Global Marketplace (ch3).pdf

LE: Global Marketplace (ch3) Week # of sessions year 1.1.1 Lecture course MTP Economic Globalization Increasing integration and interdependence of national economies around the world Why countries and companies trades internationally: Focusing on relative trends Comparative advantage suggests th...

LE: Global Marketplace (ch3) Week # of sessions year 1.1.1 Lecture course MTP Economic Globalization Increasing integration and interdependence of national economies around the world Why countries and companies trades internationally: Focusing on relative trends Comparative advantage suggests that each country should especialize in areas where it can produce more efficiently. Trade for goods & services that it can’t produce as economically 💡 Will increase a country’s total output and allow both trading partners to enjoy a higher standard of living Expanding Markets Companies have many ambitions too big for their own backyards. -Vast opportunity to expand geographically Pursuing economies of scale Economies of scale Savings from buying parts and materials, manufacturing, or marketing in large quantities Acquiring materials, goods, and services LE: Global Marketplace (ch3) 1 No country can produce everything its citizens want or need at prices they’re willing to pay -Many companies embrace online retailing-often buying products/resources from foreign countries Keeping up with customers Companies have to expand in order to keep or attract multinational customers Keeping up with competitors Companies are forced to engage on a global scale because their competitors are doing so -If they fail to respond, they can allow competitors to increase its financila resources and become a greater threat Key enablers to the level of growth World’s borders are much more open to Advances in communication and trade, thanks to the advent of international trade organizations and growing awareness transportation technologies have made global trade safer, easier, and more profitable. How international trade is measured Key measurements of a nation’s level of international trade Balance of Trade Balance of Payments Total value of the products a nation Sum of all payments one nation receives exports minuus thet total value of the products it imports, over some period of time from the other nations minus the sum of all payments it makes to other nations, over some period of time. Trade Surplus Includes LE: Global Marketplace (ch3) 2 Favorable trade balance created when a country exports more than it imports balance of trade plus the net dollars received and spent on foreign investment Trade Deficit military expenditures Unfavorable trade balance created when a country imports more than it exports tourism foreign aid Foreign exchange rates and currency valuations Foreign Exchange Exchange Rate Conversion of one currency into an equivalent amount of another currency Rate at which the money of one country is traded for the money of another 💡 Because supply & demand for a currency are always changing, the rate at which is exchanged for other currencies may change a little daily Currency’s strong when exchange rate is higher than normal Currency’s weak when exchange rate is lower than normal Conflicts in International Trade Free Trade International trade unencumbered by restrictive measures Government Intervention in International Trade Protectionism Government policies aimed at shielding a country’s industries from foreign competition Ways to intervene in International Trade Tariffs Import Quotas Embargoes taxes, surcharges or duties Limits placed on the quantity of imports a Complete ban on trade with a particular nation or LE: Global Marketplace (ch3) 3 generate revenue restrict trade punish other countries for breaking int.tr. laws Restrictive Import Standards Requiring special licenses for doing certain kind of nation will allow for a specific product a particular product Export Subsidies Antidumping measures Form of financial Dumping assistance in which producers receive enough money from the government to allow them to lower prices business Practice of selling large quantities of a product at a price lower than the cost of production Antidumping is used to win foreign -Making it difficult for foreign companies to customers or to reduce product obtain these licenses surpluses International Trade Organizations Organizations Facilitating International Trade Agreements and organizations that address trading issues World Trade Organization (WTO) Forum for negotiating, implementing, and monitoring international trade procedures 160 member countries Principles Preventing discriminatory policies Reducing trade barriers Making trade policies more predictable Discouraging unfair practices LE: Global Marketplace (ch3) 4 Promoting economic progress International Monetary Fund (IMF) Foster international financial cooperation and increase the stability of the international economy 188 member countries Principles Monitoring global financial developments Offering technical advice Training to help countries manage their economies Providing short term loans to members World Bank Financial institutions whose primary goals are Eradicating extreme levels of poverty Raising the income to the poorest people Improve economic conditions by investing in education and health Global Business Environment Cultural Differences in the Global Business Environment Culture Shared system of symbols, beliefs, attitudes, values, expectations and norms of behavior Businesspeople dealing with other cultures must avoid stereotyping and ethnocentrism Stereotyping LE: Global Marketplace (ch3) Ethnocentrism 5 Assigning a wide range of generalized Judging all other groups according to the attributes to an individual based on his membership in a particular culture standars, behaviors, and custom’s of one’s own group Tips for 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 the other person’s Show respect Legal Differences in the Global Business Environment Common Law Civil Law Theocratic Law Tradition, custom, and judicial interpretation play Legal parameters are specified in detailed legal Law based on religious principles impt roles codes United States & Iran & Pakistan France & Germany United Kingdom Tax Haven Country whose favorable banking laws and low tax rates gives them opportunity to shield some of their income from higher tax rates in their home country Forms of International Business Importing & Exporting Importing Exporting Purchasing goods or services from Selling and shipping goods or services to another country and bringing them into one’s home country another country LE: Global Marketplace (ch3) 6 Many countries have foreign trade offices to help importers and exporters interested in doing business within their borders International Licensing Licensing Agreement to produce and market another company’s product in exchange for a royalty or fee Allows them to use another firm’s intellectual property (patents, trademarks, brand names, copyrights) International Franchising Franchising involves selling the right to use a business system, including brand names, business processe, trade secrets and other assets. Reduces the cost and risks of expanding internationally while leveraging their investments in branding International Strategic Alliances and Joint Ventures Strategic alliances are long term partnerships between 2 or more companies to jointly develop, produce and sell products. Share: Ideas Expertise Resources Technologies Investment costs Risks LE: Global Marketplace (ch3) 7 Profits Joint venture in which two or more firms join together to create a new business entity that is legally separate and distinct from its parents Foreign Direct Investment (FDI) Investment of money by foreign companies in domestic business enterprises Exploit the availability of raw materials Take advantage of low wage rates Minimize transportation costs by choosing locations that give them direct access to foreign market Multinational Corporations (MNCs) Companies with operations in more than one country Strategic Approaches to International Markets Organizational Strategies for International Expansions Multidomestic strategy A decentralized approach to international expansion in which a company creates highly independent operating units in each new country Local managers have the freedom to run their operations almost as though they were independent countries Global strategy A highly centralized approach to international expansion, with headquarters in the home country making all major decisions Viewing the world as a single integrated market Transnational Strategy LE: Global Marketplace (ch3) 8 A hybrid approach that attempts to reap the benefits of international scale while being responsive to local market dynamics Think globally, act locally Major strategic decisions and business systems such as accounting are centralized, but local business units are given the freedom to make decisions that are most appropiate for local markets Functional Strategies for International Expansion Important decisions involve the following: Products Which products shoudl you try to sell in each market? Shoudl you standarize your product or customize your product? Customization increases costs and operational complexity Degree of customization -Change in product’s name or packaging -Modify a product’s components, size and functions Customer Support Many customers are reluctant to buy foreign products that don’t offer some form of local support Promotion Companies need to consider nonverbal symbols ( significance of colors and and gestures) while doing advertising Pricing Businesses need to make sure they can cover all costs and still be able to offer competitive prices Staffing LE: Global Marketplace (ch3) 9 Costs of hiring locally are considerablu lower, and there is less risk of a foreign manager failing to adapt working and living in another country LE: Global Marketplace (ch3) 10