Large Firms Invest Overseas, They Also Export LO1 Proportion of Foreign Sales and Profits of the World’s Largest Multinationals Source: Company annual reports; Fortune magazine’s 2007 Global 500 listing of world’s largest companies, (July 4, 2008).

World Exports of Merchandise (FOB Values; in Billions of Current U.S. Dollars). LO1 Source: Monthly Bulletin of Statistics (New York: United Nations, June 1997, August 2000); World Merchandise Exports by Region and Selected Economy, 1980, 1985, 1990, 1995 and 1999–2001, WTO, Statistics Division, (June 30, 2002); World Exports of Commercial Services by Selected Region and Economy, 1980–2001, WTO, Statistics Division, (June 5, 2002); and International Trade Statistics 2007, (Geneva: WTO, 2008), (July 6, 2008).

World Exports of Commercial Services (FOB Values; in Billions of Current U.S. Dollars). LO1 Source: Monthly Bulletin of Statistics (New York: United Nations, June 1997, August 2000); World Merchandise Exports by Region and Selected Economy, 1980, 1985, 1990, 1995 and 1999–2001, WTO, Statistics Division, (June 30, 2002); World Exports of Commercial Services by Selected Region and Economy, 1980–2001, WTO, Statistics Division, (June 5, 2002); and International Trade Statistics 2007, (Geneva: WTO, 2008), (July 6, 2008).

Why do Managers Focus on Major Trading Partner Countries? 1. Export and import regulations are not insurmountable 2. Favorable business climate in the importing nation 3. Minimal cultural objections to buying that nation’s goods 4. Satisfactory transportation facilities already established LO2

Why do Managers Focus on Major Trading Partner Countries? 5. Import channel members (merchants, banks, customs brokers) are experienced in handling the exporting country’s shipments 6. Foreign exchange is available to pay for exports 7. The trading partner’s government may be applying pressure on importers to buy from the country’s good customer nations LO2

Imports from Major Trading Partners of the United States LO2

Exports to Major Trading Partners of the United States Source: “U.S. Aggregate Foreign Trade Data, 1999 and Prior Years,” U.S. Foreign Trade Highlights, tables 10 and 11, U.S. Department of Commerce International Trade Administration, “Table 11: Top 50 Suppliers of U.S. Imports in 2004,” U.S. Department of Commerce International Trade Administration, (July 14, 2006); “Table 10: Top 50 Purchasers of U.S. Exports in 2004,” U.S. Department of Commerce International Trade Administration, (July 14, 2006). LO2

Two Aspects of Foreign Investment  Portfolio investment  The purchase of stocks and bonds of firms in other countries to obtain a return on the funds invested  Foreign Direct investment (FDI)  The purchase of sufficient equity in a firm located in another country to obtain significant management control LO3

Why Do Firms Enter Foreign Markets?  Firms enter foreign markets to increase sales and profits  New sales from  new customer base  better managerial control through improved communications technologies  Obtain greater profits  increased revenues  lower cost of goods sold (maybe) LO5

Why Do Firms Enter Foreign Markets?  Firms enter foreign markets to  protect their domestic market  attack in competitor’s home market and force competitor to dedicate resources there  guarantee supply of raw materials  acquire technology and management know-how  diversify geographically  follow customers overseas  satisfy management’s desire for expansion to a particular country or region  bypass protectionist regulations LO5

Dimensions Along Which Management Globalizes a Firm  Management globalizes a firm through  products  markets  promotion  where value is added to the product  competitive strategy  use of non-home-country personnel  extent of global ownership in the firm LO6