Chapter Two Competing in Global Markets Growing World
Chapter Two Competing in Global Markets
Growing World Population In Billions Source: Population Reference Bureau
U. S. Trade in Goods & Services ($ Billions) Source: St. Louis Business Monthly, Oct. 1999
Company % of Earnings From Outside U. S. Source: Investment Advisor, August 2000
Why Trade With Other Nations? Ø Reasons Ø No nation can produce all its needs Ø Mutually beneficial exchange Ø Natural Resources or Technology-
Theories of Advantage Absolute = Virtual Monopoly South Africa The Rest of the World Diamond Production
Theories of Advantage Comparative U. S. China U. S. Output per Unit of Input Software Clothing
Specialize & Trade Software Clothing
Checklist for Exporters • Analyze your capabilities • Define export potential of product • Identify best foreign markets for product • Use available government assistance • Study entry strategies/export procedures
Developing Countries Need Infrastructure • 1. 2 billion people lack clean drinking water • 2 billion people lack electricity • 3 billion people lack adequate sanitation Source: Business Week, May 3, 1999
China’s Telecom Growth Users in millions Source: Wired, September 2000.
Import Goods- Money Goes Out of Country
Export Goods- Money Comes Into the Country
Trade Deficits/Surpluses. Balance of Trade(1999) ýU. S. Exports to Japan Food/Beverages ýRaw Materials ýChemicals & Pharmaceuticals ý ý$58. 6 Billion
Balance of Trade 1999 (cont’d) þJapan Exports to U. S. Computers & Telecommunications þ Cars/Trucks þ Consumer Products þ Semi-Finished Goods þ þ$113. 9 B
1999 Balance of Trade $58. 6 B Goods To Japan $113. 9 B Goods From Japan Yen to U. S. $55. 3 B Dollars to Japan U. S. Balance of Payments = Unfavorable
Forces Affecting Trading in Global Markets üSociocultural üSociety effects the business üSome businesses are against society and culture which can lead to conflict. üEconomic/Currency Shifts üCurrencies and economic condition highly effects the business. üLegal/Regulatory üBudget, Custom Laws, Income Tax Laws.
Forces Affecting Trading in Global Markets üProtectionism üSecurity is the main concern of foreign investment and global trade. üCompanies don’t prefer to invest in the areas where security risk is high. üGlobal E-Commerce üE-Commerce usage has changed the concept of trade. üE-Commerce has eliminated the borders for business.
Cultural Differences in Global Markets þ Language þLanguage is important factor and countries. þ Religion þThe religion differences can effect the business in many ways.
Cultural Differences in Global Markets þ Values & Attitudes þPeople give value to which thing þPrice Conscious and Quality Conscious
Cultural Differences in Global Markets þIndividualism / Collectivism Individualism People give priority to their own interest, more concern with own career ( USA, CANADA, UK) Collectivism Top priority to group and society, greater concern about organization (Japan, Hong Kong, Mexico and Greece etc. )
Cultural Differences in Global Markets þPower Distance High Power distance Boss makes decision, group member readily comply (France, Spain, Japan, Mexico) Lower Power distance Accept direction when convinced (Israel, Ireland, USA, Germany)
Cultural Differences in Global Markets þUncertainty Avoidance Lower uncertainty Avoidance People accept unknown and tolerate risk. Not afraid to face unknown(USA, Canada Austria) High Uncertainty avoidance. Society contain majority of people who want predictable and certain futures (Japan, Italy, Israel, Argentine)
Cultural Differences in Global Markets þLong Term- Short Term Orientation Long Term : Have long time perspective, do not demand quick return on investments (Pacific Rim Countries) Short Term : Demand immediate result (USA, Canada)
Cultural Differences in Global Markets þUrgent Time-Casual Time How much importance given to time Urgent time : People perceive time as an scare asset and tend to be impatient (USA imposes dead lines) Casual time : People view time as an ultimate and unending resources and tend to be patient (Asians, Middle East)
Sources of Foreign Direct Investments In the U. S. Source: U. S. Commerce Dept.
Key Dimensions Of Differences In Cultural Values Urgent Time / Casual Time How much importance given to time Urgent time : People perceive time as an scare asset and tend to be impatient (USA imposes dead lines) Casual time : People view time as an ultimate and unending resources and tend to be patient (Asians, Middle East)
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