LO3 Global Market & Trade Notes

LO3-1: The importance of the global market and the rules of comparative and absolute advantage

• Global market size and reach
  • The United States is a market of over $328{,}000{,}000$ people.
  • There are over $7{,}700{,}000{,}000$ potential customers in the 195 countries that make up the global market.
  • The global market is too large to ignore for business strategy and employee development.
• Examples of global market activity and presence
  • US consumers buy hundreds of billions of dollars worth of goods from Canada, Mexico, and China.
  • Costco opened its first store in Shanghai, drawing so many Chinese shoppers that traffic was shut down.
  • Walmart and PepsiCo have expanded and built business in South Africa.
  • Major League Baseball is broadcast in 189 countries in 17 languages.
  • The NBA and NFL played regular-season games in London and Mexico in 2019.
  • NBC paid $1{,}000{,}000{,}000$ to telecast England's Barclays Premier League in the United States through 2022.
  • US film stars (Robert Downey Jr., Tom Hanks, Meryl Streep) draw crowds to movie theaters around the globe.
• Language in global trade
  • Importing is buying products from another country.
  • Exporting is selling products to another country.
• Global trade rationale
  • No nation can produce everything it wants or needs; mutual exchange expands variety and efficiency.
  • Some countries have abundant natural resources but limited technological know-how (e.g., Venezuela, DRC).
  • Others have advanced technology but limited natural resources (e.g., Japan, Switzerland).
• Free trade
  • Free trade is the movement of goods/services among nations without political/economic barriers.
  • Pros and cons of free trade are discussed (referenced as Figure 3.2 in the text).
• Theories: comparative and absolute advantage
  • Comparative advantage (David Ricardo): a country should sell to other countries those products it produces most effectively/efficiently and buy from others those products it cannot produce as effectively/efficiently.
  • US example: The United States has a comparative advantage in software development and engineering services, but not in growing coffee or making shoes, so it imports shoes and coffee.
  • Absolute advantage: a country can produce a specific product more efficiently than all other countries. Absolute advantages are not permanent; global competition can erode them, so there are fewer instances of absolute advantage today.
• LO3-2: Importing and exporting; key terms
  • Importing and exporting are central to global business activity and career opportunities.
  • Small business export potential
  • In the United States, only about 1% of the 30,000,000 small businesses export, yet they account for roughly one third of total US exports.
  • With support from the US Department of Commerce, small-business exporting has grown significantly in the past decade, though not to hoped-for levels.
• Getting started globally: a mindset for opportunity
  • Observation, determination, and risk-taking are common threads in getting started in global business.
  • Classic example: an American traveler in Africa noticed no ice factory for hundreds of miles, investigated, and built an ice-making plant after returning to the US to raise investment.
  • Importing can involve individuals in colleges/universities observing gaps in product availability abroad and becoming importers while still in school.
• Notable case study: Tim Cook, Apple CEO
  • Early life and education
  • Tim Cook demonstrated strong work ethic from a young age.
  • Auburn University: Bachelor's in Engineering.
  • Duke University's Fuqua School of Business: MBA (top 10% of class).
  • Early career
  • IBM: rose to North American fulfillment director, managing manufacturing/distribution in North and Latin America.
  • Compaq: became COO after leaving IBM.
  • Apple career and supply chain strategy
  • Steve Jobs recruited Cook in 1998; joined Apple and helped streamline operations.
  • Replaced expensive Apple factories/distribution centers with contract manufacturers to cut costs and boost supply-chain efficiency.
  • 2007: promoted to COO; managed worldwide sales and operations.
  • 2011: became CEO after Jobs's death.
  • 2015: oversaw the launch of the Apple Watch.
  • 2014 (context in text): oversaw Beats Electronics acquisition for $3{,}000{,}000{,}000$.
  • 2018: Apple became the first American public company valued at $1{,}000{,}000{,}000{,}000$ (one trillion dollars).
