Competing in Global Market

Agustina Caroline E. (2011-011-008) Sandra (2011-011- 032) Billy Pangestu (2011-011-104)

THE DYNAMIC GLOBAL MARKET



In time past, got to working in such cities was in a dream. But now, the situation has changed. Its hard to find a company that doesnt cite global expansion as a link to its future growth. Companies doing business globally believe its important to send employees on assignments in other countries. There are 2 aspects: Importing and Exporting

WHY TRADE WITH OTHER NATIONS?

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No nation can produce all of the products that its people want and need. Even if a country did become self-sufficient, other nation would seek to trade with that country. Some nations have an abundance of natural resources but limited technological know how.

Global trade enables a nation to produce what it is most capable of producing and to buy what it needs from others in mutually beneficial exchange relationship. Free trade is the movement of goods and services among nations without political or economic barriers.

The Theories of Comparative

 

David Richardo A country sell to other countries those products that it produce most effectively and efficiently. A country buy from other countries those products it cannot produce as effectively or efficiently. Ex : Indonesia & Malaysia.

The Theories of Absolute Advantage

 

Adam Smith A country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries. Ex : Indonesia & Jepang

GETTING INVOLVED IN GLOBAL TRADE



People interested in finding a job in global business often think of firms which have large multinational accounts. With the help and encouragement many small businesses are becoming more involved in global markets. Getting started globally is often a matter of observation, determination, and risk.
Importing Exporting Measuring Global Trade

Importing Goods and Services



To bring or carry in from an outside source, especially to bring in (goods or services) from a foreign country for trade or sale. We will notice that some products widely available in our countries are not available or are more expensive in other countries.

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Exporting Goods and Services



You can sell just about any good or service used in your country to other countries. Sometimes the competition is not nearly as in tense in global markets as it is at home.

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Measuring Global Trade #1

In measuring global trade, nations follow two key indicators: balance of trade and balance of payments.  Balance of trade : total value of a nations exports compared to its imports measured over a particular period. Trade surplus occurs when the value of exports exceeds that its imports. Trade deficit occurs the opposite of trade surplus.

Measuring Global Trade #2



Balance of payment : the difference between money coming into a country (for exports) and money leaving the country (for imports) plus money flows coming into or leaving a country from other factors. Favorable balance of payment : to have more money flowing into the country than flowing out of the country. Unfavorable balance of payment : more money flowing out of a country than coming in.

In supporting free trade, the United States, like other nations, wants to make certain that global trade is conducted fairly. To ensure this level playing field, the United State and other countries enforce laws to prohibit unfair practices such as dumping.

DUMPING


The practice of selling products in a foreign country at lower price than those charged in the producing country. It used to reduce surplus products in foreign markets or to gain a foothold in a new market by offering products for lower prices than domestic competitors do.

STRATEGIES FOR REACHING GLOBAL MARKETS



The key strategies include

Licensing Exporting Franchising contract manufacturing creating international joint ventures and strategic alliances creating foreign subsidiaries engaging in foreign direct investment.

Each strategy provides opportunities for becoming involved in global markets, along with specific commitments and risks.

Licensing


Licensing is a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty)

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Exporting


Exporting is a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty)

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Franchising


Franchising is a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty)

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Contract Manufacturing


Contact Manufacturing is a domestic company attaches its brand name to a foreign countrys production

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International Joint Ventures and Strategic Alliances



International Joint Ventures and Strategic Alliances is a partnership in which two or more companies join to undertake a major project

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The Benefits

Strategic Alliance

The Benefits of International Joint Ventures are clear

 

Shared technology and risk Shared marketing and management expertise Entry into markets where foreign companies are often not allowed unless goods are produced locally

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Strategic Alliance


Strategic Alliance is a long-term partnership between two or more companies established to help each company build competitive market advantages

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A Foreign Subsidiary


A Foreign Subsidiary is a company that is owned in a foreign country by another company (called the parent company)

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Foreign Direct Investment



Foreign Direct Investment is the buying of permanent property and businesses in foreign nations

Multinational Corporation

Multinational Corporation


Multinational Corporation is an organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management

Forces Affecting Trading in Global Markets

4 Forces Affecting Trading In Global Markets: 1. Socio-cultural forces 2. Economic and financial forces 3. Legal and regulatory force 4. Physical and environmental forces

Socio-cultural Forces


Religion is important part of any societys culture and can have a significant impact on business operations. Understanding socialcultural differences can also be important in managing employess.

What is Ethnocentricity

What is ethnocentricity?


Ethnocentricity is an attitude that ones own culture is superior to all others

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Economic and Financial Forces



Economic differences can also muddy the water in global market. Global finacial markets operate under a system called floating exchange rate, in which currencies float according to the supply and demand in the global market for the currency.

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Legal and Regulatory Forces



In a economy, the product and direction of business are firmly tied to the legal and regulatory evironment Its important to remember that to be succesful in global market its often useful to contact local businesspeople in the host countries and gain their cooperation and sponsorship.

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Physical and Environmental Forces



Certain physical and evirontment forces can also impact a companys ability to conduct business in global markets. Example: some developing countries have such primitive tranportation and storage systems that international distribution is ineffective.

TRADE PROTECTIONISM


Trade protectionism is the use of government regulations to limit the import of goods and services Tariff is a tax imposed on imports. There are two different kinds of tariffs:
Protective tariffs (import taxes) Revenue tariffs

Import Quota and Embargo



Import quota is a limit on the number of products in certain categories that a nation can import Embargo is stopping all trade with a particular country

Organization in Trade Protectionsm

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WTO Common Markets NAFTA

The World Trade Organization (WTO)

 

World Trade Organization(1995) To assume the ask of mediating trade disputes among nations

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Common Markets


A common market (also called a trading bloc) is a regional group of countries that have a common external tariff, no internal tariffs, and the coordination of laws to facilitate exchange among member countries. Ex : European Union (EU) and the South American Common Market called the Mercosur.

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The North American and Central American Free Trade Agreements

 

Which created a free-trade area among the United State, Canada, and Mexico. The objectives of NAFTA were to
eliminate trade barriers and facilitate cross-border movement of goods and services promote conditions of fair competition increase investment opportunities provide effective protection and enforcement of intellectual property rights establish a framework for further regional trade cooperation improve working conditions in North America.

The Future of Global Trade



Global Trade opportunities grow more interesting yet more challenging each day. New and expanding markets present great potential for trade and development. Change in technology, especially the internet, enable companies worldwide to bypass normally required distribution channels to reach a large market that is only a mouse click away

The Challenge of Offshore Outsourcing



Outsourcing is the purchase of goods and services from sources outside a firm rather than providing them within the company. The sift in outsourcing manufacturing and services from domestic businesses to primarily low-wafe markets has become a major issue. This sift is referred to as offshore outsoucing.

Globalization and Your Future



Whether to be an entrepreneur, manager, or other type of business leader; its increasingly important to think globally in planning your career. Global market offer many opportunities yet are laced with significant challenges and complexities. By studying foreign languages, learning about foreign cultures, taking business courses can develop a global perspective on future.