Doing Business in Global Markets Chapter 03 Doing Business in Global Markets McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

LEARNING GOALS Chapter Three Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Explain the importance of importing and exporting, and understand key terms used in global business. Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. 3-2

LEARNING GOALS Chapter Three Evaluate the forces that affect trading in global markets. Debate the advantages and disadvantages of trade protectionism. Discuss the changing landscape of the global market and the issue of offshore outsourcing. 3-3

BUSINESS in the GLOBAL MARKET The Dynamic Global Market LG1 Over 90% of companies doing business globally believe it is important for employees to have international experience. U.S. organizations (like UPS, MLB, the NFL and the NBA) are also expanding abroad. See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. 1. The U.S. is a market of over 310 million potential customers, but the world market is over 6.9 billion. 2. It is easy for students in the United States to lose sight of the importance of the global market. This slide helps them see that the international marketplace offers businesses opportunities due to the size of the market. Companies like Procter & Gamble and Wal-Mart have found the international market offers opportunities for additional revenue growth. 3-4

WORLD POPULATION by CONTINENT The Dynamic Global Market LG1 See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. 3-5

IMPORTING and EXPORTING The Dynamic Global Market LG1 Importing -- Buying products from another country. Exporting -- Selling products to another country. The U.S. is the largest importing and the third largest exporting nation in the world. See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. The U.S. follows China and Germany in exports. 3-6

WHY TRADE with OTHER NATIONS LG1 No nation can produce all that it needs Other nations need to trade in order to meet their needs; mutually beneficial exchange Some nations have less natural Resources and more Technology, or vice-versa See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. No nation can produce all the products its people want and need. 3-7

TRADING with OTHER NATIONS For Example: Why Trade With Other Nations? LG1 Countries with abundant natural resources (like Venezuela or Russia) need technological resources from other countries (like Japan). Global trade allows countries to produce what they make best and buy what they need from others. Free Trade -- The movement of goods and services among nations without political or economic barriers. See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. No nation can produce all the products its people want and need. 3-8

HOW FREE TRADE BENEFITS the WORLD Why Trade With Other Nations? LG1 Global trade has led the world in a new direction: Literacy rates worldwide have increased from 56% in 1950 to 89% in 2011. Life expectancy in less developed areas rose from 40.9 years in 1950 to 69 years in 2011. See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. How Free Trade Benefits the World Often it is difficult for students to see how world trade has improved the living conditions of millions of the world’s poorest individuals. This slide shows some of the improvement in literacy rates and life expectancy since 1950. These improvements in the standard of living can be somewhat attributed to free trade. From The Economist, January 26, 2008, print edition: Twenty-five years ago two-thirds of the population or 600 million people were living in extreme poverty (on less than $1 a day). Now, the number living on $1 a day is below 180 million and yet the world’s population has increased. To start a discussion ask the students: Why has China been able to improve the living conditions of so many of its citizens in the last twenty-five years? (More liberal economic policies have led to greater economic growth and an increase in the standard of living for individuals.) Source: The World Bank, June 2011. 3-9

COMPARATIVE and ABSOLUTE ADVANTAGE The Theories of Comparative and Absolute Advantage COMPARATIVE and ABSOLUTE ADVANTAGE LG1 Comparative Advantage: A country should sell the products it produces most efficiently and buy from other countries the products it cannot. For Ex. United States: Software and engineering Absolute Advantage: A country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries. For Ex. South Africa : Diamonds See Learning Goal 1: Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. David Ricardo expanded on Adam Smith’s theory of absolute advantage with the theory of comparative advantage. This theory can be difficult for students to grasp. A country should produce only what it can produce efficiently, buying what it cannot produce as efficiently. This theory of international trade, along with Adam Smith’s Theory of Absolute Advantage, has been a guiding tenet of international trade since the late 1700s. 3-10

GOING GLOBAL with a SMALL BUSINESS Getting Involved in Global Trade LG2 Small businesses may be the key in global job growth. Only 1% of U.S. small businesses export, yet they account for 30% of total U.S. exports. President Obama wants small businesses to help double exports by 2015. See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. 3-11

TRAITS NEEDED FOR GOING GLOBAL Getting Involved in Global Trade Observation Determination Risk LG2 See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. 3-12

GETTING INVOLVED in IMPORTING Importing Goods and Services LG2 Students abroad may notice products that they like are unavailable in their new country. By working with producers in their own country, they become importers while still in school. Starbucks CEO, Howard Shultz, found his importing opportunity in Italy. He transformed a coffee shop in Seattle to mimic European cafes. See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. Starbucks CEO, Howard Shultz, found his importing opportunity in Italy. He transformed a coffee shop in Seattle to mimic the European cafes. 3-13

