1. ChapterTwo Competing in Global Markets

2. Growing World Population In Billions Source: Source: Population Reference Bureau

3. U. S. Trade in Goods & Services ($ Billions) Source: St. Louis Business Monthly, Oct. 1999

4. Company % of Earnings From Outside U.S. Source: Investment Advisor, August 2000

5. Why Trade With Other Nations?  Reasons  No nation can produce all its needs  Mutually beneficial exchange  Natural Resources or Technology-

6. Theories of Advantage Absolute Diamond Production South Africa The Rest of the World = Virtual Monopoly

7. Theories of Advantage Output per Unit of Input Comparative U. S. China Software China Clothing

8. Specialize & Trade Software Clothing

9. 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

10. Developing Countries Need 1.2 billion people lack clean drinking water 2 billion people lack electricity 3 billion people lack adequate sanitation Infrastructure Source: Business Week, May 3, 1999

11. China’s Telecom Growth Users in millions Source: Wired, September 2000.

12. Import Goods- Money Goes Out of Country

13. Export Goods- Money Comes Into the Country

14. Trade Deficits/Surpluses- Balance of Trade(1999)  U. S. Exports to Japan  Food/Beverages  Raw Materials  Chemicals & Pharmaceuticals  $58.6 Billion

15. Balance of Trade 1999 (cont’d)  Japan Exports to U.S.  Computers & Telecommunications  Cars/Trucks  Consumer Products  Semi-Finished Goods  $113.9 B

16. 1999 Balance of Trade $113.9 B Goods From Japan $58.6 B Goods To Japan Dollars to Japan Yen to U.S. $55.3 B U.S. Balance of Payments = Unfavorable

17. 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.

18. 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.

19. Cultural Differences in Global Markets  Language  Language is important factor and countries.  Religion  The religion differences can effect the business in many ways.

20. Cultural Differences in Global Markets  Values & Attitudes  People give value to which thing  Price Conscious and Quality Conscious

21. Cultural Differences in Global Markets  Individualism / 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.)

22. 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)

23. Cultural Differences in Global Markets  Uncertainty 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)

24. 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)

25. 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)

26. Sources of Foreign Direct Investments In the U.S. Source: U.S. Commerce Dept.

27. 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)