Competing

Competingin
inthe
the
Global
GlobalMarketplace
Marketplace
Chapter
4
THE
THEFUTURE
FUTUREOF
OFBUSINESS
BUSINESS
Gitman
Gitman&&McDaniel
McDaniel
55ththEdition
Edition

Prepared
Preparedby
by
Chapter 4

Deborah Baker
Deborah Baker
Texas
Texas ChristianUniversity
Christian University
 Learning Goals
1 Why is global trade important to the United States and
how is it measured?
2 Why do nations trade?
3 What are the barriers to international trade?
4 How do governments and institutions foster world trade?
5 What are international economic communities?
6 How do companies enter the global marketplace?
7 What threats and opportunities exist in the global
marketplace?
8 What are the advantages of multinational corporations?
Chapter 4

9 What are the trends in the global marketplace?

Copyright 2005 by South-Western, a division of 2

 PRINCIPLES OF GLOBAL COMPETITION

Recognizing and reacting to

international business
opportunities

Global
Global Being aware of threats from
Vision
Vision foreign competitors

Effectively using international

distribution networks
Chapter 4

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 1 Learning Goal 1

Why is global trade important

to the United States
and how is it measured?
Chapter 4

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 1
The Importance of Global Business to U.S.

U.S. exports a fifth of industrial production

and a third of its farm products
One of every sixteen jobs in U.S. is
supported by exports
A third of U.S. corporate profits is from
international trade and investment
Exports accounted for one-third of
U.S. economic growth
Chapter 4

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 1 Key Measures of International Trade

Exports
Exports
Imports
Imports

Balance
Balance of
of
Trade
Trade

Balance
Balance of
of
Payments
Payments
Exchange
Exchange
Rates
Rates
Chapter 4

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 2 Learning Goal 2

Why do nations trade?

Chapter 4

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 2 WHY NATIONS TRADE
Absolute Advantage

A country can produce and sell products

at a lower cost
A country is the only provider of a product

Comparative Advantage
A country should specialize in the products that it
can produce most readily and cheaply, and trade
these for goods that foreign countries can produce
most readily and cheaply
Chapter 4

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 2 The Fear of Trade and Globalization

Millions of Americans have lost jobs

Millions fear losing their jobs

Employers threaten to export jobs if

workers do not accept pay cuts

Service and white-collar jobs are vulnerable

to operations move
Chapter 4

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 2 Benefits of Globalization
Rise from poverty for foreign nations
Per capita income increases
Productivity and living standard increase
Global competition keeps down prices,
so Inflation is less threatening
Open economy spurs innovation
Export jobs may pay more
Few American workers are in direct competition
with workers from poorer countries
Chapter 4

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 3 Learning Goal 3

What are the barriers to

international trade?
Chapter 4

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 3 BARRIERS TO TRADE

Natural
Natural Barriers
Barriers
Major
Major Obstacles
Obstacles
to
to
International Tariff
Tariff Barriers
Barriers
International
Trade
Trade
Nontariff
Nontariff Barriers
Barriers
Chapter 4

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 3 Tariffs vs. No Tariffs

For
For Tariffs
Tariffs Against
Against Tariffs
Tariffs

Protect infant Discourage free trade

industries Raise prices
Protect American jobs
Aid in military
preparedness
Chapter 4

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 4 Learning Goal 4

How do governments and

institutions foster
world trade?
Chapter 4

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 4 FOSTERING GLOBAL TRADE

Antidumping
Antidumping Laws
Laws

The
The Uruguay
Uruguay Round
Round and
and the
the WTO
WTO

The
The World
World Bank
Bank and
and International
International Monetary
Monetary Fund
Fund
Chapter 4

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 5 Learning Goal 5

What
What are
are international
international
economic
economic communities?
communities?
Chapter 4

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 5 INTERNATIONAL ECONOMIC COMMUNITIES

