The World Is Not Enough

The World is NOT Enough Business on an International Playfield Dr. Sheelan Misra Assistant Professor New Horizon College, Bangalore

….

The Shrinking Globe

MADE IN CHINA

SOME MORE……

Let’s view……. • The top 5 exporting countries of merchandise? • The top 5 exporting countries of services? • The top 5 importing countries of merchandise? • The top 5 importing countries of commercial services?

Leading exporters in world merchandise trade, 2005 (in billions of dollars) (source: www.wto.org)

1000 900 800 700 600 500 400 300 200 100 0 Germany

U.S.

China

Japan

France

Leading exporters in world commercial services trade, 2005 (in billions of dollars) (source: www.wto.org)

400 350 300 250 200 150 100 50 0 U.S.

U.K.

Germany

France

Japan

Leading importers in world merchandise trade, 2005 (in billions of dollars) (source: www.wto.org) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 U.S.

Germany

China

Japan

U.K.

Leading importers in world commercial services trade, 2005 (in billions of dollars) (source: www.wto.org)

300 250 200 150 100 50 0

U.S.

Germany

U.K.

Japan

France

World Value in Exports and Imports (in billions of dollars) (source: www.wto.org) 12000 10000 8000 Exports Imports

6000 4000 2000 0

1948 1953 1963 1973 1983 1993 2003 2005

Expansion of International Trade • In the past 30 years, the volume of international trade has expanded from $200 billion to over $7.5 trillion. • The sales of foreign affiliates of multinational corporations are now twice as high as global exports.

The Composition of Trade • Between the 1960’s and the 1990’s the importance of manufactured goods increased while the role of primary commodities (i.e. rubber or mining) had decreased. • More recently, there has been a shift of manufacturing to countries with emerging economies. • There has been an increase in the area of services trade in recent years.

Trade with China : 2006 NOTE: All figures are in millions of U.S. dollars. Month

Exports

Imports

Balance

January 2006

3,494.1

21,404.9

-17,910.9

February 2006

4,087.0

17,926.5

-13,839.5

March 2006

4,955.4

20,526.1

-15,570.7

April 2006

4,343.7

21,377.2

-17,033.5

May 2006

4,542.0

22,253.6

-17,711.6

June 2006

4,347.0

24,052.4

-19,705.4

July 2006

5,064.6

24,639.6

-19,574.9

August 2006

4,764.3

26,723.4

-21,959.0

September 2006

4,637.5

27,596.8

-22,959.3

October 2006

4,941.7

29,306.8

-24,365.1

November 2006

4,858.3

27,777.1

-22,918.8

•'TOTAL' may not add due to rounding. •Table reflects2006 only those months for which there was trade. 5,188.4 December 24,188.4 •CONTACT: Data Dissemination Branch, U.S. Census Bureau, (301) 763-2311 •SOURCE: Dissemination Branch, Washignton, D.C. 20233 TOTALU.S. Census Bureau, Foreign Trade Division, Data 55,224.2 287,772.8

-19,000.0 -232,548.6

The Scenario…….. • Japan is the biggest customer for Boeing • Japan is also a dominant market (in dollar value) from which Boeing buys major assemblies, products and services.

McDonalds Corporation • McDonalds does business in 120 countries • 65% of total revenue is derived outside the U.S.

Volkswagen Group • One of the world’s leading automobile manufacturers and the largest car producer in Europe • 44 production plants in eleven european countries, and seven countries in the America, Asia and Africa • Sells in more than 150 countries

Coca Cola • Corporate headquarters in Canada with local operations in over 200 countries around the world • More than 70% income comes outside the US

Example of Globalized Production Of the $20,000 sticker price of a General Motors Automobile LeMans: • $6,000 goes to South Korea, where the car was assembled • $3,000 goes to Japan for sophisticated high-tech parts (engines, transaxles, electronics) • $800 goes to Taiwan, Singapore, and Japan for small parts • $500 goes to Great Britain for advertising and marketing services • $1,000 goes to Ireland for data processing • $7,600 goes to GM and its external professional firms in the United States

International Business Questions • How will an idea, good, or service fit into the international market? • Should trade or investment be used to enter a foreign market? • Should supplies be obtained domestically or abroad? • What product adjustments are necessary to be responsive to local conditions? • What are the threats from global competitors, and how can these threats be counteracted?

All this is part of…….

International Business

International Business • • • •

All business transactions Private or Governmental That involves Two or more countries

Benefits of international business • Causes the flow of ideas, services, and capital around the world • Offers consumers new choices and greater variety • Allows the mobility of labor, capital and technology • Provides employment opportunities • Reallocates resources and

The Changing Pattern of International Business • Changing world output and world trade picture  The U.S. no longer dominates the world economy  Large U.S. multinationals no longer dominate international business  The centrally planned communist economies that made up roughly half the world suddenly become accessible to Western businesses  The global economy has become more knowledge-intensive

International Business (continued) • Lowered trade barriers  General Agreement on Tariffs and Trade (GATT)  World Trade Organization (WTO) • Integrated Economic Markets 

The European Union (EU)



The North American Free Trade Act (NAFTA)



The Association of Southeast Asian Nations (ASEAN)



The Asia Pacific Economic Cooperation

The Changing Pattern of International Business (continued)

• Global consumer preferences  Tastes

and preferences are converging

 Presence

of mass media, exposure to goods from various countries, and

International Business (continued) • Technological innovations 

Advances in communications, information processing, and transportation technology



Fiber optics, wireless technology, the Internet and World Wide Web, and satellite technology

• Management across cultures 

Adaptation to business strategies, structures, operational policies, and human resource programs

Modes of IB • Merchadise Exports & Imports • Service Exports & Imports • • • •

Tourism & Transportation Performance of services(banking, insurance) Use of assets (trademarks, patents, copyrights,licensing agreements) Franchising

• Investments • •

Direct Investment Portfolio Investment

WALMART CASE • Largest retailer in the world • Established in 1962 • 1991 – opened first store in Mexico • 1995 - learned from its mistakes & adapted its Mexican operations to match the local environment • 2002 – the company had more than 1200 stores outside the united states in countries like Canada, Britain, Germany, Japan & South Korea

A Fundamental shift is occurring in the world economy

We are moving into the world in which

• barriers to trade • Perceived distance • Similar material culture • Interdependent global economic systems • The process by which all this is happening is called as……………

Globalization ! • Used by an Indian • Set made in China/Taiwan • Chip made in US • Transported to India in the ship owned by some other country people

GLOBALIZATION Shift toward a more integrated and interdependent world economy Globalization has two different facets: The Globalization of Markets

The Globalization of Markets • Refers to the merging of historically distinct and separate national markets into one huge global market place • Consumer products credit cards, soft drinks, sony play station video games, McDonalds hamburgers,

But Significant differences • Between national markets n the various dimensions like • Consumer

tastes & preferences • Distribution channels • Culturally embedded value systems • Business systems & legal regulations

• These differences require customized marketing strategies, product features and operating practices to best match conditions in a country • The most global markets are still not markets for consumer products but for industrial goods and materials that serve

• In many global markets , same firms confront each other as competitors in nation after nation Coca Cola x Pepsi Ford x Toyota Boeing x Airbus Caterpillar x Kamatsu Nintendo x Sega