Ch. 3 - Global Business and Trade Concepts

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The following topics are covered extensively:

LO 3-1: Importance of the global market, comparative advantage, and absolute advantage.
LO 3-2: Understanding importing and exporting, along with terminology used in global business.
LO 3-3: Strategies for entering global markets and the significance of multinational corporations.
LO 3-4: Evaluating forces that impact trading in global markets.
LO 3-5: Debate the pros and cons of trade protectionism.
LO 3-6: Discuss changes in the global market landscape and the issue of offshore outsourcing.

Global Business Expansion: Global business is growing rapidly due to a world population of approximately 7.7 billion.
Definitions:
- Importing: Purchasing products from another nation.
- Exporting: Selling products to another nation.

Tim Cook: CEO of Apple Inc.
- Background: Grew up in Alabama; earned an MBA from Duke University.
- Career: Thereafter worked for IBM for 12 years, joined Apple in 1998, played a critical role in streamlining operations and supply chains.

Global Trade: Now viewed as a pivotal area for economic activities, involving strategies such as:
- Free Trade: Movement of goods and services among nations with no political or economic barriers.

1. Resource and Product Availability: Countries might need resources or products that they cannot produce.
- Free Trade concept reinforces this accessibility.

Comparative Advantage: Selling products that are most efficiently produced and buying those that are not produced as effectively.
- Example: A country that produces coffee efficiently might trade it for electronics.
Absolute Advantage: A monopoly exists if a country can produce a specific product more efficiently than others.

Culture: Defined as a set of values, beliefs, and rules held by a specific group.
- Understanding cultural differences is crucial for global business success.
Ethnocentricity: Belief that one’s own culture is superior, which can hinder global business.

Exchange Rates: The value of a nation’s currency in relation to others.
- High/low exchange rates influence imports and exports.
Devaluation: Lowering a currency’s value to increase export competitiveness.

Global Legal Systems: Absence of a unified legal framework can create inconsistencies affecting businesses.
- Importance of complying with domestic laws even when trading internationally.
OECD and Transparency International: Organizations working to mitigate corruption in global business.

Definition: Government intervention to limit imports to protect domestic industries.
- Tools: Tariffs (taxes on imports), quotas, and embargoes
Pros and Cons: Supports local production but can lead to higher prices and less choice for consumers.

Emerging Markets:
- Countries like China (largest exporter) and India (rapidly growing economy) are key players.
- Brazil is facing economic challenges that hinder its expected growth.
Offshore Outsourcing: Allows firms to outsource jobs to reduce costs, though it raises concerns about job quality and communication.
Globalization Considerations: Preparing for an increasingly interconnected global market is crucial for future career success in business.

Localization of Global Brands: Diverse menu items for franchises like McDonald’s cater to regional preferences.
- Examples include unique menu items in different countries (e.g., Teriyaki burgers in Japan).
Translation Pitfalls: Incorrect translations can lead to misunderstandings, showcasing the importance of cultural sensitivity.