Chp. 3 Doing Business in Global Markets

Best Countries for Business

1. United Kingdom

2. Sweden

3. Hong Kong

4. Netherlands

5. New Zealand

Importing

Buying products from another country

Exporting

Selling products to another country

Top Import Categories (into U.S., 2025)

• Machinery ($665 B)

• Electronic equipment ($514 B)

• Vehicles ($338 B)

Top Export Categories (from U.S., 2025)

• Oil & Gas ($309 B)

• Machinery ($284 B)

• Electronic equipment ($226 B)

Strategies for Reaching Global Markets (Least to Greatest amount of commitment, control, risk, and profit potential)

• Licensing

• Exporting

• Franchising

• Contract manufacturing

• International joint ventures & strategic alliances

• Foreign direct investment

Largest Multinational Corporations in the World

1. Walmart - U.S.

2. Amazon - U.S.

3. State Grid - China

4. China National Petroleum - China

5. Sinopec Group - China

6. Saudi Aramco - Saudi Arabia

7. Apple - U.S.

8. Volkswagen - Germany

9. China State Construction - China

10. CVS Health - U.S.

Resources & Products

Countries with abundant natural resources (Ex. Venezuela) need technological resources from other countries (Ex. Japan)

Global trade allows…

nations to produce what they make best and buy what they need from others

Free trade

the movement of goods and services among nations without political or economic barriers

Comparative advantage

A country should sell to other countries those products that it produces more efficiently and buy from other countries those products that it cannot produce as efficiently

Absolute advantage

A country is able to produce a product more efficiently than all other countries

Balance of trade

Total value of a nation’s exports compared to its imports over a particular period

Trade surplus

When the value of a country’s exports exceeds that of its imports

Trade deficit

When the value of a country’s imports exceeds that of its exports

Exchange rate

The value of one nation’s currency relative to the currencies of other countries

High value of the dollar

Dollar is trading for more foreign currency; foreign products become cheaper for us

Low value of the dollar

Dollar is trading for less foreign currency; foreign goods become more expensive for us

Floating exchange rates

Currencies float in value depending on the supply and demand for them in the global market

Legal & Regulatory Considerations

• There’s no global system of laws

• US businesses must follow US laws while conducting global business

• Foreign Corrupt Practices Act of 1978: prohibits “questionable” or “dubious” payments to foreign officials to secure business contracts

Higher Corruption Countries

1. Somalia

2. Syria

3. South Sudan

4. Venezuela

5. Yemen

Trade Protectionism

The use of government regulations to limit the import of goods and services

Tariffs

A tace imposed on imports

Protective tariffs

Meant to protect domestic industries

Revenue tariffs

Meant to raise money for government

Tariffs are paid by the…

importing company

Import Quota

A limit on the number of products in certain categories that a nation can import; meant to protect domestic industry

US import quotas

• Beef

• Sugar

• Other Products

Embargo

A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country

Political disagreements can lead to…

embargos

U.S. has embargoes on…

• Cuba

• North Korea

• Iran

General Agreement on Tariffs & Trade (GATT)

A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions

World Trade Organization (WTO)

An independent entity of 164 member nations whose purpose is to oversee cross-border trade issues and global business practices; created in 1995; headquarter in Geneva, Switzerland

Common Markets

A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; aka trading bloc

Common Markets Examples

• European Union (EU)

• Mercosur: Bolivia, Chile, Columbia, Ecuador, Peru, Suriname

• Association of Southeast Asian Nations (ASEAN)

• Common Market for Eastern & Southern Africa (COMESA)

North American Free Trade Agreement (NAFTA)

Agreement that created a free-trade area among the United States, Canada, and Mexico

• Passed in 1993

• Replaced in 2020 with USMCA

United States Mexico Canada Agreement (USMCA)

• Replaced NAFTA in 2020

• Agreed to in 2018; formally ratified in 2020; expires in 2036

• Unclear whether US tariffs on Canada implemented in 2026 violate this agreement

USMCA Goals

• Create level playing field for US workers with improved rules

• Modernize and strengthen food & agriculture trade in North America

• Support modern economy

• Introduce new rules on digital trade. anticorruption, and good regulatory practices