 5. Define the major forms of international business activity. 6. Discuss the strategic choices that must be considered before entering international markets. Copyright © 2017 Pearson Education, Inc. 3-42 Copyright © 2017 Pearson Education, Inc. 3-43