3. The Role of International Business
To buy, sell and trade goods and services across national boundaries
Did You Know?
McDonald’s serves 50 million customers a day at 30,000 restaurants in 120 countries.

4. Why Nations Trade To obtain raw materials and goods that are:
Otherwise unavailable
Available elsewhere at a lower price

5. Absolute Advantage A monopoly that exists when a country is the:
Only source of an item
Only producer of an item
Most efficient producer of an item
Example: DeBeers Consolidated Mines, Ltd.
Virtually controls the world’s diamond trade

6. Comparative Advantage
A country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items
Example:
U.S. agricultural commodities, such as corn and wheat

7. Trade Between Countries
Importing
The purchase of goods and services from foreign sources
Exporting
The sale of goods and services to foreign markets

8. The U. S. Trade Deficit 1980-2005 (in billions of dollars)

9. Top 10 Countries Maintaining Trade Deficits & Surpluses with the US

10. International Trade Barriers
Economic
Legal/political
Social/cultural
Technological

11. Economic Barriers The level of a country’s economic development
Industrialized nations – U.S., Japan, Great Britain, Canada
Less-developed countries – Africa, Asia, and South America
The level of existing infrastructure
Currency exchange rates

12. Political & Legal Barriers
Laws and regulations
Tariffs and trade restrictions
Import tariffs, exchange controls, quotas, embargos, anti-dumping regulations
Political barriers
Political instability, cartels

13. Social & Cultural Barriers
Understanding the differences among the cultures of countries can be important to a firm
Spoken and written language
Body language and personal space
Family roles
Perception of time
Religious holidays and local customs

14. How US jobs compare:
Americans are more likely to work longer than 40 hours a week than workers in Japan, Germany or 20 other developed countries. In fact, in the U.S., 70.3% of all American workers put in more than 40 hours a week, compared to 49.4% in Japan; 14.2% in Germany; 57.1% in Canada; and 10.1% in Norway
The U.S. ranks below six other countries in annual income per person: Norway ($39,806); Switzerland ($38,425); Denmark ($33,367); Sweden (32,125); Finland ($31,737); and Japan (31,624). In the U.S., annual income per person is $28,553.
The U.S. ranks below 10 other countries in paid vacation days for workers. In the U.S., the average worker gets 16 paid vacation days a year, compared to 30 days in Portugal and Spain; 25 days in Austria, Finland, Sweden and France; and 20 days in Belgium, the Netherlands and Switzerland. European countries guarantee workers paid vacation days by law
The income gap between rich and poor in the United States is bigger than in any other developed country in the world.
In many countries, workers are guaranteed health coverage by law. In the U.S., there are 45.8 million people without health insurance, and the percentage of Americans who lack health coverage recently reached 15.7%. In parental leave and unemployment insurance coverage, the United States also lags behind most European countries.
Source: (Accessed October 30, 2006)

15. Cultural Behavioral Differences

16. Technological Barriers
Varying levels of technological development and infrastructure

17. Trade Agreements, Alliances & Organizations
GATT
WTO
NAFTA EU
MERCOSUR
APEC
World Bank
IMF

18. GATT and NAFTA General Agreement on Tariffs and Trade (GATT):
Provides a forum for tariff negotiations and discussion
The World Trade Organization (WTO)
Deals with the rules of trade between nations
North American Free Trade Agreement (NAFTA):
Eliminates most tariffs and trade restrictions on agricultural and manufactured products between Canada, Mexico, and U.S. ( ).

19. Levels of Involvement in International Trade
Import/Export
Trading Companies
Licensing & Franchising
Contract Manufacturing
Joint Ventures & Alliances
Direct Investment
The MNC

20. Major Export Markets for U.S. Companies
Percent of Total US Exports
Source: “Top Trading Partners, Total Trade, Exports and Imports,” U.S. Census Bureau, August, 2006, available at

21. Outsourcing
U.S. companies are increasingly transferring manufacturing and other tasks to countries where labor and supplies are less expensive

22. The Ten Largest Global Corporations

23. Wal-Mart Around the World
Country
# of stores
# of employees
Argentina 12
4,000
Brazil
296
7,000
Canada
279
62,000
China 66
18,000
Germany 85
14,000
Japan
391
30,000
Korea 15
3,000
Mexico
845
100,000
Puerto Rico 54
12,5000
United Kingdom
326
125,000
Source: “Wal-Mart International Operations,” accessed October 30,2006

24. Top 10 Global Franchise Operations

25. U.S. Exporters and Value By Company size

26. Procter & Gamble Global Brands
Description
Countries Available
Ace
High quality bleach
North America, Latin America, Europe, Middle East, Africa
Alldays
Lightweight panti-liner
Latin America, Europe, Middle East, Africa
Always
Aussie
Hair care products
North America, Europe, Middle East, Africa, Asia
Bess
Strong, thick bathroom tissue
Europe, Middle East, Africa
Source: “Global Operations.” accessed October 30, 2006.

27. Procter & Gamble Global Brands
Description
Countries Available
Bounce
Dryer sheets
North America, Latin America, Europe, Middle East, Africa, Asia
Cierto
Dishwashing soap
Latin America
Fairy
Dishwashing products & detergents
Europe, Middle East, Africa, Asia
Febreeze
Odor eliminating fabric spray
Hipoglos
Diaper rash lotion
Source: “Global Operations.” accessed October 30, 2006.

28. Developing International Business Strategies
Multinational Strategy:
Customizing and adapting products, promotion and distribution to the local market condition
Global Strategy (Globalization):
Standardizing products, promotion, and distribution to one world market

29. Managing the Challenges of Global Business
Adapting to different cultures
Carefully studying those markets
Preparing and implementing appropriate strategies

30. Solve the Dilemma
What are the key issues that need to be considered in determining global expansion?
What are some of the unique problems that a small business might face in global expansion that larger firms would not?
Should Audiotech consider a joint venture?
Should it hire a sales force of people native to the countries it enters?

31. Explore Your Career Options
What are some of the skills required to be a successful businessperson in the borderless world of the 21st century?

32. Additional Discussion Questions and Exercises
Look at the “Foreign Exchange” section of the business section of a newspaper.
What nation’s currency or exchange rate is listed?
How much of that nation’s currency would equal one dollar?
Assume your firm wishes to do business by selling manufactured products in other countries but does not wish to do actual manufacturing in the United States other country.
What options are available?

33. Additional Discussion Questions and Exercises
Consider the world situation in general.
What are the political hot spots or areas of unrest in which doing business would be risky?
What would be the possible advantage for a company setting up a business venture in these areas of unrest at the first sign of political stability?
What are some of the reasons for the United States trade deficit?

34. Chapter 3 Quiz A negative balance of trade occurs when
a country imports more than it exports
a company has a monopoly on the production of a specific resource
a country exports more than it imports
a country’s currency can be exchanged for another’s currency or gold
A partnership between a foreign company and a local partner is called:
a trading company
an export agency company
a direct investment
a joint venture

35. Chapter 3 Quiz
When the United States established a policy forbidding trade with Cuba, this was an example of what type of trade restriction?
a quota
an embargo
a countertrade agreement
an import tariff
A comparative advantage exists when
a firm supplies a product at lower costs.
a firm is the only supplier of a product.
a country supplies a product at lower costs.
a country is the most efficient supplier of an item.

36. Multiple Choice Questions about the Video
Which of the following is not a Chinese brand?
Tsingtao
Wahaha
Lenovo
Chicken
Which of the following is a reason why Chinese brands might have trouble growing
Overcapacity of production
They are already in stores such as Target and Costco in the U.S.
The products are of inferior quality
The products are too popular in China