Chapter 03 - Theories of Advantage Comparative U S China...

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Unformatted text preview: * * * Theories of Advantage Comparative U. S. China Output per Output Unit of Input Unit China U. S. Software Clothing 3-1 * * * Theories of Advantage Absolute = Virtual Monopoly Virtual Monopoly South Africa Output per Output Unit of Input Unit The Rest of The the World Diamond Production 3-2 * * * The Dynamic Global Market World Population by continent: ** The U.S. is the largest importing nation in the World! 3-3 * * * 12 10 8 6 4 2 0 Growing World Population 10.8 In Billions 5.3 6.0 8.5 6.5 1990 Source: Population Reference Bureau Source: 1998 2010 2030 2060 3-4 * * * Why Trade With Other Nations? Other No • No nation can produce all its needs its Mutually • Mutually beneficial exchange exchange Natural • Natural Resources or Technology- Produce or Buy? Buy? 3-5 * * * Global Competitiveness Country United States Finland Taiwan Singapore Sweden Strengths Technology, R & D Spending Univ. Enrollment, Efficient Legal System, Business Ethics Cell-phone Ownership, Tech. Innovation, Local Firms Competitiveness Savings Rate, Math/Science Education, Political Trust H.S. Enrollment, Press Freedom, Phone Access 3-6 * * * Global Trade • Goods & Services • Measuring Trade • Importing Exporting • Exporting Balance • Balance of Trade/Payments • Trade Deficit • Dumping 3-7 * * * 1600 1400 1200 1000 800 600 400 200 0 U. S. Trade in Goods & Services (Billions) Goods Balance of Balance Trade Trade Exports Imports 1995 2000 2002 2005 1975 1980 1985 1990 Source: St. Louis Business Monthly, Oct. 1999 & World Trade Organization & Wikipedia 3-8 * * * Leading Goods Exporters/Importers Exporters/Importers In Billions $ Country United States Germany Japan France United Kingdom World Total Source: Wikipedia, 2005 Exports 928 928 1016 1016 539 539 443 443 374 374 9,099 Imports 1,476 717 402 420 439 8,823 3-9 * * * Strategies for Reaching Global Markets Reaching • • • • • Licensing Exporting Franchising Contract Contract Manufacturing Manufacturing Joint Ventures 3-10 • • Joint Ventures & Joint Strategic Alliances Strategic Foreign Direct Foreign Investment Investment * * * Country Presence of Well-Known Companies of Krispy Kreme 7-Eleven Starbucks McDonald's Whirlpool UPS FedEx 0 Source: World Features Syndicate 50 100 150 200 250 3-11 * * * Starbucks’ Expansion World Locations 29% 71% International Source: Starbucks.com May 2006 U.S. 3-12 * * * 11% Most Spoken Languages 1% 4% 3% English Spanish Other IndoEuropean Asian and Pacific Island Other Most Spoken Languages in the U.S. 81% 22% 37% Most Spoken Languages in the World Mandarin Chinese Spanish English Hindi 7% 8% 13% 13% Portuguese Other Source: 2005 CIA World Factbook 3-13 * * * Foreign Direct Investments in the U.S. Investments 1200000 1000000 800000 600000 400000 200000 0 Europe Latin America Asia Canada Source: Bureau of Economic Analysis, 2004 3-14 * * * World’s Largest MNCs 1) Wal-Mart Stores Wal-Mart 2) Exxon Mobil Exxon 3) General Motors General 4) BP BP 5) Ford Motor Ford 6) Daimler Chrysler Daimler 7) Royal Dutch/Shell Royal 8) General Electric General 9) Toyota Motor Toyota 10)Mitsubishi Source: Business Week; Morgan Stanley Capital International; and S&P Compustat Revenue ($Billions) Revenue 217 217 213 213 175 175 174 174 162 162 136 136 135 135 125 125 121 121 112 3-15 * * * What’s On Your Pizza • • • • • • • Costa Rica - Coconut France - Bacon, onion and fresh cream India - Pickled ginger, minced mutton and tofu Australia - Shrimp and pineapple Pakistan - Curry Brazil - Green peas Japan - Squid and mayo jaga Source: World Features Syndicate 3-16 * * * Forces Affecting Trading in Global Markets in • Socio-cultural • Economic & Financial • Legal & Regulatory • Physical & Environmental 3-17 * * * Cultural Differences Cultural in Global Markets in • • • Language Language Religion Religion Values & Attitudes Attitudes Communication Communication • Social Structure • Aesthetics Personal • Personal 3-18 * * * 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. 3-19 * * * Economic & Financial Forces • No Worldwide Currency • Currency Fluctuations • Floating Exchange Rates • Bartering/Countertrading 3-20 * * * U.S. Oil Imports Canada Mexico Venezuela 15% 12% 12% 10% Nigeria Saudi Arabia Other 33% 18% Source: Gibson Consulting 2005 3-21 * * * Nations That Have Not Converted to the Metric System United States Liberia Myanmar (Burma) Source: 2005 Yourunits.com 3-22 * * * Legal & Regulatory Forces 1. Inconsistent Laws & Regulations 1. Foreign Corrupt Act of 1978 Practices 1. Local Business Contact Required 3-23 * * * Developing Countries Need Infrastructure Need • 1.2 billion people lack clean drinking water • 2 billion people lack electricity lack • 3 billion people lack adequate sanitation 3-24 * * * Protectionism • Mercantilism • Tariffs • Import Quota • Embargo • Nontariff Barriers-Keiretsu 3-25 • Protective • Revenue * * * Trade Agreements • • • • • • General Agreement on Tariffs & Trade (1948) Uruguay Round of GATT (1986) World Trade Organization (1995) Common Markets • • European Union (EU) Mercosur North American Free Trade Agreement (1994) Central America Free Trade Agreement Central (2005) (2005) 3-26 * * * Future Global Trade • People’s Republic of ChinaPermanent Normal Trade Relations/Rights Relations/Rights • Russia & Others Russia • Internet Internet •Technology- Obstacles/Problems 3-27 * * * Pro’s Pro’s & Con’s of Pro’s Offshore Outsourcing Offshore Con’s • • • More focus on areas More where they can excel and grow grow Outsourced work creates Outsourced efficiencies, resulting in hiring more workers hiring Fuels global market Fuels growth growth • • • Jobs lost/wages fall Reduces product quality Communication Communication becomes much more difficult difficult 3-28 ...
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