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Business 100 Introduction to Business Dr. Kathy Broneck
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Review Economics
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Preview Global Markets Trading Import/Export Strategies Forces that affect trade E-commerce Free market vs. protectionism
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Growing World Population In Billions Source: Source: Population Reference Bureau
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Global Market Terms Goods Tangible products Services Intangible products Importing Goods and services from other countries into your country Exporting Goods and services from your country into other countries
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Why Trade With Other Nations? No nation can produce all its needs Mutually beneficial exchange Natural Resources or Technology- Produce or Buy?
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Leading Goods Exporters/Importers (2001) CountryExportsImports United States 731 1,180 Germany 571 493 Japan 404 350 France 322 326 United Kingdom 273 332 World Total6,155 6,441 In Billion $ Source: World Trade Organization
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Leading Services Exporters/Importers (2001) CountryExports Imports United States 263 188 Germany 80 133 Japan 64 107 France 80 62 United Kingdom 108 92 World Total1,460 1,445 In Billion $ Source: World Trade Organization
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U.S. Trading Partners RegionExportsImports Asia 26.5% 36.3% West. Europe 24.0 20.8 North America 22.5 18.7 Latin America 21.8 17.3 Middle East 2.7 3.3 Africa 1.7 2.3 C./E. Europe/ Baltic States/CIS 0.9 1.3 Total 100% 100% Source: World Trade Organization, 2001
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Comparative and Absolute Advantage Comparative Advantage Theory Sell products that are effectively and efficiently produced Buy products that cannot be effectively and efficiently produced Absolute Advantage Advantage of a country Monopoly Produce it more effectively
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CountryStrengths United States Technology, R & D Spending Finland Univ. Enrollment, Efficient Legal System, Business Ethics Taiwan Cell-phone Ownership, Tech. Innovation, Local Firms Competitiveness Singapore Savings Rate, Math/Science Education, Political Trust Sweden H.S. Enrollment, Press Freedom, Phone Access Global Competitiveness
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Measuring Trade Balance of Trade Imports : Exports Trade Deficit Imports > Exports Balance of Payments $ from Exports - $ from Imports + = favorable - = unfavorable
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U. S. Trade in Goods & Services ($ Billions) Source: St. Louis Business Monthly, Oct. 1999 & World Trade Organization Balance of Trade
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Sources of U.S. Oil Imports In Millions of Barrels Source: USA Today
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US Trade Experience Debtor Nation A nation that is owed less foreign currency obligations than it owes other nations Dumping Selling in a foreign country at lower prices than in own country
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Foreign Direct Investments In U.S. Source: U.S. Commerce Dept.
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Strategies for Global Markets Licensing Exporting Franchising Contract Manufacturing/ Outsourcing Joint Ventures Strategic Alliances Subsidiaries-MNCs (Multi-National Companies) Foreign Direct Investment
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World’s Largest MNCs- 2002 Revenue ($Billions) 1) Wal-Mart Stores 217 2) Exxon Mobil 213 3) General Motors 175 4) BP 174 5) Ford Motor 162 6) Daimler Chrysler 136 7) Royal Dutch/Shell Group 135 8) General Electric 125 9) Toyota Motor 121 10) Mitsubishi112
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Forces Affecting Trading in Global Markets Socio-cultural Economic & Financial Legal & Regulatory Physical & Environmental Trade Protectionism Global E-Commerce-Future
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Days of Annual Vacation Source: AAA World
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Cultural Differences in Global Markets Language Religion Values & Attitudes Aesthetics Materialism
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Did You Know? In Turkey it’s rude to cross your arms while you are facing someone. In the Arab world the left hand is considered unclean; don’t eat with it! In India never pat someone’s head, it’s the seat of the soul. The Chinese associate gifts such as straw sandals, clocks and handkerchiefs with funerals.
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Most Valuable Global Business Languages Source: Accountemps Poll
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Economic & Financial Forces No Worldwide Currency Currency Fluctuations Floating Exchange Rates Bartering/Countertrading
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Developing Countries Need Infrastructure 1.2 billion people lack clean drinking water 2 billion people lack electricity 2 billion people lack electricity 3 billion people lack adequate sanitation
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Legal & Regulatory Forces Inconsistent Laws & Regulations Foreign Corrupt Practices Act of 1978 No “dubious” payments to foreign officials to secure business Local Business Contact Required Sponsorship of local companies
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Free Trade Trading goods and services without political or economical trade barriers Different countries have different trade agreements NAFTA European Union …upcoming slide
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Protectionism Mercantilism Nation sells more goods to other nations creating a favorable balance of trade Tariffs Protective Raise Retain Price More Competitive Revenue Raise money for government Fledgling Businesses
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Protectionism Import Quota Limiting Numbers of a Product Embargo Complete ban on product Nontariff Barriers-Keiretsu (care-yet-sue) Corporate alliences with government (Japan)
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Trade Agreements General Agreement on Tariffs & Trade (GATT) (1948) International forum Negotiate mutual reductions in trade restrictions Uruguay Round of GATT (1986) Lower Tariffs Extend Rules Agriculture, services, patent protection
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Trade Agreements World Trade Organization (WTO) (1995) Replaced GATT Mediates trade disputes between nations Common Markets European Union (EU) 15 nations; 12 under the Euro Mercosur Brazil, Argentina, Paraguay, Uruguay (Chile & Bolivia) North American Free Trade Agreement (1994) Canada, Mexico, US
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Future Global Trade o People’s Republic of China- Permanent Normal Trade Relations/Rights o Russia & Others o Internet o Technology- Obstacles/Problems
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