Chapter 2: Doing Business in Global Markets

Global Market Overview

The US has a population of approximately 333,000,000, while the world population is about 7,900,000,000.
Importing involves bringing goods into the US that are not available domestically.
Exporting entails selling goods to other countries that are abundant in the US.
China and the US are the largest importing and exporting nations.
World population distribution:
- Australia: 0.6\%
- Africa: 17.2\%
- South America: 5.5\%
- North America: 7.6\%
- Europe: 9.6\%
- Asia: 59.4\%
The world population is growing and is projected to reach 9,280,000,000 by 2050.
Population growth presents opportunities for businesses to buy and sell products and services.

The US is ranked as the most business-friendly country due to its government rules, bureaucracy, and markets.
Other top countries include the United Kingdom, Australia, France, Chile, Italy, Spain, Turkey, Mexico, and Germany.
Countries with capitalistic economies are generally more favorable for starting businesses.

The US has the highest number of billionaires (724).
Other countries with a significant number of billionaires include China and India.

No single nation can produce all the products its people want.
Countries with abundant natural resources may need technology resources from other countries.
Global trade enables countries to produce what they make best and buy what they need from others.

Definition: The movement of goods and services among nations without political or economic barriers.
Free trade fosters innovation and keeps firms competitive.
Pros:
- Access to a global market of 7,900,000,000 customers.
- Inspiration for new products and competitive challenges.
Cons:
- Domestic workers may lose jobs due to increased imports and production shifts to low-wage global markets.
- Domestic companies may lose their competitive advantage.

Balance of trade: The total value of a nation's exports compared to its imports over a specific period.
Trade surplus: A favorable balance of trade where exports exceed imports.
Trade deficit: An unfavorable balance of trade where imports exceed exports.
Dumping: Selling products in a foreign market at a lower price than charged in the domestic market.

Licensing: A firm (licensor) allows a foreign company (licensee) to produce its product in exchange for a royalty.
- Benefits: Distribution, promotion, consulting, and revenue gains.
- Drawbacks: The bulk of the revenue may belong to the licensee.
- Example: Marvel licenses its products to companies worldwide and earns royalties.
Exporting: Selling goods and services to other countries.
- Exporting assistance centers can help small businesses with exporting and importing.
Franchising: Selling the rights to use a business name and sell a product or service in a specific territory.
- Franchisors need to adapt their products to the countries they serve.
- Examples:
  - Domino's Pizza: Offers curry toppings in India and squid with sweet mayonnaise in Japan.
  - Dunkin' Donuts: Adapts flavors to local tastes, such as sweet potato and honeydew donuts in Taiwan.
  - McDonald's: Offers different menu items in various countries based on local preferences.

Buying permanent property and businesses in foreign nations.
Foreign subsidiary: A company owned in a foreign country by a parent company.
- Advantage: Complete control of technologies and expertise.
- Disadvantage: Requires committing funds and technology.
Multinational corporations: Firms with manufacturing capacity or physical presence in different countries.

Sociocultural forces: Culture includes social structures, religion, manners, customs, values, attitudes, language, and personal communication.
Ethnocentricity: The belief that one's own culture is superior.
Exchange rate: The value of one nation's currency relative to another.
Currency float: Currency value floats according to supply and demand in the global market.

High value of the dollar means foreign goods and travel are cheaper for US consumers.
Low value of the dollar means foreign tourists are likely to visit US cities.
*Tariff is a tax on imports, making the imported good more expensive.
Types of tariffs
- Protective: Raise the retail price of the import. Domestic companies can compete better.
- Revenue: Raise money for governments.

US Jobs are lost to imported product because wages are cheaper in other countries.
Should governments protect their industry by placing tariffs on imported products? In class, there is a discussion about it.
It's important to balance that out to where companies can still remain strong, so that they can have individuals pay money.

Too many US jobs have been lost to imported wages cheaper in foreign countries.
*North America Free Trade Agreement
*Controversial since its passage in '93, it was changed in the 2020.
*Modernized and strengthened food and agriculture trade in North America, support modern economy, produced new rules on digital trade and a corruption, make sure that the regulation was there so that it protected all the countries, meaning United States, Mexico, and Canada.

China's economy is booming with a highly educated middle class with money to spend.

Globalization is the future.
If interested in international business:
- Study foreign languages.
- Learn about foreign cultures.
- Take global business courses or logistics.