Global Business Environment

U.S. Multinational in Europe - 1960’s

Fifteen years from now the world’s third greatest

industrial power, just after the United States and

Russia, may not be Europe, but American industry in

Europe.J.S. Servan Schreiber:

Le Defi American, 1967

The Nationality of the World’s 100 Largest Industrial Corporations (by country of origin)

1963 1979 1984 1990 1993 1995 1997United States 67 47 47 33 32 24 24Germany 13 13 8 12 14 14 13Britain 7 7 5 6 4 1 2France 4 11 5 10 6 12 13Japan 3 7 12 18 23 37 29Italy 2 3 3 4 4 3 4Netherlands-UnitedKingdom

2 2 2 2 2 2 2

Netherlands 1 3 1 1 1 2 2Switzerland 1 1 2 3 3 3 5Argentina - - 1 - - - -Belgium - 1 1 1 - - -Brazil - 1 - 1 1 - -Canada - 2 3 - - - -India - - 1 - - - 1Kuwait - - 1 - - - 1Mexico - 1 1 1 1 - 4Venezuela - 1 1 1 1 - -South Korea - - 4 2 4 2 -Sweden - - 1 2 1 - -South Africa - - 1 1 - - -Spain - - - 2 2 - -Turkey - - - - 1 - -

SOURCES: Adapted from “The World’s 500 Largest Industrial Corporations,” Fortune, Aug. 4, 1997

History of International Trade

The Roman Empire - Build on International Trade

– What the Romans had: Pax Romana Common coinage Systematic law Central Market Locations Communication System

The Fall of the Roman Empire– Loss of cooperation

European Feudalism & Protectionism Medieval International Trade Turning away from International Trade

– China & The Empress’s Palace (1896)– Smoot-Hawley Act (1930s) & Consequences– Trade embargoes as foreign policy tools

History of International Trade

International Trade and Recent History

Post World War II - A world divided

– Eastern Bloc Council for Mutual Economic Assistance

– Western world Pax Americana

International Trade and Recent History

Charter for International Trade Organization (1948) - 53 countries

International Trade and Recent History

Charter for International Trade Organization (1948) - 53 countries

General Agreement on Tariffs and Trade (GATT) - reduce tariffs

International Monetary Fund (IMF)

World Bank

International Trade and Recent History

World Trade Organization (1994)

Reading Assignment

What is the role of each of the three world organizations?

When was each formed? How has the role of each organization

changed? Which of these organizations was at the

center of protests last year? Why?

Trends in Global Business

Internationalization of U.S. Markets

Internationalization of U.S. Business

Growth of Regional Trade Areas

EU, NAFTA, AFTA, APEC

Move toward free market system by countries in

Latin America, Asia, Eastern Europe

Large Emerging Markets such as

Argentina, China, South Korea, Poland, India

Evolving global middle income households

GATT and World Trade Organization

The TRIAD

Until recently, competition for U.S. markets was only among U.S. businesses with the same relative cost of money, labor and product

U.S market now includes competitors from all over the world

Globalization of Business and Markets

Why internationalization?

Saturation of U.S. markets

Foreign Acquisitions of U.S. Companies

U.S. Company Foreign Owner

Keebler (Cookies and other foods) Britain

J. Walter Thompson (Advertising) Britain

Spiegal (Catalog retailing) Germany

Mack Trucks (Automotive) France

Giant Food Stores (Supermarkets) Netherlands

Pillsbury, Burger King, Pearle Vision Britain

CBS Records (Music and Entertainment) Japan

Carnation (Coffee-Mate, Friskies pet food) Switzerland

Chesebrough-Pond’s (Vaseline) Netherlands

SOURCE: Adapted from “The 100 Largest Foreign Investmentsin the U.S.,” Forbes, July 18, 1994, pp. 266-270.

Why internationalization?

Saturation of U.S. markets

Higher ROI in foreign markets

Some Big U.S. Players in the Global Game*

*1993 data.SOURCE: Adapted from “The 100 largest Multinationals: Getting the Welcome Carpet,”Forbes, July 18, 1994, pp. 276-279.

Company Foreign Revenues% of Total

Foreign Profits% of Total

Foreign Assets% of Total

Ei du Pont de Nemours 51.4 99.8 37.3

Proctor & Gamble 52.1 65.1 40.7

Coca-Cola 67.0 67.8 48.6

Eastman Kodak 48.8 41.5 32.4

Motorola 43.9 84.8 34.6

Johnson & Johnson 49.1 54.6 43.9

Sara Lee 35.5 41.3 45.0

Colgate-Palmolive 64.5 67.0 46.9

Gillette 67.5 61.4 65.7

Compaq Computer 49.0 63.6 40.5

McDonald’s 46.9 45.1 46.9

Avon Products 32.0 59.9 48.3

Why internationalization?

Saturation of U.S. markets

Higher ROI in foreign markets

Establish early position in world markets

Invented Here, Made Elsewhere

U.S. Invented Technology

Phonographs

Color TVs

Audiotape Recorders

Videotape Recorders

Machine Tools

Telephones

Semiconductors

Computers7 4%

9 8%6 4%

8 9%2 5%

9 9%3 5%

9 9%1%

1 0%0%

4 0%1 0%

9 0%1%

9 0%

0 20 40 60 80 100

1 9 7 0

N O W

“Every American company is international, at least to the extent

that its business performance is conditioned in part by events that

occur abroad”

Definition of International Marketing

The performance of business activities that direct the flow of a company’s goods and services to consumers or users in more than nation for profit.

What’s the difference between international marketing and domestic marketing?

The environment in which marketing strategies have to be implemented

7

The International Marketing Task

Political/legalforces

Economicforces

1

2

Environmentaluncontrollablescountry market A

Environmentaluncontrollablescountrymarket B

Environmentaluncontrollablescountrymarket C

Competitivestructure Competitive

Forces

Level of Technology

Price Product

Promotion Channels of distribution

Geography and

Infrastructure

Foreign environment(uncontrollable)

Structure ofdistribution

Economic climate

Cultural forces

3

45

6

7Political/

legalforces

Domestic environment(uncontrollable)

(controllable)