Competing in Global Markets

Globalization

  • Definition: The trend toward opening up foreign markets to international trade and investment.

Benefits of Globalization

  • Key Points:

    • Productivity: Grows more quickly when countries produce goods and services in which they have a comparative advantage.

    • Global Competition: Results in lower prices due to cheap imports.

    • Innovation: An open economy spurs innovation.

The Fear of Trade and Globalization

  • Concerns:

    • Millions of Americans have lost jobs due to globalization.

    • There is a widespread fear of job loss.

    • Employers may threaten to export jobs if workers do not accept pay cuts.

Barriers to Trade

Major Obstacles to International Trade

  • Types of Barriers:

    • Natural Barriers

    • Tariff Barriers

    • Nontariff Barriers

Trade Protectionism

  • Definition of Tariffs: Taxes on imports.

    • Types of Tariffs:

    • Protective Tariffs: Raise the retail price of imports, making domestic goods more competitively priced.

    • Revenue Tariffs: Raise money for governments.

Arguments For and Against Tariffs

  • For Tariffs:

    • Protect infant industries.

    • Protect American jobs.

    • Aid in military preparedness.

  • Against Tariffs:

    • Discourage free trade.

    • Raise prices for consumers.

Nontariff Barriers

  • Types:

    • Import Quotas

    • Embargos

    • Buy-National Regulations

    • Exchange Controls

Import Quotas and Embargos

  • Import Quota: Limits the number of products in certain categories a nation can import.

  • Embargo: A complete ban on the import or export of a certain product or the cessation of all trade with a particular country.

    • Example: The U.S. embargo against Cuba.

The Global Marketplace

Reasons for Going Global

  • Potential Benefits:

    • Cost savings

    • Leverage unique products or advantages

    • Earn additional profits

  • Motivations: Saturated domestic markets can drive firms to explore international opportunities.

The External Environment

Factors Influencing Global Trade

  1. Culture

  2. Economic and Financial Structure

  3. Political Structure

  4. Legal Structure

  5. Physical and Environmental Factors

Culture

  • Definition: The common set of values shared by its citizens that determines what is socially acceptable.

Socio-cultural Forces

  • Importance: Awareness of cultural differences is critical in global trade.

    • Key Cultural Differences Include:

    • Social Structures

    • Religion

    • Manners

    • Values

    • Language

    • Personal Communication

Examples of Cultural Misunderstandings

  • Braniff Airlines: The Spanish translation of