View
221
Download
0
Tags:
Embed Size (px)
Citation preview
Competing in Global Markets
Key Ideas
Absolute AdvantageComparative Advantage
Free TradeMeasuring Trade
Economic InstitutionsMacro Factors
Multi-domestic and Global (Competition/Strategy)Entry Strategies
Partnerships
Why Trade?
No country is self-sufficient
Countries need products that other countries produce.
Natural Resources, technological skills and other factors of production are not distributed evenly or
“efficiently” around the world.
Example: Weekly Business Project
Pretend that Each Week the Following Activities Need to be Completed for a Business Project:
Gathering Data through InterviewsStatistical AnalysisReport WritingReport EditingPutting together a PowerPoint PresentationStanding up before the audience and presenting the report
How many hours would it take you to complete each task? How do you value your time?
Absolute Advantage
Exists when a country can produce a product more efficiently than any other country.
Theory of Comparative Advantage
Countries should sell to other countries those products that it produces most efficiently and buy from countries those products it cannot produce as effectively or efficiently.
In other words, comparative advantage is the ability of a country to produce a good at a lower opportunity cost than another country.
Free Trade
The movement of good and services among nations without political or
economic trade barriers.
Examples of Barriers: Tariffs, Quotas, Embargo, Exchange Controls
Measuring Global Trade
Balance of Payments
Balance of Trade
Trade Deficit
Exchange Rates
Important Economic Institutions
World Trade Organization
World Bank
International Monetary Fund
International Macro Environment Factors
Economic
Social/Cultural
Political/Legal
Technological
Economic Factors
Help us to measure the state of the macroeconomic environment and determine the general health and well being of an economy.
Examples: GDP trends, interest rates, money supply, inflationunemployment levels, wage/price controls, energy availabilityand costs, disposable and discretionary income, exchange rates.
Barbados
Land Mass: 166 square milesOakland County, MI: 873 square milesUS land mass: 3,794,083 sq mi
Economic Data
GDP $5.1 Billion (2006)
(United States$12.37 trillion)
GDP Growth Rate 4%
Per Capita Income $18,200
GDP by Sector Agriculture – 6%
Industry – 16%
Services – 78%
Unemployment Rate 10%
Exports $209 million (Main exports: sugar and molasses, rum, other food and beverages,
chemicals, electrical components)
Imports $1.47 billion
Exchange Rates $1 US = $2 Barbadian
Inflation 2.4% (US 3.2% for 2005)
Source: CIA Factbook and Country Commercial Guides
HaitiSource: CIA Factbook
Land mass: 10,714 sq mi
Economic Data
GDP $14.56 billion (2006)
GDP Growth Rate 1.8%
Per Capita Income $1,800
(80% live in abject poverty)
GDP by Sector
Agriculture – 30%, Industry – 20%
Services - 50%
GDP by Labor
Agriculture – 66%, Industry – 9%
Services - 25%
Unemployment Rate 66%
Exports $443.7 million (main exports: light manufactures, coffee, mangoes)
Imports $1.7 billion
Exchange Rates 1$ US = 45.19 gourdes
Inflation 14.4%
Source: CIA Factbook and World Bank
Social/Cultural Factors
This category of factors describe the beliefs, values, attitudes,opinions, and lifestyles of persons in the firm’s externalenvironment as developed from cultural, demographic, religious,educational and ethnic conditioning.
Examples: Lifestyle changes, career expectations, age distribution,regional shifts in population, birth rates, life expectancies,growth rate in population, consumer activism, rate of family formation, literacy levels, language, social institutions, skill level of the workforce
Social/Cultural Factors
Total Population: 279,912 (Oakland County, MI: 1,213,339)
Fertility rate: 1.65 children/woman
Ethnic Groups: Black (90%), White (4%), Asian and Mixed (6%)
Language: English
Years of Compulsory Schooling: 12 years
Literacy Rates: 99% (United States: 97%)
Religious Affiliations: Christian (71%), None (17%), Other (12%)
Other Info: Life Expectancy = 71 (m) and 75 (f)
Source: CIA Factbook
Social/Cultural Factors
Total Population: 8.3 million (2006)
Fertility rate: 4.9 children/woman
Ethic Groups: Black (95%), White and Mixed (5%)
Language: French and Creole
Years of Compulsory Schooling: 6 years
Literacy Rates: 52.9%
Religious Affiliations: Christian (96%), None (1%), Other (3%)
Other Info: Doctors per 100,000 people = 25, Life expectancy = 53.23years
Source: CIA Factbook and World Bank
Political/Legal Factors
These factors define the legal and regulatory parameters withinwhich a firm must operate.