North
North American
American Free
Free Trade
Trade Agreement
Agreement
(NAFTA)
(NAFTA)

The
The European
European Union
Union
Chapter 4

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 5 The European Union
Chapter 4

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 6 Learning Goal 6

How
How do
do companies
companies enter
enter the
the
global
global marketplace?
marketplace?
Chapter 4

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 6 THE GLOBAL MARKETPLACE

Earn
Earn additional
additional profits
profits

Leverage
Leverage aa unique
unique product
product or
or
technological
technological advantage
advantage

Why
Why Possess
Possess exclusive
exclusive
Go
Go Global?
Global? market
market information
information

Saturated
Saturated domestic
domestic markets
markets
and
and excess
excess capacity
capacity

Potential
Potential for
for cost
cost savings
savings
Chapter 4

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 6 Entering the Global Marketplace

High
Risk risk/
Direct high
Joint Foreign
Invest- return
Contract Venture
ment
Manu-
Export Licensing facturing

Low
risk/
low
Return
return
Chapter 4

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 6 Entering the Global Marketplace

Sell
Selldomestically
domesticallyproduced
produced
Export
Export products
productstotobuyers
buyersin
inother
othercountries.
countries.

Legal
Legalprocess
processallowing
allowinguse
useof
of
Licensing
Licensing manufacturing/patents/knowledge.
manufacturing/patents/knowledge.

Contract
Contract Private-label
Private-labelmanufacturing
manufacturingby
byaa
Manufacturing foreign
foreigncountry
country
Manufacturing
Domestic
Domesticfirm
firmbuys/joins
buys/joinsaaforeign
foreign
Joint
Joint Venture
Venture company
companyto tocreate
createnew entity..
newentity

Active
Activeownership
ownershipof
ofaaforeign
foreign
Direct
Direct Investment
Investment company/manufacturing
company/manufacturingfacility.
facility.
Chapter 4

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 6 Entering the Global Marketplace

AAform
form of
of international
international
trade
tradein inwhich
whichpart part or
orall
all
Countertrade
Countertrade of
of the
thepayment
payment of of goods
goods
or
or services
servicesis isin
inthe
theform
form
of
of goods
goodsandandservices.
services.
Chapter 4

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 7 Learning Goal 7

What
What threats
threats and
and opportunities
opportunities
exist
exist in
in the
the global
global marketplace?
marketplace?
Chapter 4

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 7 THREATS AND OPPORTUNITIES

Politics
Politics
Global
Global
Marketplace
Marketplace
Threats Cultural
Cultural Differences
Differences
Threats and
and
Opportunities
Opportunities
Economic
Economic Environment
Environment
Chapter 4

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 8 Learning Goal 8

What
What are
are the
the advantages
advantages
of
of multinational
multinational corporations?
corporations?
Chapter 4

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 8 MULTINATIONAL CORPORATIONS

Corporations
Corporationsthat
that move
move
resources,
resources, goods,
goods,
services,
services,and
andskills
skillsacross
across
Multinational
Multinational national
national boundaries
boundaries
Corporations
Corporations without
withoutregard
regardtotothe
the
country
countryin
inwhich
whichtheir
their
headquarters
headquartersare
are located.
located.
Chapter 4

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 8 MULTINATIONAL CORPORATIONS
Chapter 4

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 8 The Multinational Advantage

Overcome trade problems

Sidestep regulatory problems

Shift production from one plant
to another
Tap new technology from around
the world
Save in labor costs
Chapter 4

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 9 Learning Goal 9

What
What are
are the
the trends
trends in
in the
the
global
global marketplace?
marketplace?
Chapter 4

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 9 Trends in Global Competition

Market
Market expansion
expansion

Resource
Resource acquisition
acquisition

Trends
Trends in
in
Global
Global The
The impact
impact of
of the
the Internet
Internet
Competition
Competition
Technological
Technological change
change

Government
Government actions
actions
Chapter 4

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