Globalization & Business opportunities Unit 2 – Social & Ethical issues of business ownership

Reasons to market globally With the advent of the World Wide Web, and the ease of communications and transportation it is a necessity for business to market globally. The U.S. market has over 300 million people, while the global market is approximately 7.1 billion. For many years, a major reason to export goods to foreign markets for U.S. companies was to extend their product life cycle. Products that were approaching market saturation in domestic markets could be introduced aboard and begin a whole new life.

Reasons to market globally

Strategic options for global ventures Importing – the sale of products produced in a foreign country to customers in your home country Exporting – selling goods or services produced domestically to foreign customers. Importing/Exporting is a highly regulated, complex process that requires commitment and cultural competency. There is a well-developed system of trading through international brokers and dealers that will manage almost every aspect of the process. Foreign embassies, consulates and the National Customs Brokers are good sources of information on importing. Website – http://www.ncbfaa.org

Legal and Regulatory barriers Tariffs – Governments impose taxes or duties on goods and services imported into a country. Tariffs are intended to weaken competition for comparable domestic products and services. Quotas – Some countries create limits on the amounts of specific products that can be imported. Embargoes – a total prohibition on imports of all products from a particular nation, or specific products. Dumping – Some companies price products below cost and sell large quantities in foreign markets.

Trade Agreements Influence Global Marketing Regional Trade Agreements - (RTA) designed to facilitate trade on a regional basis, generally including tariff cutting and often including complex regulations regarding trade between participating countries. (contain rules on competition, labor, investment and the environment) European Union – (EU) The European Union is a political and economic confederation formed in 1993 that has addressed foreign and security policy, created a central bank, and adopted a common currency. (the euro) North Amercian Free Trade Agreement – (NAFTA) The North American Free Trade Agreement was established in 1994 to support free trade between Canada, Mexico, and the United States.

Questions for discussion How do trade barriers and regulations affect international business? What can this mean to small business? Why is cultural awareness and sensitivity important for participants in the global marketplace? What contributions can trade agreements make for small firms?