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Adeyl Khan, Faculty, BBA, NSU Competing in Global Markets Products I used today!

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Presentation on theme: "Adeyl Khan, Faculty, BBA, NSU Competing in Global Markets Products I used today!"— Presentation transcript:

1 Adeyl Khan, Faculty, BBA, NSU Competing in Global Markets Products I used today!

2 Adeyl Khan, Faculty, BBA, NSU Peoples Car 2

3 Adeyl Khan, Faculty, BBA, NSU Why Nations Trade Boosts economic growth Import: Required resources Export: Expands markets, Growth More efficient production systems Less reliance on economies of home nations Exports: Domestically produced goods and services sold in markets in other countries. Imports: Foreign-made products and services purchased by domestic consumers. Bangladeshi Organizations Trading Internationally

4 Adeyl Khan, Faculty, BBA, NSU International Sources of Factors of Production Decisions to operate abroad depend upon availability, price, and quality of: Labor Natural resources Capital Entrepreneurship Companies can spread risk throughout nations

5 Adeyl Khan, Faculty, BBA, NSU Size of the International Marketplace As developing nations expand into the global marketplace, opportunities grow Many developing countries have posted high growth rates of annual GDP United States 4.4% China 11.1% India 9.4%

6 Adeyl Khan, Faculty, BBA, NSU Though developing nations generally have lower per capita income, many have strong GDP growth rates and their huge populations can be lucrative markets. Population Size and Prosperity

7 Adeyl Khan, Faculty, BBA, NSU Top Ten Trading Partners With the United States

8 Adeyl Khan, Faculty, BBA, NSU Absolute and Comparative Advantage Absolute advantage: Country can maintain a monopoly or produce at a lower cost than any competitor. Example: Chinas domination of silk production for centuries. Comparative advantage: Country can supply a product more efficiently and at lower cost than it can supply other goods, compared with other countries. Example: Indias combination of a highly educated workforce and low wage scale.

9 Adeyl Khan, Faculty, BBA, NSU Measuring Trade Between Nations Balance of trade Difference between a nations imports and exports. Balance of payments Overall flow of money into or out of a country. Balance of payments surplus = more money into country than out Balance of payments deficit = more money out of country than in

10 Adeyl Khan, Faculty, BBA, NSU U.S. demand for imported goods is partly a reflection of the nations prosperity and diversity. U.S. imports more goods than it exports, but exports more services than it imports. Major US Exports and Imports

11 Adeyl Khan, Faculty, BBA, NSU G-C4 Due 6th June Left side: Prepare a graph similar to Figure 4.1 (Top Ten Trading Partners With Bangladesh) Right Side: Prepare a table similar to Table 4.2 of the textbook in the context of Bangladesh(Major BD Exports and Imports) 11

12 Adeyl Khan, Faculty, BBA, NSU Exchange Rates Currency Rates are influenced by: Domestic economic and political conditions Central bank intervention Balance-of-payments position Speculation over future currency values Values fluctuate, or float, depending on supply and demand. National governments can deliberately influence exchange rates. Business transactions are usually conducted in currency of the region where they happen. Rates can quickly create or wipe out competitive advantage.

13 Adeyl Khan, Faculty, BBA, NSU Barriers to International Trade Green-tea flavored Hershey Kisses

14 Adeyl Khan, Faculty, BBA, NSU Social and Cultural Differences Language: Potential problems include mistranslation, inappropriate messaging, lack of understanding of local customs and differences in taste. Values and Religious Attitudes: Differing values about business efficiency, employment levels, importance of regional differences, and religious practices, holidays, and values about issues such as interest-bearing loans.

15 Adeyl Khan, Faculty, BBA, NSU Economic Differences Infrastructure: Basic systems of communication, transportation, energy facilities, and financial systems. Currency Conversion and Shifts: Fluctuating values can make pricing in local currencies difficult and affect decisions about market desirability and investment opportunities.

16 Adeyl Khan, Faculty, BBA, NSU Political and Legal Differences Political Climate – Stability is a key consideration. Legal Environment – U.S. law – International regulations – Countrys law – Climate of corruption. Foreign Corrupt Practices Act forbids U.S. companies from bribing foreign officials, candidates, or government representatives.Foreign Corrupt Practices Act International Regulations – Treaties between U.S. and other nations. – Tariffs are taxes charged on imported goods. – Enforcement problems, as with piracy

17 Adeyl Khan, Faculty, BBA, NSU Government Corruption

18 Adeyl Khan, Faculty, BBA, NSU Types of Trade Restrictions Tariffs - taxes, surcharges, or duties on foreign products. – Tariffs generate income for the government. – Protective tariffs raise prices of imported goods to level the playing field for domestic competitors. Nontariff Barriers - also called administrative trade barriers – Quotas limit the amount of a product that can be imported over a specified time period. – Dumping is the act of selling a product abroad at a very low price. – An embargo imposes a total ban on importing a specified product or all – Exchange controls through central banks or government agencies regulate the buying and selling of currency to shape foreign exchange in accordance with national policy.

