Global Analysis

International Trade – exchange of goods and services among nations Imports – goods and services purchased from another country Exports – goods and services sold to another country Absolute advantage – occurs when a country has natural resources or talents that allow it to produce an item at the lowest cost possible Comparative advantage – value a nation gains by selling what it produces most efficiently. It is also when they specialize in products or services well suited to their capabilities. Benefits of international trade 1. Consumers benefit in the form of lower prices, and variety of goods and services. 2. Producers benefit from being able to expand their business by conducting operations in other countries 3. Workers benefit from increased trade which can lead to higher employment 4. Nations benefit from increased foreign investment which often improves standard of living for the people of that country

Government Involvement Balance of trade – difference between what a country exports to what it imports trade deficit – causes US to be a debtor nation, can increase unemployment as jobs leave country Free Trade – exchanges between nations that is conducted on free market principles, without restrictions or regulations Tariff – tax on imports (very low) protective tariff – high tax; used to increase price of imported goods so that domestic company’s can compete Quota – limits either quantity or monetary value of product that can be imported Embargo – total ban on specific goods coming into or leaving country. Can be used for health or political reasons

Trade Agreements and Alliances World Trade Organization ( WTO) North American Free Trade Agreement (NAFTA) European Union (EU) Project : You are to look up each. Tell who is involved and what are the rules and regulations, and the functions of each.

Doing Business Internationally Exporting – enter global market with minimal risk and control Licensing – letting another company use trademark, patent, special formula, company name, or other intellectual property for a fee foreign company makes product using info and guidelines provided by licensor. special type of licensing is franchising. Contract manufacturing – hiring a foreign manufacturer to make your products according to your specifications. Finished goods can be sold and / or exported. Pros: lower wagesCons: company must give up info Joint Ventures – business enterprise that companies set up together. Some countries foreign investors are not allowed to own 100% of a company so they need to find local investors

Global Environmental Scan Political Factors – government stability, trade regulations and agreements, and any laws that can impact operation Economic Factors – look at infrastructure, labor force, employee benefits, taxes, standard of living, foreign exchange rate Socio-Cultural Factors – must be aware of cultural diversity and value system. Need to look at language and symbols, holidays and religious observations, social and business etiquette. Technological Factors – need to look at use of computers, faxes, voice mail, cell phones, and the internet. Project : Take the country you used for project. Go to CIA World Fact Book, and click on Guide to Country Comparisons. Tell me number of cell phone users, internet users, life expectancy rate in your country and the US.

Global Marketing Strategies Globalization – selling same product and use same promotion methods in all countries Adaptation – study characteristics of country and find ways to target customers with similar needs and wants. Sometimes requires companies to change the product or change the promotion. Customization – creating specially designed products or promotions for certain countries or regions. Product or service become unique to that market segment