“Trends in International Business” Chapter 1

1. “Trends in International Business”Chapter 1 Victor Haislop Trev Hall Ali Kanawati Luis Ochoa Mike Wiley

2. The World Trade Organization: Perspectives and Prospects 1948- International Trade Organization (ITO) with 50 nations World trade was valued at over $58 billion 1950 - President Truman didn’t resubmit to Congress for ratification, due to perceived threats of national sovereignty, and too much ITO intervention in markets. 1994 - World Trade Organization - similar to ITO Today world trade is over $4 trillion. US over 12 percent New Players The tigers of Asia: Hong Kong, Singapore, Taiwan and South Korea.

3. International Currency Rates Exchanged rates used to be fixed Based on actual supply and demand for currency relating to international trade of goods and services Also determined on interest rates between countries. Today, currency rates float. Examples of Currency Margin: ADR’s, Golondrinas’ Capital, Petroleum and Coffee (Commodities in general).

4. International Currency Rates (Cont.) Rates are determined largely by currency traders. Today, there is over 1.5 trillion dollars a day of traded currencies. This compares to a world trade of products and services of almost 4 trillion annually. The end result is an increase volatility of exchange rates, which drastically shifts export and import prices.

5. The Corporate Perspective Brand new corporate environment “Fixed parameters became fluid” This change requires an increased flexibility in decision-making. “Instant worldwide communication” Due to a dramatic increase in the speed and ease of technology transfer. Technological Innovation can be exchanged very quickly. Today’s revolutionary product can be tomorrow’s industry commonplace. More international joint ventures sharing risks, costs, capabilities and profits.

6. The Context of a New Global Trade Framework Government changing goals in the context of worldwide competition. Ensure success for firms - foreign/abroad. Create employment. Increase public standard of living. US has lost it’s world trade dominance. World wide competitiveness has leveled the international playing field. This has created a need for cross cultured products and services with less ethnocentricity. Free market access governs the new global trade framework.

7. The Future of the World Trade Organization The WTO should focus on the core mission of world trade and global business. The WTO should not be distracted/overload with social issues. Such issues detract from trade and investment which slows progress and world trade efficiency. Together with the other pillars of a global economy- the World Bank for development, and the international monetary fund for finance, the WTO can form the underpinning for a world economic platforms. Further social dimensions focusing on compassion and social issues should come later.

8. America’s New World Trade Order Improve quality and amount of information that government and business share. Policies should encourage cooperation between government and businesses. American industry must overcome its export reluctance and short term financial focus. America must invest in its people providing education and training needed to compete in the global business environment.

9. America’s World Trade Challenges Japanese import barriers Structure of Japanese distribution channels / Keirtsu Unreasonable Product testing standards Inadequate intellectual property protections. Policy makers should pursue government collaboration with businesses. Should focus on information sharing, collaboration, export promotion, and human capital.

10. Japan’s Problems Identified Distribution and cultural impediments Government trade barriers Very demanding customers Bureaucratic practices

11. Solutions to Japanese Problems Need Anti-trust structure to reduce the overall collusive power of the Keirtsu. The Keirtsu by design inhibits the free flow evolution of a market economy. Reduces Competition. Props up the weak and inefficient. Lessens Innovation and Incentive US needs to increase market research in Japan. Better Product Adaptation and service orientation to the Japanese Consumer. Japanese and American collaborative ventures and long range vision.

12. Filling International Gaps of Efficiency Distribution costs are high in emerging industrialized nations. Japan and US should assist these nations in developing more efficient distribution systems. 40 percent of US shipments are under a J.I.T./Quick response structure. US and Japan are roughly 11 percent of GNP for distribution costs. Eastern Europe and Russia are well above 30 percent of GNP. By helping reduce distribution costs, international products will cost less to distribute, thus resulting in lower prices to the consumer.

13. Shifting Global Competitiveness Innovation is a critical measure to future competitiveness in international trade. A Patent is a legal document issued by a governmental agency that establishes ownership of a piece of intellectual property for a specified period. Protect the property rights of the inventor. Encourage the inventiveness and technical progress of societies by rewarding innovation and creativity. Serve as a measure of innovation and subsequent global competitiveness. Patent information will be scrutinized to determine country specific competitiveness.

14. Domestic and International Patent Data In 1991, 40 percent of US patents were given to foreigners. Top four companies receiving patents were all Japanese firms. 20 percent of patents granted in the US were awarded to Japan. In Japan, only 14 percent of Patents were held by foreigners. Only 7 percent were awarded to US companies.

15. Comparison of the US and Japanese Patent System The US patent system awards based on “first to invent” The Japan patent system awards on “first to file/obtain a patent” The US patent system is conducted in secrecy The Japan patent system is conducted publicly. Meaning that it seeks input from industry to determine uniqueness or novelty. This dramatically increases the risk of Japanese companies stealing this information and the patent rights.

16. Patent System Comparison (Cont.) The Japanese Patent system is not as stringent in the requirements of uniqueness and novelty. This fact reflects more patents applied for and filed as a whole. The US is soliciting help from Japanese patent consultants to better learn the patent system.