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95 Cards in this Set
- Front
- Back
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YANG LANCo-Founder and Chair of Sun Media Group
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•China's biggest TV personality
China has the world’s largest media market, but much remains controlled by the state. • Lan attracts 200 million daily viewers and has interviewed some of the world’s most famous people. • Lan used her media clout to create a media empire, despite struggles. |
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Importing
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Buying products from another country.
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Exporting
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Selling products to another country
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United States Rank, importing and exporting |
The U.S. is the largest importing and the third largest exporting nation in the world .
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TRADING with OTHER NATIONS
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Countries with abundant natural resources (like Venezuela or Russia) need technological resources from other countries (like Japan).
• Global trade allows countries to produce what they make best and buy what they need from others. |
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Free Trade
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The movement of goods and services among nations without political or economic barriers.
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GDP % dependent on exports USA China Germany |
11% 25% 35% |
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Pros of Global Free Trade |
access to 6.9 billion customers increased productivity growth due to increased comparative advantages increased competition and cheaper imports decreases inflation Increased competition encourages innovation uninterrupted capital opens up foreign investment and lowers interest rates |
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Cons of Global Free Trade |
some domestic workers lose jobs (low skill manufacturing for example) due to competition some workers pay decreases due to global competition outsourcing decreases some service/white collar jobs domestic companies lose comparative advantages when competitors operate in low wage countries |
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Comparative Advantage
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A country should sell the products it produces most efficiently and buy from other countries the products it cannot produce as efficiently
started by English economist David Ricardo, in the early 19th century |
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Absolute Advantage
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A country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries. very rare
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GOING GLOBAL with aSMALL BUSINESS
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Small businesses may be the key in global job growth.
• Only 1% of U.S. small businesses export, yet they account for 30% of total U.S. exports President Obama wants small businesses to help double exports by 2015. |
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VisionSpring
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Jordan Kassalow visited Mexico and saw how the lack of eyeglasses affected the local workers.
founded VisionSpring, part charity and part franchiser, with a partner. VisionSpring employs mostly women needing additional income. They buy glasses from VisionSpring and then sell them to locals. • This gives eyesight to those who need it and stimulates the local economy. |
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US Exporting and Jobs |
Exporting provides a great boost to the U.S.economy.
• It’s estimated every $1 billion in U.S. exports generate over 7,000 U.S. jobs. $1.5 trillion exported results in 10 million jobs |
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Balance of Trade
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The total value of a nation’s exports compared to its imports measured over a particular period.
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Trade Surplus (Favorable)
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When the value of a country’s exports is more than that of its imports.
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Trade Deficit (Unfavorable)
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When the value of a country’s exports is less than that of its imports.
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Balance of Payments
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The difference between money coming into a country (from exports) and money leaving the country (from imports) plus other money flows.
• The goal is to have more money flowing into a country than out – a favorable balance. • An unfavorable balance is when more money flows out of a country. |
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Dumping
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Selling products in a foreign country at lower prices than those charged in the producing country.
• Dumping is prohibited. • China, Brazil and Russia have been penalized for dumping steel in the U.S. |
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KEY STRATEGIES for REACHING GLOBAL MARKETS, ranked from least amount commitment, control, risk, and profit potential to most
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licensing, exporting, franchising, contract manufacturing, international job ventures and strategic alliances, foreign direct investment |
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Licensing
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When a firm (licensor) provides the right to manufacture its product or use its trademark to a foreign company (licensee) for a fee (royalty)
benefit a firm by: - Gaining revenues it wouldn’t have otherwise generated. - Spending little or no money to produce or market their products.
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EXPORT ASSISTANCE CENTERS
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EACs provide hands-on exporting assistance and trade-finance support for small and medium sized businesses that wish to directly export goods and services.
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EXPORT TRADING CENTERS
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ETCs help companies engage in indirect exporting by:- Matching buyers and sellers.- Dealing with foreign customs offices, documentation, and conversions.
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We franchise 37,000 of our KFC, Taco Bell and Pizza Hut restaurants in 109 countries around the world. We found in Japan that a favorite pizza enjoyed by our patrons was topped with squid and sweet mayonnaise. In China it’s a must to serve a “dragon twister” with our chicken. |
Yum Brands
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Franchising
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A contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product/service in a given area.
• Franchisors need to be careful to adapt their product to the countries they serve. |
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Fun facts about McDonalds |
has more than 32,000 restaurants inover 117 countries.
