Global Business Environment

1. Global Business Environment

2. U.S. Multinational in Europe - 1960’s }Fifteen years from now the world’s third greatest industrial power, just after the United States and Russia, may not be Europe, but American industry in Europe.~ J.S. Servan Schreiber: Le Defi American, 1967

3. The Nationality of the World’s 100 Largest Industrial Corporations (by country of origin) SOURCES: Adapted from “The World’s 500 Largest Industrial Corporations,” Fortune, Aug. 4, 1997

4. History of International Trade • The Roman Empire - Build on International Trade • What the Romans had: • Pax Romana • Common coinage • Systematic law • Central Market Locations • Communication System

5. History of International Trade • The Fall of the Roman Empire • Loss of cooperation • European Feudalism & Protectionism • Medieval International Trade • Turning away from International Trade • China & The Empress’s Palace (1896) • Smoot-Hawley Act (1930s) & Consequences • Trade embargoes as foreign policy tools

6. International Trade and Recent History • Post World War II - A world divided • Eastern Bloc • Council for Mutual Economic Assistance • Western world • Pax Americana

7. International Trade and Recent History • Charter for International Trade Organization (1948) - 53 countries

8. International Trade and Recent History • Charter for International Trade Organization (1948) - 53 countries á General Agreement on Tariffs and Trade (GATT) - reduce tariffs á International Monetary Fund (IMF) á World Bank

9. International Trade and Recent History • World Trade Organization (1994)

10. Reading Assignment • What is the role of each of the three world organizations? • When was each formed? • How has the role of each organization changed? • Which of these organizations was at the center of protests last year? Why?

11. Trends in Global Business Internationalization of U.S. Markets Internationalization of U.S. Business Growth of Regional Trade Areas EU, NAFTA, AFTA, APEC Move toward free market system by countries in Latin America, Asia, Eastern Europe Large Emerging Markets such as Argentina, China, South Korea, Poland, India Evolving global middle income households GATT and World Trade Organization The TRIAD

12. Globalization of Business and Markets • Until recently, competition for U.S. markets was only among U.S. businesses with the same relative cost of money, labor and product è U.S market now includes competitors from all over the world

13. Why internationalization? • Saturation of U.S. markets

14. Foreign Acquisitions of U.S. Companies U.S. Company Foreign Owner Keebler (Cookies and other foods) Britain J. Walter Thompson (Advertising) Britain Spiegal (Catalog retailing) Germany Mack Trucks (Automotive) France Giant Food Stores (Supermarkets) Netherlands Pillsbury, Burger King, Pearle Vision Britain CBS Records (Music and Entertainment) Japan Carnation (Coffee-Mate, Friskies pet food) Switzerland Chesebrough-Pond’s (Vaseline) Netherlands SOURCE: Adapted from “The 100 Largest Foreign Investments in the U.S.,” Forbes, July 18, 1994, pp. 266-270.

15. Why internationalization? • Saturation of U.S. markets • Higher ROI in foreign markets

16. Some Big U.S. Players in the Global Game* Foreign Revenues % of Total Foreign Profits % of Total Foreign Assets % of Total Company 51.4 Ei du Pont de Nemours 99.8 37.3 52.1 Proctor & Gamble 65.1 40.7 67.0 Coca-Cola 67.8 48.6 48.8 Eastman Kodak 41.5 32.4 43.9 Motorola 84.8 34.6 49.1 Johnson & Johnson 54.6 43.9 35.5 Sara Lee 41.3 45.0 64.5 Colgate-Palmolive 67.0 46.9 67.5 Gillette 61.4 65.7 49.0 Compaq Computer 63.6 40.5 46.9 McDonald’s 45.1 46.9 32.0 Avon Products 59.9 48.3 *1993 data. SOURCE: Adapted from “The 100 largest Multinationals: Getting the Welcome Carpet,”Forbes, July 18, 1994, pp. 276-279.

17. Why internationalization? • Saturation of U.S. markets • Higher ROI in foreign markets • Establish early position in world markets

18. Invented Here, Made Elsewhere U.S. Invented Technology 9 0% Phonographs 1% 9 0% Color TVs 1 0% 1 9 7 0 4 0% Audiotape Recorders 0% N O W 1 0% Videotape Recorders 1% 9 9% Machine Tools 3 5% Telephones 9 9% 2 5% 8 9% Semiconductors 6 4% 9 8% Computers 7 4% 0 20 40 60 80 100

19. “Every American company is international, at least to the extent that its business performance is conditioned in part by events that occur abroad”

20. Definition of International Marketing • The performance of business activities that direct the flow of a company’s goods and services to consumers or users in more than nation for profit.

21. What’s the difference between international marketing and domestic marketing? • The environment in which marketing strategies have to be implemented

22. The International Marketing Task 7 Foreign environment (uncontrollable) 1 Economic forces Political/legal forces Domestic environment (uncontrollable) 2 7 Competitive structure Political/ legal forces Competitive Forces (controllable) Cultural forces Environmental uncontrollables country market A Price Product 3 Channels of distribution Promotion Environmental uncontrollables country market B 6 Level of Technology Geography and Infrastructure Economic climate Environmental uncontrollables country market C 4 5 Structure of distribution