GETTING INVOLVED in EXPORTING Exporting Goods and Services LG2 Exporting provides a great boost to the U.S. economy. It is estimated that every $1 billion in U.S. exports generate over 7,000 U.S. jobs. See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. One website that can enliven a lecture on exporting is http://tse.export.gov. The TradeStats Express website is presented by the U.S. Commerce Department and gives students a look at any number of statistics on exporting. One example that may surprise students is that snow plows/blowers have been sold in Middle Eastern countries, like Saudi Arabia. They are used to clear sand from driveways. 3-14

HOW to MEASURE GLOBAL TRADE Measuring Global Trade LG2 Balance of Trade -- The total value of a nation’s exports compared to its imports measured over a particular period. Trade Surplus (Favorable) -- When the value of a country’s exports is more than that of its imports. Trade Deficit (Unfavorable) -- When the value of a country’s exports is less than that of its imports. See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. 3-15

BALANCE of PAYMENTS Measuring Global Trade LG2 Balance of Payments -- The difference between money coming into a country (from exports) and money leaving the country (from imports) plus other money flows. The goal is to have more money flowing into a country than out – a favorable balance. An unfavorable balance is when more money flows out of a country. See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. Since 1975, the U.S. has bought more goods from other nations than it has sold and thus has a trade deficit. 3-16

UNFAIR TRADE PRACTICES Measuring Global Trade LG2 Dumping -- Selling products in a foreign country at lower prices than those charged in the producing country. Used to reduce surplus products Or to enter new markets Dumping is prohibited. China, Brazil and Russia have been penalized for dumping steel in the U.S. See Learning Goal 2: Explain the importance of importing and exporting, and understand key terms used in global business. 3-17

KEY STRATEGIES for REACHING GLOBAL MARKETS LG3 International joint ventures and strategic alliances Contract Manufacturing Foreign direct investment Licensing Exporting Franchising See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. When senior management elects to expand internationally, they have a wide range of options available to them. Such options range from licensing with the least risk all the way to foreign direct investment with the most risk. A few examples to be shared during this portion of the lecture include: Coca-Cola’s use of licensing, McDonald’s use of franchising, Nike’s use of contract manufacturing, Volkswagen’s joint venture in China and Toyota’s foreign direct investment in the United States. Least Amount of commitment, control, risk and profit potential Most 3-18

LICENSING Licensing LG3 Licensing -- When a firm (licensor) provides the right to manufacture its product or use its trademark to a foreign company (licensee) for a fee (royalty). Licensing can benefit a firm by: Gaining revenues it wouldn’t have otherwise generated. Spending little or no money to produce or market their products. See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. Coca-Cola has entered into licensing agreements with over 300 licensees that have extended into long-term service contracts that sell over $1 billion of the company’s products each year. 3-19

EXPORT ASSISTANCE CENTERS and EXPORT TRADING CENTERS Exporting LG3 EACs provide hands-on exporting assistance and trade-finance support for small and medium- sized businesses that wish to directly export goods and services. ETCs help companies engage in indirect exporting by: Matching buyers and sellers. Dealing with foreign customs offices, documentation, and conversions. See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. 3-20

FRANCHISING Franchising LG3 Franchising -- A contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product/service in a given area. Franchisors need to be careful to adapt their product to the countries they serve. Yum! Brands, home of KFC, Taco Bell and Pizza Hut, learned that food preferences differ all around the world. See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. Links on the slide take you to KFC-Japan, Taco Bell-India and Pizza Hut-Hong Kong. The next few slides offer specific examples of how franchisors have adapted their products for various countries. 3-21

GOLDEN ARCHES GLOWING ACROSS the GLOBE (Reaching Beyond Our Borders) McDonald’s has more than 32,000 restaurants in over 117 countries. Maintains varying menus around the world due to the different preferences of its customers. Attracts top-level college graduates to be trained for management spots. Only 8 of every 1,000 applicants actually makes it into the program! See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. Students may find it interesting that McDonald’s Hamburger University is more selective than Harvard (62 out of 1,000 applicants make it in). 3-22

