“Trends in International Business” Chapter 1
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Transcript of “Trends in International Business” Chapter 1
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“Trends in International Business”Chapter 1
• Victor Haislop
• Trev Hall
• Ali Kanawati
• Luis Ochoa
• Mike Wiley
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The World Trade Organization: Perspectives and Prospects
• 1948- International Trade Organization (ITO) with 50 nations
• World trade was valued at over $58 billion
• 1950 - President Truman didn’t resubmit to Congress for ratification, due to perceived threats of national sovereignty, and too much ITO intervention in markets.
• 1994 - World Trade Organization - similar to ITO
• Today world trade is over $4 trillion. US over 12 percent
• New Players The tigers of Asia: Hong Kong, Singapore, Taiwan and South Korea.
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International Currency Rates
• Exchanged rates used to be fixed
– Based on actual supply and demand for currency relating to international trade of goods and services
– Also determined on interest rates between countries.
• Today, currency rates float.
– Examples of Currency Margin: ADR’s, Golondrinas’ Capital, Petroleum and Coffee (Commodities in general).
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International Currency Rates (Cont.)
• Rates are determined largely by currency traders.
• Today, there is over 1.5 trillion dollars a day of traded currencies.
• This compares to a world trade of products and services of almost 4 trillion annually.
• The end result is an increase volatility of exchange rates, which drastically shifts export and import prices.
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The Corporate Perspective
• Brand new corporate environment• “Fixed parameters became fluid”• This change requires an increased flexibility in decision-making.
– “Instant worldwide communication”
• Due to a dramatic increase in the speed and ease of technology transfer.
• Technological Innovation can be exchanged very quickly.• Today’s revolutionary product can be tomorrow’s industry
commonplace.• More international joint ventures sharing risks, costs, capabilities
and profits.
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The Context of a New Global Trade Framework
• Government changing goals in the context of worldwide competition.– Ensure success for firms - foreign/abroad.
– Create employment.
– Increase public standard of living.
• US has lost it’s world trade dominance.• World wide competitiveness has leveled the international
playing field.• This has created a need for cross cultured products and services
with less ethnocentricity.• Free market access governs the new global trade framework.
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The Future of the World Trade Organization
• The WTO should focus on the core mission of world trade and global business.
• The WTO should not be distracted/overload with social issues.• Such issues detract from trade and investment which slows
progress and world trade efficiency.• Together with the other pillars of a global economy- the World
Bank for development, and the international monetary fund for finance, the WTO can form the underpinning for a world economic platforms.
• Further social dimensions focusing on compassion and social issues should come later.
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America’s New World Trade Order
• Improve quality and amount of information that government and business share.
• Policies should encourage cooperation between government and businesses.
• American industry must overcome its export reluctance and short term financial focus.
• America must invest in its people providing education and training needed to compete in the global business environment.
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America’s World Trade Challenges
• Japanese import barriers
• Structure of Japanese distribution channels / Keirtsu
• Unreasonable Product testing standards
• Inadequate intellectual property protections.
• Policy makers should pursue government collaboration with businesses.
• Should focus on information sharing, collaboration, export promotion, and human capital.
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Japan’s Problems Identified
• Distribution and cultural impediments
• Government trade barriers
• Very demanding customers
• Bureaucratic practices
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Solutions to Japanese Problems
• Need Anti-trust structure to reduce the overall collusive power of the Keirtsu.
• The Keirtsu by design inhibits the free flow evolution of a market economy.– Reduces Competition.– Props up the weak and inefficient.– Lessens Innovation and Incentive
• US needs to increase market research in Japan.
• Better Product Adaptation and service orientation to the Japanese Consumer.
• Japanese and American collaborative ventures and long range vision.
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Filling International Gaps of Efficiency
• Distribution costs are high in emerging industrialized nations.
• Japan and US should assist these nations in developing more efficient distribution systems.
• 40 percent of US shipments are under a J.I.T./Quick response structure.
• US and Japan are roughly 11 percent of GNP for distribution costs.
• Eastern Europe and Russia are well above 30 percent of GNP.
• By helping reduce distribution costs, international products will cost less to distribute, thus resulting in lower prices to the consumer.
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Shifting Global Competitiveness
• Innovation is a critical measure to future competitiveness in international trade.
• A Patent is a legal document issued by a governmental agency that establishes ownership of a piece of intellectual property for a specified period. – Protect the property rights of the inventor.
– Encourage the inventiveness and technical progress of societies by rewarding innovation and creativity.
– Serve as a measure of innovation and subsequent global competitiveness.
• Patent information will be scrutinized to determine country specific competitiveness.
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Domestic and International Patent Data
• In 1991, 40 percent of US patents were given to foreigners.
• Top four companies receiving patents were all Japanese firms.
• 20 percent of patents granted in the US were awarded to Japan.
• In Japan, only 14 percent of Patents were held by foreigners.
• Only 7 percent were awarded to US companies.
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Comparison of the US and Japanese Patent System
• The US patent system awards based on “first to invent”
• The Japan patent system awards on “first to file/obtain a patent”
• The US patent system is conducted in secrecy
• The Japan patent system is conducted publicly.
– Meaning that it seeks input from industry to determine uniqueness or novelty.
– This dramatically increases the risk of Japanese companies stealing this information and the patent rights.
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Patent System Comparison (Cont.)
• The Japanese Patent system is not as stringent in the requirements of uniqueness and novelty.
• This fact reflects more patents applied for and filed as a whole.
• The US is soliciting help from Japanese patent consultants to better learn the patent system.