Chapter 5 - Global Business

GLOBALIZATION

  • Definition: Spread of products, technology, information, and jobs globally, fostering interdependence through free trade.

IMPORTING AND EXPORTING

  • Importance of trade: No nation produces all desired products/services.

  • Exporters: Sell goods/services to other nations.

  • Importers: Buy goods/services from other nations.

ADVANTAGE TYPES

  • Absolute Advantage: A country can produce more of a product with fewer resources.

  • Comparative Advantage: A country can produce a product at a lower opportunity cost than another country.

  • Opportunity Cost: The loss of potential gain from other alternatives when one alternative is chosen.

TRADE SIGNIFICANCE

  • Trade impacts consumers, international students, and managers in global contexts.

BALANCE OF PAYMENTS

  • Accounts for imports and exports; usually shows import surplus in the U.S.

TRADE DEFICIT AND SURPLUS

  • Example: U.S. trade deficits with China in 2017, showing high import vs. low export numbers.

  • Understanding trade surpluses in various markets.

STRATEGIES FOR MARKETING GLOBALLY

  • Key strategies range from low commitment (contract manufacturing) to high commitment (foreign direct investment).

  • Licensing: Allows others to produce/sell products under a brand in exchange for royalties.

  • Franchising: Grants rights to use brand and sell products while providing operational support.

JOINT VENTURES AND STRATEGIC ALLIANCES

  • Strategic alliances pool resources for mutual benefit.

  • Joint ventures create new companies for specific projects.

FOREIGN DIRECT INVESTMENT (FDI)

  • Establishment of business operations abroad to serve local markets.

CULTURAL CHALLENGES

  • Understanding cultural differences is crucial (e.g., language, time perceptions, communication styles).

GLOBAL LAWS AND ETHICS

  • Companies navigate inconsistent laws and regulations internationally.

  • Awareness of corruption perceptions in global business.

TRADE CONTROLS

  • Instruments include subsidies, tariffs, quotas, and embargoes.

TRADE BARRIERS

  • Efforts to reduce barriers via trade agreements (e.g., GATT, WTO) and support for emerging economies.