MCDONALDS !!! Franchising LG3 Malaysia: Bubur Ayam McD – Chicken strips in porridge with onions, ginger, and shallots. Egypt: Mcarabia – Grilled chicken with tehina sauces, lettuce, tomato and onion on Arabic bread. Japan: Teritama – Teriyaki burger topped with an egg. Germany: Want a beer with your burger? You can order one in the German stores. Israel: Operates using Kosher kitchens. See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. McDonald’s Items Worldwide McDonald’s is a leader in franchising and the company operates in 117 different countries. This slide gives students an insight into some of the changes McDonald’s has made to its menu when operating in the world market. Ask students: Why does the leading provider of American style fast-food adopt different menu items? (Like all successful companies, McDonald’s adapts its menu to meet the different needs of its customers worldwide.) Source: McDonalds, www.mcdonalds.com, June 2011. 3-23

CONTRACT MANUFACTURING Contract Manufacturing -- A foreign company produces private-label goods to which a domestic company then attaches its own brand name or trademark. A form of outsourcing. Contract manufacturing can be used to: Allow a company to experiment in a new market without incurring heavy start-up costs such as building a manufacturing plant. Temporarily meet an unexpected increase in orders. See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. The worldwide contract manufacturing business is estimated to be a $250 billion industry that’s expected to grow to $325 billion by 2013. 3-24

JOINT VENTURES International Joint Ventures and Strategic Alliances LG3 Joint Venture -- A partnership in which two or more companies join to undertake a major project. The benefits of joint ventures: Shared technology and risk. Shared marketing and management expertise. Entry into markets where foreign companies are often not allowed unless goods are produced locally. See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. Joint ventures can also have drawbacks: (1) One partner can learn the other’s practices then use the knowledge to its own advantage; (2) A shared technology may become obsolete; (3) The joint venture may become too large to be as flexible as needed. 3-25

STRATEGIC ALLIANCES International Joint Ventures and Strategic Alliances LG3 Strategic Alliance -- A long-term partnership between two or more companies established to help each company build competitive market advantages. Strategic alliances don’t typically share costs, risks, management or profits. Strategic alliances provide broad access to markets, capital and technical expertise. See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. 3-26

FOREIGN DIRECT INVESTMENT LG3 Foreign Direct Investment (FDI) -- The buying of permanent property and businesses in foreign nations. Foreign Subsidiary -- A company owned in a foreign country by another company called the parent company. The most common form of FDI. Primary Advantage: Parent company maintains complete control over its technology or expertise. Primary Disadvantage: Must commit funds and technology within foreign boundaries. See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. 3-27

MULTINATIONAL CORPORATIONS Foreign Direct Investment LG3 Multinational Corporation -- A company that manufactures and markets products in many different countries and has multinational stock ownership and management. Note: Not all large global businesses are multinational. Only firms that have manufacturing capacity or some other physical presence in different nations can truly be multinational. See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. 3-28

SOVEREIGN WEALTH FUNDS Foreign Direct Investment LG3 Sovereign Wealth Funds (SWFs) -- Investment funds controlled by governments holding large stakes in foreign companies. (Ch. 18) The size of the funds and the fact that they are government-owned make some fear they might be used for: Geopolitical objectives. Gaining control of strategic natural resources. Obtaining sensitive technologies. Undermining the management of the companies in which they invest. See Learning Goal 3: Illustrate the strategies used in reaching global markets and explain the role of multinational corporations in global markets. 3-29

FORCES AFFECTING GLOBAL TRADE (Ch. 1) Forces Affecting Trading in Global Markets LG4 Socio-cultural Economic and Financial Legal and Regulatory Physical and Environmental See Learning Goal 4: Evaluate the forces that affect trading in global markets. What makes operating in the international environment more complex than operating only in the domestic market is the addition of new uncontrollable forces. Examples of these forces include: sociocultural, economic, financial, legal, regulatory, physical and environmental. 3-30

1-CULTURAL DIFFERENCES Socio-cultural Forces LG4 To be involved in global trade, you must be aware of the cultural differences among nations: Social Structures Religion Manners Values Language Personal Communication See Learning Goal 4: Evaluate the forces that affect trading in global markets. A lack of cultural understanding can create problems when working in the international market. Even the color or type of flower can have a different meaning. One book that provides numerous examples to share with students is entitled Kiss, Bow or Shake Hands: How to Do Business in Sixty Countries . Never assume what works in one country will work in another. 3-31

LOST in TRANSLATION Advertisements Gone Wrong Socio-cultural Forces LG4 Braniff Airlines’ slogan "Fly in leather” translated in Spanish as "Fly naked.” Siri, Apple’s new digital assistant on iPhone 4S, is a common slang term for “butt” in Japanese. In Italy, Schweppes Tonic Water was mistaken as Schweppes Toilet Water. Nokia’s line of Lumia phones is Spanish for “prostitute.” See Learning Goal 4: Evaluate the forces that affect trading in global markets. Lost In Translation 1. Culture refers to the set of values, beliefs, rules, and institutions held by a specific group of people. 2. One of the basic elements of culture is language and language delineates cultures. To operate successfully in the international marketplace, a company must never assume what works in one country will work in another. To avoid the funny and sometimes disastrous advertisements listed above, shrewd marketers must use back translations. Back translation is a process in which the first translation is made by a bilingual native, after which the work will then be translated back by a bilingual foreigner to see how it compares with the original. 3-32

