Global Management Chapter 5

1. Global ManagementChapter 5 Mr. Sherpinsky Business Management Class Council Rock School District

2. Goals & Objectives • Define global management • Compare and contrast importing and exporting • Explain the advantages and disadvantages of protectionism • Discuss the challenges of doing business globally

3. Taco Barn The World of Work Customer Service by Foreign Firms Page 73 Textbook Discuss Questions 1-4 Warm Up

4. Do You Know? Can you name some brand names owned by foreign companies?

5. Examples of Brand Names Owned by Foreign Companies

6. Global Management • International Trade • Exchange of goods and services by different countries • Extent of Trade • In a recent year, world trade in goods exceeded $12 Trillion • Most trade occurs in developed countries • Examples: Japan, China, North America, and Western Europe

7. International Trade • Defined: Exchange of goods and services by different countries. • Today, world totally depends on international trade • Necessary to maintain standard of living • America sells autos, heavy machinery, clothing, and electronics abroad • Argentine cattle ranchers ship beef to consumers in dozens of countries • Saudi Arabian oil producers supply much of the world oil • All these countries in return purchase goods and services from other countries

8. U.S. Trading Partners Exports Imports Source: CIA World Factbook Canada Mexico China Japan UK Germany China Canada Mexico Japan Germany • 19.30% • 14.24% • 11.12% • 6.14% • 4.53% • 19.37% • 12.21% • 6.58% • 4.84% • 4.33% • 4.10%

9. (Billions of Dollars) Source: World Trade Organization Leading Exporters of Merchandise

10. (Billions of Dollars) Source: World Trade Organization Leading Importers of Merchandise

11. Global Management • Changes in global management • Society Union replaced by 15 independent republics • EU (European Union) trading bloc • Southern Common markets • Brazil, Argentina, Paraguay, & Uruguay

12. Global Management • Changes in global management-Continued • ASEAN (Association of Southeast Asia Nations) • NAFTA (North American Free-Trade Agreement) • U.S., Canada, and Mexico • BRIC nations • Brazil, Russia, India, and China • Future Economic Superpowers • Management takes on new meaning

13. Global Management • Changes in global management-Continued • Opportunities come with risks • Political instability • Erratic currency exchange rates • Global economic interdependence • Ties once isolated countries more closely than ever • Knowing your customer take on a new meaning • Cultural impacts on business, people, laws, and attitudes

14. Global Management • New Reality • Products made in one country • Purchased in another country • Serviced in a third country • Borders are NOW political not economic • Interdependent global economic systems

15. Web Quest: Locate Products Using the Internet, you will find 5 common products (by categories below) that are made in foreign countries • You must include: • Pictures of the product • Flag of the country of origin • Name of the company who makes it • Name of the company who owns the company that makes it • Categories • Car/Automobile • TV/Radio/PMD • Candy/Snack/Food • Article of Clothing • Household item • Beverage/Drink • Jewelry • Appliance

16. Global Management • Absolute advantage • Ability to produce more of a good than another producer with the same quantity of inputs • i.e., Jamaica’s sugar production • Absolute advantage is when a country uses less resources to produce a good. • Country A can produce one widget using one unit of labor. • Country B can produce one widget using two units of labor. • Country A has an absolute advantage over Country B in producing widgets.

17. Global Management • Comparative advantage • Producers should produce the goods they are most efficient at producing, and import goods they are less efficient at producing • Comparative advantage speaks in terms of opportunity costs. • A country has a comparative advantage in the production of a good if it can do it at a LOWER opportunity cost than another country.