  • Global leadership and ongoing challenges
  • Focus on expanding impact in global markets (e.g., China and India).
  • Tim Cook is presented as a successful global business leader who navigates cultural and economic differences and adapts Apple to global changes.
  • Reflection and sources
  • The section cites multiple sources for Tim Cook’s story and Apple’s operations (e.g., articles from alabama.com, Motley Fool, New York Times, CNBC, Business Insider, etc.).
• Name that company
  • The world’s second-largest athletic gear maker closed footwear factories in Ansbach, Germany and suburban Atlanta, GA, and moved to a high-tech speed factory in Vietnam to invest in automated production technology for footwear.
  • Answer highlighted in the chapter end: Adidas.
• LO3-3: Strategies for reaching global markets; role of multinational corporations (MNCs)
  • Global market strategies include:
  • Streamlining operations via contract manufacturers to reduce costs and increase efficiency (as demonstrated by Apple under Tim Cook).
  • Integrating global supply chains to optimize production locations and distribution networks.
  • Multinational corporations (MNCs): operate across multiple countries, leveraging international resources, markets, and capabilities to compete globally.
• LO3-4: Forces affecting trading in global markets
  • The chapter indicates that there are key forces affecting global trading that will be discussed later (no exhaustive list provided in the excerpt).
  • Anticipated factors typically include policy barriers, exchange rates, cultural differences, technology, logistics and infrastructure, and global demand patterns.
• LO3-5: Trade protectionism – advantages and disadvantages
  • The chapter frames a debate around trade protectionism, outlining both sides, though explicit arguments are not detailed in the provided excerpt.
• LO3-6: The changing landscape of the global market; offshore outsourcing
  • The text highlights a shifting global market landscape and discusses offshore outsourcing as part of global strategic considerations.
• Exporting impact on the US economy
  • Exports boost the US economy; a prominent figure: The US economy was worth $1{,}000{,}000{,}000{,}000$ more annually due to integration with the world economy.
  • Jobs supported by exports: Every $1{,}000{,}000{,}000$ in additional US exports generates over $7{,}000$ jobs at home.
  • Overall contribution: Exports represent about $12\%$ of US GDP and account for $11{,}500{,}000$ jobs.
• Practical exports resources
  • For more on exporting, refer to the International Trade Administration at export.gov and explore “learn how to export.”
  • Additional guidance is available via other official resources (e.g., websites sponsored by the US government).
• Key metrics and figures referenced (for quick study):
  • US population: $328{,}000{,}000$
  • World population: $7{,}700{,}000{,}000$ (global population figure cited as 7.7 billion; note: use the simpler representation in class as appropriate)
  • Global corporate milestones: Apple’s trillion-dollar valuation by 2018; Beats acquisition for $3{,}000{,}000{,}000$; Compaq acquisition by HP in 2002 for $25{,}000{,}000{,}000$
  • Trade/exports impact: US GDP impact from exports ≈ $12\%$; jobs from exports ≈ $11{,}500{,}000$; each $1{,}000{,}000{,}000$ in exports ≈ $7{,}000$ jobs
• Notation note
  • All mathematical expressions appear in LaTeX format and are enclosed within double dollar signs as required. For example, dollars are represented as $12\%$ and large monetary figures as $3{,}000{,}000{,}000$.
• Summary takeaways
  • Global markets offer vast opportunities but require understanding of comparative vs absolute advantage to allocate resources efficiently.
  • Importing and exporting are foundational activities enabling mutual gains from trade; small businesses can play a significant role in exports.
  • Real-world leadership (e.g., Tim Cook at Apple) demonstrates how strategic supply-chain decisions and global positioning drive competitive advantage.
  • The debate on trade protectionism and the rise of offshore outsourcing reflect ongoing tensions in the global economy.
  • The US economy benefits substantially from exports, in terms of GDP, jobs, and overall economic activity; official resources can guide new exporters.