READY to TRAVEL ABROAD? Know Your Cultural Differences Socio-cultural Forces LG4 In Turkey, it’s rude to cross your arms while facing someone. In many Middle Eastern countries, you shouldn’t eat or shake hands with the left hand because it is considered unclean. In India, you should never pat anyone’s head. It’s where one’s soul is kept. In Brazil, your meeting may not start on time because punctuality isn’t important to the culture. See Learning Goal 4: Evaluate the forces that affect trading in global markets. Ready to Travel Abroad? 1. Some very fascinating cultural and social differences exist in other nations. 2. Discuss the following interesting points: A smile in Japan can mean that a person is uncomfortable or sad. When traveling to Sweden, make appointments two weeks in advance. Lack of punctuality is a fact of life in Brazil. Become accustomed to waiting. 3. Review the following helpful hints when dealing globally: a. Be culturally savvy. Learn about the culture, language, and dress code. b. Recognize the importance of dealing with cultural differences and consequences of taking no action. c. Manage and learn to appreciate various cultures. d. Build a database of information about each country where you have business relationships. 3-33

2-ECONOMIC & FINANCIAL Exchange Rates Economic and Financial Forces 2-ECONOMIC & FINANCIAL Exchange Rates LG4 Exchange Rate: The value of one nation’s currency relative to the currencies of other countries. High value of the dollar: Dollar is trading for more foreign currency; foreign goods are less expensive. Low value of the dollar: Dollar is trading for less foreign currency; foreign goods are more expensive. Floating Exchange Rate: Currencies “float” in value depending on the supply and demand for them in the global market. See Learning Goal 4: Evaluate the forces that affect trading in global markets. The floating exchange rate system creates transaction risk. If the U.S. dollar is trading for more foreign currency, it is said to be getting stronger. When the U.S. dollar is trading for less foreign currency, it is said to be getting weaker. Since the breakdown of the Bretton Woods agreement in 1971, the value of the U.S. currency has generally trended downward versus major world currencies. 3-34

2-ECONOMIC & FINANCIAL Devaluation/Countertrading Economic and Financial Forces LG4 Devaluation -- Lowers the value of a nation’s currency relative to others. Countertrading -- Complex form of bartering in which several countries each trade goods or services for other goods or services. See Learning Goal 4: Evaluate the forces that affect trading in global markets. It’s estimated that countertrading accounts for over 20% of all global exchanges, especially in developing countries. One famous example of countertrading involved Pepsi and Russian vodka. Pepsi received the right to market Russian vodka in the United States as payment for Pepsi sold in Russia. More information on countertrading can be found at www.londoncountertrade.org. 3-35

3-LEGAL CONCERNS OVERSEAS Legal and Regulatory Forces LG4 No global system of laws; laws are inconsistent U.S. businesses must follow U.S. laws while conducting global business Organization for Economic Cooperation and Development (OECD) and Transparency Int’l fight to end corruption/bribery in foreign markets Little has been accomplished See Learning Goal 4: Evaluate the forces that affect trading in global markets. 3-36

4-ENVIRONMENTAL FORCES Physical and Environmental Forces LG4 Developing countries have transportation and storage systems that make international distribution difficult or impossible. Often, technological capabilities are far from those in the U.S. which make for a tough business environment. See Learning Goal 4: Evaluate the forces that affect trading in global markets. 3-37

TRADE PROTECTIONISM Trade Protectionism LG5 Trade Protectionism -- The use of government regulations to limit the import of goods and services. Advocates of protectionism believe it allows domestic producers to survive, grow and produce jobs. See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. The Great Depression was exacerbated by the passage of the Glass-Steagall Act. The Glass-Steagall Act of 1933 raised the tariff rates on thousand of products imported into the United States. This led to other nations enacting similar protectionist measures effectively shutting down world trade. Many fear that the economic contraction the world is currently experiencing will lead to similar laws. 3-38

TARIFFS Trade Protectionism LG5 Tariffs -- Taxes on imports, making imported goods more expensive. Two kinds of tariffs: Protective – Raise the retail price of imports so domestic goods are competitively priced. Revenue – Raise money for governments. See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. While a tariff may end up raising revenue for the government, it ultimately costs consumers more money in the long run. Due to tariff rates on the importation of sugar, consumers in the United States end up paying close to 50 percent more for sugar than the rest of the world. 3-39

