1. ****** 3-1 1-1 McGraw-Hill/Irwin Understanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Nickels McHugh McHugh ** 3 CHAPTER * ** Competing in Global Markets

2. ****** 3-2 The Dynamic Global Market World Population by continent: ** The U.S. is the largest importing nation in the World!

3. ****** 3-3 Growing World Population In Billions Source: Source: Population Reference Bureau

4. ****** 3-4 Why Trade With Other Nations? No nation can produce all its needsNo nation can produce all its needs Mutually beneficial exchangeMutually beneficial exchange Natural Resources or Technology- Produce or Buy?Natural Resources or Technology- Produce or Buy?

5. ****** 3-5 Theories of Advantage Output per Unit of Input Comparative U. S. China Software China Clothing

6. ****** 3-6 Theories of Advantage Absolute Output per Unit of Input Diamond Production South Africa The Rest of the World = Virtual Monopoly = Virtual Monopoly

7. ****** 3-7 CountryStrengths United States Technology, R & D Spending Finland Univ. Enrollment, Efficient Legal System, Business Ethics Taiwan Cell-phone Ownership, Tech. Innovation, Local Firms Competitiveness Singapore Savings Rate, Math/Science Education, Political Trust Sweden H.S. Enrollment, Press Freedom, Phone Access Global Competitiveness

8. ****** 3-8 Global Trade Goods & ServicesGoods & Services ImportingImporting ExportingExporting Measuring TradeMeasuring Trade Balance of Trade/Payments Balance of Trade/Payments Trade DeficitTrade Deficit DumpingDumping

9. ****** 3-9 U. S. Trade in Goods & Services (Billions) Source: St. Louis Business Monthly, Oct. 1999 & World Trade Organization & Wikipedia Balance of Trade

10. ****** 3-10 Leading Goods Exporters/Importers CountryExportsImports United States 928 1,476 Germany 1016 717 Japan 539 402 France 443 420 United Kingdom 374 439 World Total9,099 8,823 In Billions $ Source: Wikipedia, 2005

11. ****** 3-11 Strategies for Reaching Global Markets LicensingLicensing ExportingExporting FranchisingFranchising Contract ManufacturingContract Manufacturing Joint VenturesJoint Ventures Joint Ventures & Strategic AlliancesJoint Ventures & Strategic Alliances Foreign DirectForeign DirectInvestment

12. ****** 3-12 Country Presence of Well-Known Companies Source: World Features Syndicate

13. ****** 3-13 Starbucks’ Expansion World Locations Source: Starbucks.com May 2006

14. ****** 3-14 Most Spoken Languages Source: 2005 CIA World Factbook Most Spoken Languages in the U.S. Most Spoken Languages in the World

15. ****** 3-15 Foreign Direct Investments in the U.S. Source: Bureau of Economic Analysis, 2004

16. ****** 3-16 World’s Largest MNCs Revenue ($Billions) Revenue ($Billions) 1)Wal-Mart Stores 217 2)Exxon Mobil 213 3)General Motors 175 4)BP 174 5)Ford Motor 162 6)Daimler Chrysler 136 7)Royal Dutch/Shell 135 8)General Electric 125 9)Toyota Motor 121 10)Mitsubishi112 Source: Business Week; Morgan Stanley Capital International; and S&P Compustat

17. ****** 3-17 What’s On Your Pizza Costa Rica - CoconutCosta Rica - Coconut France - Bacon, onion and fresh creamFrance - Bacon, onion and fresh cream India - Pickled ginger, minced mutton and tofuIndia - Pickled ginger, minced mutton and tofu Australia - Shrimp and pineappleAustralia - Shrimp and pineapple Pakistan - CurryPakistan - Curry Brazil - Green peasBrazil - Green peas Japan - Squid and mayo jagaJapan - Squid and mayo jaga Source: World Features Syndicate

18. ****** 3-18 Forces Affecting Trading in Global Markets Socio-culturalSocio-cultural Economic & FinancialEconomic & Financial Legal & RegulatoryLegal & Regulatory Physical & EnvironmentalPhysical & Environmental

19. ****** 3-19 Cultural Differences in Global Markets Language Language Religion Religion Values & Attitudes Values & Attitudes Personal CommunicationPersonal Communication Social StructureSocial Structure AestheticsAesthetics

20. ****** 3-20 Did You Know? In Turkey it’s rude to cross your arms while you are facing someone.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 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.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.The Chinese associate gifts such as straw sandals, clocks and handkerchiefs with funerals.

21. ****** 3-21 Economic & Financial Forces No Worldwide CurrencyNo Worldwide Currency Currency FluctuationsCurrency Fluctuations Floating Exchange RatesFloating Exchange Rates Bartering/CountertradingBartering/Countertrading

22. ****** 3-22 U.S. Oil Imports Source: Gibson Consulting 2005

23. ****** 3-23 Nations That Have Not Converted to the Metric System United States Liberia Myanmar (Burma) Source: 2005 Yourunits.com

24. ****** 3-24 Legal & Regulatory Forces 1.Inconsistent Laws & Regulations 2.Foreign Corrupt Practices Act of 1978 3.Local Business Contact Required

25. ****** 3-25 Developing Countries Need Infrastructure 1.2 billion people lack clean drinking water1.2 billion people lack clean drinking water 3 billion people lack adequate sanitation3 billion people lack adequate sanitation 2 billion people lack electricity 2 billion people lack electricity

26. ****** 3-26 Protectionism MercantilismMercantilism TariffsTariffs ProtectiveProtective RevenueRevenue Import QuotaImport Quota EmbargoEmbargo Nontariff Barriers-KeiretsuNontariff Barriers-Keiretsu

27. ****** 3-27 Trade Agreements General Agreement on Tariffs & Trade (1948)General Agreement on Tariffs & Trade (1948) Uruguay Round of GATT (1986)Uruguay Round of GATT (1986) 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) Central America Free Trade Agreement (2005)Central America Free Trade Agreement (2005)

28. ****** 3-28 Future Global Trade People’s Republic of China- Permanent Normal Trade Relations/Rights People’s Republic of China- Permanent Normal Trade Relations/Rights Russia & Others Russia & Others Internet Internet Technology- Obstacles/Problems Technology- Obstacles/Problems

29. ****** 3-29 Pro’s & Con’s of Offshore Outsourcing Pro’s More focus on areas where they can excel and growMore focus on areas where they can excel and grow Outsourced work creates efficiencies, resulting in hiring more workersOutsourced work creates efficiencies, resulting in hiring more workers Fuels global market growthFuels global market growth Con’s Jobs lost/wages fallJobs lost/wages fall Reduces product qualityReduces product quality Communication becomes much more difficultCommunication becomes much more difficult