*

*Chapter Three

Doing Business in

Global Markets

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

*

*The Dynamic Global Market

• Importing -- Buying products from another country.

• Exporting -- Selling products to another country.

• The U.S. is the largest importing and the second largest exporting nation in the world.

IMPORTING and EXPORTING

LG1

3-2

*

*The Theories of Comparative and Absolute Advantage

• Comparative Advantage -- A country should sell the products it produces most efficiently and buy from other countries the products it cannot produce as efficiently.

• Absolute Advantage -- A country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.

LG1

COMPARATIVE and ABSOLUTE ADVANTAGE

3-3

*

*Importing Goods and Services

• Starbucks CEO, Howard Shultz, found his importing opportunity in Italy. He transformed a coffee shop in Seattle to mimic the European cafes.

LG2

GETTING INVOLVED in GLOBAL TRADE

3-4

*

*Measuring Global Trade

• Balance of Trade -- The total value of a nation’s exports compared to its imports measured over time.

• Trade Surplus -- When the value of a country’s exports is more than that of its imports.

• Trade Deficit -- When the value of a country’s exports is less than that of its imports.

HOW to

MEASURE

GLOBAL

TRADE

LG2

3-5

*

*Strategies for Reaching Global Markets

Least Amount of commitment, control, risk and profit potential Most

Licensing Exporting FranchisingContract

Manufacturing

International joint ventures and strategic

alliances

Foreign direct

investment

LG3

\KEY STRATEGIES for REACHING GLOBAL MARKETS

3-6

*

*Forces Affecting Trading in Global Markets

LG4

3-7

*

*Socio-cultural Forces

CULTURAL DIFFERENCES

LG4

3-8

*

*Economic and Financial Forces

EXCHANGE RATES

LG4

3-9

*

*Economic and Financial Forces

DEVALUATION and COUNTERTRADING

LG4

3-10

*

*Legal and Regulatory Forces

LEGAL CONCERNS OVERSEASLG4

3-11

*

*Trade Protectionism

TRADE PROTECTIONISM

LG5

3-12

*

*Trade Protectionism

TARIFFS

LG5

3-13