IMPORT QUOTAS and EMBARGOS Trade Protectionism LG5 Import Quota -- Limits the number of products in certain categories a nation can import. Embargo -- A complete ban on the import or export of a certain product or the stopping of all trade with a particular country. Political disagreements can lead to embargos, like the U.S. embargos against Cuba, Iran and North Korea. See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. 3-40

WORLD TRADE ORGANIZATION The World Trade Organization LG5 General Agreement on Tariffs and Trade (GATT) -- A global forum for reducing trade restrictions on goods, services, ideas and cultural problems. World Trade Organization (WTO) -- Headquartered in Geneva, the WTO is an independent entity of 153 member nations whose purpose is to oversee cross-border trade issues and global business practices. See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. 3-41

COMMON MARKETS Common Markets LG5 Common Market -- A regional group of countries with a common external tariff, no internal tariffs and coordinated laws to facilitate exchange among members. The European Union (EU), Mercosur, the ASEAN and the COMESA are common markets. See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. 3-42

EU MEMBERS Common Markets LG5 See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. 3-43

NAFTA The North American and Central American Free Trade Agreements LG5 North American Free Trade Agreement -- Ratified in 1994, created a free-trade area among the United States, Canada and Mexico. NAFTA’s objectives are: Eliminate trade barriers and facilitate cross-border movement of goods and services. Promote conditions of fair competition. Increase investment opportunities. Provide effective protection and enforcement of intellectual property rights. Establish a framework for further regional trade cooperation. Improve working conditions in North America. See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. 3-44

CAFTA The North American and Central American Free Trade Agreements LG5 Central American Free Trade Agreement -- Passed in 2005, created a free-trade zone with Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua. See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. Free traders hope CAFTA will lead to the creation of a Free Trade Area of the Americas (FTAA). 3-45

NEW FREE TRADE AGREEMENTS The North American and Central American Free Trade Agreements NEW FREE TRADE AGREEMENTS LG5 Today, free trade agreements are being negotiated with South Korea, Colombia and Panama. The U.S. is considering an agreement with a nine-nation free trade bloc called the Trans- Pacific Partnership. See Learning Goal 5: Debate the advantages and disadvantages of trade protectionism. 3-46

FUTURE of GLOBAL TRADE The Future of Global Trade LG6 With over 1.3 billion people, China has transformed the world economic map. Many multinationals invest heavily in China. India has seen huge growth in information technology, pharmaceuticals and biotechnology. Russia is a large oil producing country with many multinationals interested in developing there. Brazil is expected to be one of the wealthier economies by 2030. See Learning Goal 6: Discuss the changing landscape of the global market and the issue of offshore outsourcing. BRIC has been an acronym for these countries. However, BRIC nations are not the only areas of opportunity. Other countries to look at include: Indonesia, Thailand, Singapore, the Philippines, South Korea, Malaysia and Vietnam. 3-47

Photo Courtesy of: Vitor Lima OUTSOURCING The Challenge of Offshore Outsourcing LG6 Outsourcing -- Process by which a firm contracts with other companies to do some or all of its functions. U.S. firms have outsourced payroll functions, accounting and manufacturing for years. With the growth of global markets, companies have been shifting to offshore outsourcing – outsourcing with other countries. See Learning Goal 6: Discuss the changing landscape of the global market and the issue of offshore outsourcing. Photo Courtesy of: Vitor Lima 3-48

PLAN for YOUR GLOBAL CAREER Globalization and Your Future LG6 Study foreign languages. Learn about foreign cultures. Take global business courses. See Learning Goal 6: Discuss the changing landscape of the global market and the issue of offshore outsourcing. 3-49

IN CONCLUSION Progress Assessment How has the Internet impacted doing business in global markets? What are the economic risks of doing business in countries like China? What might be some important factors that will have an impact on global trading? What are pros and cons of offshore outsourcing? The major threats to doing business in global markets are: terrorism, nuclear proliferation, rogue states, and other issues. 2) India must relax its difficult trade laws and inflexible bureaucracy. Russia is plagued by political, currency, corruption, and social problems. 3) BRIC stands for Brazil, Russia, India, and China. 4) The key concern about offshore outsourcing is the loss of jobs. Today such loss includes professional services as well as production jobs. Questions also linger about outsourcing sensitive products like airline maintenance and medical devices. Consumers’ fears about quality and product safety keep the issue center stage. 3-50