18. Challenge: Advantage • Complete the worksheet calculating advantage. • Use a calculator!

19. Importing and Exporting • Exports • Goods and services produced at home and sold abroad • Imports • Goods and services that are produced overseas and purchased at home

20. Importing and Exporting • Identifying export markets • Analysis of demographics, economic data, country reports, consumer tastes and competition • Need to know what restrictions they face, such as packaging restrictions, labeling and product safety

21. Importing and Exporting • Why exporting? • 95% of all consumers live outside US • Increased sales • Diversification • Engage in a variety of operations so that sluggish sales in one market can be offset by high sales in another market

22. Importing and Exporting • Why importing? • Lower costs • Availability of specialized goods or unique services • Want

23. Importing and Exporting • Material importing • Importing raw materials needed to produce a product • Perhaps not available or too expensive in the home country • Consumer goods importing • Some goods are also imported as a complete product, which can also be sold in their own countries

24. Importing and Exporting • Balance of trade • Trade surplus • Occurs when a country exports more than it imports • Trade deficit • Occurs when a country imports more than it exports • Foreign exchange • Exchange rates are the value of one currency in terms of another • Fluctuate from day to day • Can have an effect on profits

25. Work Packet Time • Use this time to complete your work packets for Chapter 5 Global Management

26. Engaging in Foreign Trade • Treaties on trade and investment • WTO (World Trade Organization) creates and enforces the rules governing trade among countries • Treaties have led to cuts in tariffs • Boosted exports and imports in 150 countries • Trading Bloc: Two or more countries that agree to remove restrictions between themselves

27. Protectionism • The practice of trying to protect home markets from foreign competitors • Tariffs • Quotas • Embargoes • Dumping • Sanctions

28. Protectionism • Tariffs • A tax charged on a imported good • Purpose is to raise the price of foreign goods to allow domestic producers to compete • Specific tariff is levied per unit • Ad valorem tariff is levied as a percentage of the value of the goods

29. Protectionism • Quotas • A restriction on the quantity of goods that can enter a country • Embargos • A total pan on the import of a good from a particular country • Political reasons rather than economic

30. Protectionism • Dumping • Refers to the practice of selling goods in foreign markets at below cost or below what it sells at home • Sanctions • A mild form of embargo that bans specific business ties with a foreign country • Example: Illegal to sell nuclear technology to Pakistan, which tested atomic bombs in 1998.

31. Protectionism • Free Trade area • A region where trade restrictions are reduced or eliminated • NAFTA • Signed in 1994 • USA, Mexico and Canada with no major trade restrictions • Advantages and disadvantages • Increased sales • Possible job losses as factories have moved to Mexico

32. Protectionism • The EU • Signed in 1993 • 27 European countries • 22% of the world’s GDP • 16 of the countries have a single GDP

33. Web Research: Challenge EU • Complete the handout! • Using the Internet, research the European Union (EU) and answer the questions on the handout.

34. Doing Business Globally • Foreign intermediaries • Wholesaler or agent that markets products for companies wanting to do business abroad • Licensing agreements • Agreement that permits one company to sell another company’s products abroad in return for a percentage of revenues

35. Doing Business Globally • Strategic alliances • A pooling of resources and skills to achieve common goals • Multinational corporation • A business that maintains a presence in two or more countries and has a considerable portion of assets invested in international activities

36. Doing Business Globally • Home Country • Country in which business has its headquarters • Host Country • Foreign location where business has its facilities • Parent Firm • Company headquarters • Subsidiaries • Foreign branches, usually independently registered as legal entity

37. International Cultures • Cultures • Must understand foreign cultures and customs • Refers to customs, values, beliefs, and patterns of behavior • Dress, language and ways of doing things • English is the language of business • High-context cultures • Communication through nonverbal signs/indirect suggestions • Examples: Japan, Saudi Arabia • Low-context cultures • Communication direct and explicitly suggestions • Examples: United States

38. International Cultures • Political changes • Political challenges caused by governments or upheaval is a concern for international managers • Nationalism • When the government takes over or solely runs a business • US Postal Service • Amtrak • Argentina, Nationalized Oil Companies in May 2012

39. International Cultures • Human rights and ethics • Norms of business ethics vary greatly • Understanding human rights laws and ethics is essential to the international manager

40. Web Research: Impact of Culture on Business Take a Trip! Today is your chance to explore a foreign land. You will have the chance to learn about the economy, the culture, the society, and the people of a far away land. Sound enchanting? I hope so! • Choose a country (MUST be approved by teacher) • Using the Internet, research the required information • Load data into a PowerPoint • Add pictures, graphs, and other visual components • Be ready to present! The reason that you are completing this project is so that you can see that not all countries are the same, which means they do not all do business the same way. Each person will be responsible for presenting their country to the class.