PowerPoint Presentation by Charlie Cook Copyright © 2005 Prentice Hall, Inc. All rights reserved. Chapter 4 Understanding the Global Context of Business

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–2 “ We are in the midst of a great transition from narrow nationalism to international partnership. ” — Lyndon Baines Johnson

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–3 Key Topics The rise of global business Major world marketplaces and U.S. trading partners Influences on international business International business management The impact of differences among nations

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–4 Globalization Is Gaining Speed The world economy is becoming a single, interdependent system Export:  Domestic product sold abroad Import:  Foreign product sold domestically

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–5 The Price of Global Communication Figure 4–1

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–6 Major World Marketplaces North America Europe Pacific Asia

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–7 The North American Marketplace and the Nations of NAFTA Figure 4–2

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–8 Europe and the Nations of the European Union Figure 4–3 AustriaAustria BelgiumBelgium DenmarkDenmark FinlandFinland FranceFrance GermanyGermany GreeceGreece IrelandIreland ItalyItaly IrelandIreland ItalyItaly LuxembourgLuxembourg NetherlandsNetherlands PortugalPortugal SpainSpain SwedenSweden United KingdomUnited Kingdom

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–9 The Nations of ASEAN Figure 4–4

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–10 Pacific Asia Represents Enormous Business Potential Source: Time Global Business, Nov EnglishJapaneseChineseKorean Projections for 2010 (in millions) In less than a decade, Asian language speakers on the web will far exceed English speakers.

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–11 The Major Trading Partners of the United States Table 4–1

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–12 Competitive Advantage Absolute Advantage Comparative Advantage

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–13 National Competitive Advantage Factor conditions Demand conditions Related and supporting industries Strategies, structures, and rivalries

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–14 Attributes of National Competitive Advantage Figure 4–5

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–15 Import/Export Balances Balance of Trade  Trade Deficits  Trade Surpluses Balance of Payments

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–16 Exchange Rates Heavily Impact Global Trade When an economy’s currency is strong:  Domestic companies find it harder to export products  Foreign companies find it easier to import products  Domestic companies may move production to cheaper sites in foreign countries Implications for balance of trade?

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–17 Exchange Rates Heavily Impact Global Trade (cont’d) When an economy’s currency is weak:  Domestic companies find it easier to export products  Foreign companies find it harder to import products  Foreign companies may invest in production facilities Implications for balance of trade?

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–18 Canadian vs. U.S. Prices Table 4–2

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–19 U.S. Imports and Exports Figure 4–6

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–20 U.S. Trade Deficit Figure 4–7

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–21 Going International Figure 4–8

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–22 Levels of International Involvement Importer and Exporter International Firms Multinational Firms

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–23 International Organizational Structures Foreign Investment Strategic Alliances Branch Offices Licensing Arrangements Independent Agents INVOLVEMENT HIGH LOW

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–24 Barriers to International Trade Social and Cultural Differences Economic Differences Legal and Political Differences

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–25 Take Time to Learn the Culture Thoroughly! Este es nuestro nuevo auto: el NOVA!

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–26 The Customer’s Language: A Critical Business Success Factor In the U.S. alone, 18% of the population does not speak English at home. Only 48% of the world’s Web users are native English speakers. Consumers are four times more likely to buy a product on the Internet if the website is in their preferred language. Source: Time Global Business, Nov. 2001

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–27 Global Differences To operate effectively in another country, businesses must know when, and to what extent, the government is involved in a given industry. Legal and Political Differences  Quotas, tariffs, and subsidies  Protectionism  Local content laws  Business practice laws  Day to day operations  Cartels  Dumping

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–28 Chapter Review Discuss the rise of international business, describe the major world marketplaces. Explain how competitive advantage, import-export balances, exchange rates, and foreign competition shape international business strategies. Discuss what factors influence whether a company should engage in international business. Identify different levels of international involvement and international organizational structure. Describe key barriers to international trade.