Examples: Antitrust regulations, environmental protection, tax laws,employment laws, stability of government, foreign trade protectionForm of government, political ideology, protectionist sentiment, terrorist activity, legal system, government’s attitude toward foreign firms, corruption.
Politics in Barbados
Government Type: Parliamentary democracy; independent sovereignstate within the Commonwealth
Legislative Branch: Bicameral Parliament (Senate (appointed by the Governor General) and House of Assembly (elected by popular vote))
Political Parties: 2
Corruption: Ranked 21 in the world by Transparency International
CIA Factbook and http://www.transparency.org
Politics in Haiti
Government Type: Bicameral National Assembly
Legislative Branch: Senate and Chamber of Duties)/All elected by popular vote
Political Parties: 24
Corruption: Ranked 145 by Transparency International
CIA Factbook and http://www.transparency.org
Technological Factors
This factor deals with the general technological infrastructure, the rate of change in technology, and those things impacting the development and introduction of new technologies.
Examples: Total government spending for R&D, Total industryspending for R&D, focus of technological efforts, patent protection,new developments in technology transfer, productivity improvements through automation, Regulations on technologytransfer, information flow infrastructure, patent and trademark protection.
Barbados – Technological FactorsSource: World Bank (2000, 2004)
Haiti Technological FactorsSource: World Bank (2000, 2004)
See Handout
Balancing Macro Factors is Key
Do low wages in developing countries translate into lower manufacturing costs? What about higher profitability?
Globalization in Competition
Multi-domesticCompetition
GlobalCompetition
Multidomestic Competition
Competition is essentially segmented from country to country.
Competition in one country is independent of competition inother countries.
Examples: Grocery, healthcare
Global Competition
Global competition occurs when competition crosses national borders.
A firm’s strategic moves in one country can be significantly affected by it’s competitive position in another country.
Examples: Automobiles, Consumer electronics, Petroleum
How should firms position themselves to compete in the global marketplace?
Competing Pressures
Pressure for Local Responsiveness
Consumer’s Tastes and Preferences
Differences in Infrastructure or Traditional Practices
Differences in Distribution Channels
Demands of Host Governments
Pressure for Cost Reductions
Commodity-type product
Universal needs of customers
Competitors use a low cost position
Multidomestic Strategy
Focus: Local Responsiveness
Customize the strategy to fit the circumstances of each host country
Little to no coordination of strategy across countries
Form subsidiary companies to handle operations in each host country; each subsidiary operates more or less autonomously
Focus: Cost Reduction
Same basic strategy worldwide (minor variations where essential)
Takes advantage of location economies
Locate subunits near high-quality raw materialLocate subunits near sources of high-quality or low cost laborSeek low cost financing anywhere in the world
Much more worldwide coordination
All major strategic decisions are closely coordinated at global headquarters. Structure is designed to unify subsidiaries.
Global Strategy
Amount of Commitment, Control, Risk and Profit Potential
Licensing Exporting FranchisingContract
Manufacturing
JVand
StrategicAlliances
ForeignDirect
Investment
Least Most
Entry Strategies
A BA B
C
Strategic Alliance Joint Venture
Can be leveraged internationally by linking
value chain activities
Examples of Partnerships
Motivations for Partnerships
1. Generate scale economies: Toyota/GM joint venture (Toyota couldspread fixed investment over more units)
2. Gain access to strategic markets: Japanese firm, JVC, provided designtechnology to partner in exchange for access to European market.
3. Overcoming trade barriers: Inland Steel and Nippon Steel built coldsteel plant in Indiana (Nippon supplied technology, capital andaccess to Japanese firms in the US).
4. Use excess capacity: Toyota/GM joint venture used an idle GM plant
5. Gain access to low-cost manufacturing capabilities: GE sourcingmicrowaves from Korea.