19 Adeyl Khan, Faculty, BBA, NSU Reducing Barriers to International Trade The world is moving toward more free trade. There are many communities and groups that monitor and promote trade International Economic Communities reduce trade barriers and promote regional economic cooperation. Free-trade area: Members trade freely among selves without tariffs or trade restrictions. Customs union: Establishes a uniform tariff structure for members trade with nonmembers. Common market: Members bring all trade rules into agreement.

20 Adeyl Khan, Faculty, BBA, NSU Organizations Promoting Intl Trade General Agreement on Tariffs and Trade (GATT) Most industrialized nations found organization in 1947 to reduce tariffs and relax quotas The World Trade Organization succeeded GATT Representatives from 151 countries Reduce tariffs and promote trade World Bank Funds projects to build and expand infrastructure in developing countries International Monetary Fund (IMF) Operates as lender to troubled nations in an effort to promote trade

21 Adeyl Khan, Faculty, BBA, NSU North American Free Trade Agreement (NAFTA)NAFTA Worlds largest free-trade zone: United States, Canada, Mexico. U.S. and Canada are each others biggest trading partners. Central America-Dominican Republic Free Trade Agreement (CAFTA)CAFTA Free-trade zone among United States, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. $33 billion traded annually between U.S. and these countries. European Union Best-known example of a common market. Goals include promoting economic and social progress, introducing European citizenship as complement to national citizenship, and giving EU a significant role in international affairs. International Economic Communities

22 Adeyl Khan, Faculty, BBA, NSU South Asian Free Trade Area (SAFTA) The Agreement on South Asian Free Trade Area (SAFTA) is an agreement reached on January 6, 2004 at the 12th SAARC summit in Islamabad, Pakistan12th SAARC summitIslamabad Pakistan The Agreement on SAARC Preferential Trading Arrangement (SAPTA)[2] was signed on 11 April 1993 and entered into force on 7 December 1995, with the desire of the Member States of SAARC (India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives) to promote and sustain mutual trade and economic cooperation within the SAARC region through the exchange of concessions.[2]IndiaPakistanNepalSri LankaBangladesh BhutanMaldives 22

23 Adeyl Khan, Faculty, BBA, NSU What foreign market(s) will the company enter? Analysis of local demand, availability of resources Existing and potential competition, tariff rates, currency stability, investment barriers What expenditures are required to enter a new market? What is the best way to organize overseas operations? Good starting point for research: CIAs World FactbookCIAs World Factbook Going Global

24 Adeyl Khan, Faculty, BBA, NSU 24

25 Adeyl Khan, Faculty, BBA, NSU International Trade Research

26 Adeyl Khan, Faculty, BBA, NSU Levels of Involvement Risk increases with the level of involvement Many companies employ multiple strategies Exporting and Importing are entry-level strategies Importing is the process of bringing in goods produced abroad Exporting is the act of selling your goods overseas.

27 Adeyl Khan, Faculty, BBA, NSU Countertrade & Franchising Countertrade – international transactions that do not involve currency payments but use bartering. Franchising – a contractual agreement where a local entity gains rights to sell the franchisors product in the foreign market. A foreign licensing agreement allows a firm to produce or sell its product Subcontracting involves hiring local firms to distribute, produce or sell goods and services.

28 Adeyl Khan, Faculty, BBA, NSU Offshoring & Direct Investment The relocation of business processes to a lower-cost overseas location is offshoring Not initiating business but gaining cost savings Extremely controversial The ultimate level of global involvement is direct investment Directly operating production and marketing in foreign country. Acquisition Joint Ventures Overseas Division

29 Adeyl Khan, Faculty, BBA, NSU Multinational corporation (MNC) An organization with significant foreign operations and marketing activities outside its home country. Multinational Corporations

30 Adeyl Khan, Faculty, BBA, NSU Global Business Strategies Firm sells same product in essentially the same manner throughout the world. Works well for products with nearly universal appeal. Multidomestic Business Strategies Firm develops products and marketing strategies that appeal to customs, tastes, and buying habits of particular national markets. Example: Spinach, egg, and tomato soup on the menu in KFCs menu in China. Developing a Strategy for Intl. Business

31 Adeyl Khan, Faculty, BBA, NSU IOA- Chapter 2,4, 5 (Revised) Duration- 11th June to 17 th June 31

32 Adeyl Khan, Faculty, BBA, NSU Explain international business and why nations trade. Discuss types of advantage in international trade. Describe measurements of international trade and exchange rates. Identify the major barriers that confront global businesses. Explain how international trade organizations and economic communities reduce barriers to international trade. Compare the different levels of involvement used by businesses when entering global markets. Distinguish between a global business strategy and a multidomestic business strategy Learning Goals


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