Chapter Chapter TwoTwo
Competing in Competing in Global Global
MarketsMarkets
Growing World Population
5.36.0 6.5
8.5
10.8
0
2
4
6
8
10
12
1990 1998 2010 2030 2060
In In BillionsBillions
Source: Source: Population Reference Bureau
U. S. Trade in Goods & Services ($ Billions)
0
500
1000
1500
2000
2500
1975 1980 1985 1990 1995 1998
ImportsExports
Source: St. Louis Business Monthly, Oct. 1999
Company % of EarningsFrom Outside U.S.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
AIG
Coca-Cola
Gillette
Intel
Microsoft
Pfizer
Source: Source: Investment AdvisorInvestment Advisor, August 2000, August 2000
Why Trade With Other Nations?
ReasonsNo nation can produce all its
needsMutually beneficial exchangeNatural Resources or
Technology-
Theories of Advantage
AbsolutAbsolutee
Diamond Diamond ProductionProduction
South South AfricaAfrica
The Rest of The Rest of the Worldthe World
= Virtual = Virtual MonopolyMonopoly
Theories of Advantage
Output per Output per Unit of Unit of InputInput
ComparativComparativeeU. S.U. S.
ChinaChina
SoftwarSoftwaree
U. S.U. S.
ChinaChina
ClothinClothingg
Specialize & Trade
SoftwareSoftware
ClothingClothing
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
• 1.2 billion people lack clean drinking water
• 2 billion people lack electricity
• 3 billion people lack adequate sanitation
InfrastructureInfrastructure
Source: Business Week, May 3, 1999
China’s Telecom Growth
020406080
100120140160180200
1996 1997 1998 1999 2000
Internet HostsBusiness LinesResidential Lines
Users in Users in millionsmillions
Source: Source: WiredWired, September 2000., September 2000.
Import Goods- Money Goes Out of Country
Export Goods- Money Comes Into the Country
Trade Deficits/Surpluses- Balance of Trade(1999)
U. S. Exports to Japan Food/Beverages Raw Materials Chemicals & Pharmaceuticals
$58.6 Billion
Balance of Trade 1999 (cont’d)
Japan Exports to U.S. Computers &
Telecommunications Cars/Trucks Consumer Products Semi-Finished Goods
$113.9 B
1999 Balance of Trade
$113.9 B$113.9 B
Goods Goods FromFrom JapanJapan
$58.6 B$58.6 B
Goods Goods ToTo Japan Japan
Dollars Dollars toto JapanJapan
Yen Yen toto U.S. U.S. $55.3 $55.3 BB
U.S. Balance of U.S. Balance of Payments = UnfavorablePayments = Unfavorable
Forces Affecting Trading in Global Markets
Sociocultural Society effects the business Some businesses are against society
and culture which can lead to conflict. Economic/Currency Shifts
Currencies and economic condition highly effects the business.
Legal/Regulatory Budget, Custom Laws, Income Tax
Laws.
Forces Affecting Trading in Global Markets
Protectionism Security is the main concern of foreign
investment and global trade. Companies don’t prefer to invest in the
areas where security risk is high.Global E-Commerce
E-Commerce usage has changed the concept of trade.
E-Commerce has eliminated the borders for business.
Cultural Differences in Global Markets
Language Language is
important factor and countries.
Religion The religion
differences can effect the business in many ways.
Cultural Differences in Global Markets
Values & Attitudes People give value to
which thing Price Conscious and
Quality Conscious
Cultural Differences in Global Markets
Individualism / Collectivism
IndividualismPeople give priority to
their own interest, more concern with own career ( USA, CANADA, UK)
CollectivismTop priority to group and
society, greater concern about organization (Japan, Hong Kong, Mexico and Greece etc.)
Cultural Differences in Global Markets
Power 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
Uncertainty Avoidance
Lower uncertainty AvoidancePeople 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
Long 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
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)
Sources of Foreign Direct Investments In the U.S.
Other4%
Japan5%
Canada11%
Asia13%
Latin America17%
Britain18%
Europe32%
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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