1. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-1 NickelsMcHughMcHugh Nickels Cover

2. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-2 Chapter 33 Competing in Global Markets 3-2

3. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-3 Growing World Population In Billions Source: Source: Population Reference Bureau

4. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-4 Company % of Earnings From Outside U.S. Source: Investment Advisor, August 2000

5. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-5 Leading Goods Exporters/Importers (2001) CountryExportsImports United States 731 1,180 Germany 571 493 Japan 404 350 France 322 326 United Kingdom 273 332 World Total6,155 6,441 In Billion $ Source: World Trade Organization

6. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-6 Leading Services Exporters/Importers (2001) CountryExports Imports United States 263 188 Germany 80 133 Japan 64 107 France 80 62 United Kingdom 108 92 World Total1,460 1,445 In Billion $ Source: World Trade Organization

7. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-7 Why Trade With Other Nations?  No nation can produce all its needs  Mutually beneficial exchange  Natural Resources or Technology- Produce or Buy?

8. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-8 U.S. Trading Partners RegionExportsImports Asia 26.5% 36.3% West. Europe 24.0 20.8 North America 22.5 18.7 Latin America 21.8 17.3 Middle East 2.7 3.3 Africa 1.7 2.3 C./E. Europe/ Baltic States/CIS 0.9 1.3 Baltic States/CIS 0.9 1.3 Total 100% 100% Source: World Trade Organization, 2001

9. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-9 Theories of Advantage Output per Unit of Input Comparative U. S. China Software China Clothing

10. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-10 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

11. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-11 Theories of Advantage Absolute Output per Unit of Input Diamond Production South Africa The Rest of the World = Virtual Monopoly = Virtual Monopoly

12. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-12 Global Trade Goods & Services  Importing  Exporting Measuring Trade  Balance of Trade/Payments  Trade Deficit

13. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-13 McDonald’s International Menu PhilippinesMcSpaghetti GermanyMcBeer SwitzerlandVegi Mac MalaysiaSugar Cane Juice NetherlandsCappuccino Donuts GreeceShrimp, Veggie Burgers, & Spring Rolls (sold during Lent)

14. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-14 Daily Coffee Consumption per Capita Source: Business 2.0. July 2002.

15. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-15 Starbucks Around the World World Locations International Locations Source: Business 2.0, July 2002.

16. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-16 U. S. Trade in Goods & Services ($ Billions) Source: St. Louis Business Monthly, Oct. 1999 & World Trade Organization Balance of Trade

17. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-17 Sources of U.S. Oil Imports In Millions of Barrels Source: USA Today

18. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-18 U.S. Trade Experience Balance of Payments Debtor Nation Foreign Direct Investment Dumping

19. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-19 Sources of Foreign Direct Investments In the U.S. Source: U.S. Commerce Dept.

20. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-20 Strategies for Reaching Global Markets  Licensing  Exporting  Franchising  Contract Manufacturing  Joint Ventures  Strategic Alliances  Subsidiaries-MNCs  Foreign Direct Investment

21. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-21 World’s Largest MNCs- 2002 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 Group 135 8)General Electric 125 9)Toyota Motor 121 10)Mitsubishi112

22. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-22 Forces Affecting Trading in Global Markets Socio-cultural Socio-cultural Economic & Financial Economic & Financial Legal & Regulatory Legal & Regulatory Physical & Environmental Physical & Environmental Trade Protectionism Trade Protectionism Global E-Commerce-Future Global E-Commerce-Future

23. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-23 Days of Annual Vacation Source: AAA World

24. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-24 Cultural Differences in Global Markets  Language  Religion  Values & Attitudes  Aesthetics  Materialism

25. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-25 Did You Know?  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 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.

26. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-26 What’s the 2 nd Most Valuable Global Business Language? Source: Accountemps Poll

27. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-27 Favorite Campbell Soups Around the World  Hong Kong - Watercress & Duck Gizzard  United States - Chicken Noodle, Cream of Mushroom  Britain - Tomato  Japan - Corn  South America - Cream of Asparagus  Australia- Cream of Pumpkin

28. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-28 Nations That Have Not Converted to the Metric System United States Liberia Yemen Myanmar (Burma) Brunei

29. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-29 Economic & Financial Forces  No Worldwide Currency  Currency Fluctuations  Floating Exchange Rates  Bartering/Countertrading

30. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-30 Developing Countries Need Infrastructure 1.2 billion people lack clean drinking water 1.2 billion people lack clean drinking water 3 billion people lack adequate sanitation 3 billion people lack adequate sanitation 2 billion people lack electricity 2 billion people lack electricity

31. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-31 Legal & Regulatory Forces 1.Inconsistent Laws & Regulations 2.Foreign Corrupt Practices Act of 1978 3.Local Business Contact Required

32. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-32 Protectionism MercantilismTariffsProtectiveRevenue Import Quota Embargo Nontariff Barriers-Keiretsu

33. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-33 Trade Agreements General Agreement on Tariffs & Trade (1948)General Agreement on Tariffs & Trade (1948) Uruguay Round of GATT (1986)Uruguay Round of GATT (1986) Lower TariffsLower Tariffs Extend RulesExtend Rules 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)

34. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-34 Future Global Trade o People’s Republic of China- Permanent Normal Trade Relations/Rights o Russia & Others o Internet o Technology- Obstacles/Problems