• Maintains varying menus around the world due to the different preferences of its customers. Attracts top-level college graduates to be trained for management spots (Hamburger University in China). • Only 8 of every 1,000 applicants actually makes it into the program! |
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Contract Manufacturing
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A foreign company produces private-label goods to which a domestic company then attaches its own brand name or trademark. A form of outsourcing.
can be used to: - Allow a company to experiment in a new market without incurring heavy start-up costs such as building a manufacturing plant. - Temporarily meet an unexpected increase in orders. |
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Joint Venture
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A partnership in which two or more companies join to undertake a major project.
Benefits: - Shared technology and risk. - Shared marketing and management expertise. -Entry into markets where foreign companies are often not allowed unless goods are produced locally. Drawbacks -business partners learn the others technology and business practices and implements them for its own advantage -shared tech can become obsolete - joint ventures large size decreases flexibility
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Strategic Alliance
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A long-term partnership between two or more companies established to help each company build competitive market advantages.
don’t typically share costs, risks,management or profits. provide broad access to markets, capital and technical expertise.
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Foreign Direct Investment (FDI)
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The buying of permanent property and businesses in foreign nations.
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Foreign Subsidiary
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A company owned in a foreign country by another company called the parent company. The most common form of FDI. Home country is parent company, host country is where the subsidiary is located
- Primary Advantage: Parent company maintains complete control over its technology or expertise. - Primary Disadvantage: Must commit funds and technology within foreign boundaries. Risk of expropriation (take over by foreign government) if relationship falters. |
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Multinational Corporation
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A company that manufactures and markets products in many different countries and has multinational stock ownership and management.
Not all large global businesses are multinational. • Only firms that have manufacturing capacity or some other physical presence in different nations can truly be multinational. |
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Sovereign Wealth Funds (SWFs)
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Investment funds controlled by governments holding large stakes in foreign companies.
The size of the funds and the fact that they are government-owned make some fear they might be used for: - Geopolitical objectives. - Gaining control of strategic natural resources. - Obtaining sensitive technologies. - Undermining the management of the companies in which they invest. Benefits: way to creating thousands of US jobs, is a vote of confidence in US economy
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FORCES AFFECTING GLOBAL TRADE
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• Sociocultural
• Economic and Financial • Legal and Regulatory • Physical and Environmental |
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CULTURAL DIFFERENCES
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- Social Structures
- Religion - Manners - Values - Language - Personal Communication |
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ethnocentricity |
attitude that your own culture is superior to other cultures |
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READY to TRAVEL ABROAD? Know Your Cultural Differences
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In Turkey, it’s rude to cross your arms while facing someone.
• In many Middle Eastern countries, you shouldn’t eat or shake hands with the left hand because it is considered unclean. • In India, you should never pat anyone’s head. It’s where one’s soul is kept. • In Brazil, your meeting may not start on time because punctuality isn’t important to the culture. |
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Exchange Rate
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The value of one nation’s currency relative to the currencies of other countries.
• High value of the dollar – Dollar is trading for more foreign currency; foreign goods are less expensive. • Low value of the dollar – Dollar is trading for less foreign currency; foreign goods are more expensive. • Currencies float in value depending on the supply and demand for them in the global market. |
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Devaluation
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Lowers the value of a nation’s currency relative to others.
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Countertrading
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Complex form of bartering in which several countries each trade goods or services for other goods or services. accounts for 20% of all global exchanges, especially focused in developing countries.
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bartering |
the exchange of merchandise or service for service with no money traded. Largely used in nations with weak currency, bad economies, with high inflation. |
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LEGAL CONCERNS OVERSEAS
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There’s no global system of laws.
• Laws may be inconsistent. • U.S. businesses must follow U.S. laws while conducting global business. • The Organization for Economic Cooperation and Development (OECD) and Transparency International fight to end corruption and bribery in foreign markets and have had limited success. |
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ENVIRONMENTAL FORCES
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Developing countries have transportation and storage systems that make international distribution difficult or impossible.
• Often, technological capabilities are far from those in the U.S. which make for a tough business environment. |
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Trade Protectionism
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The use of government regulations to limit the import of goods and services.
Advocates of protectionism believe it allows domestic producers to survive, grow and produce jobs.
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mercantilism |
economic policy endorsed by leaders in the 17th and 18th century. Want to have a favorable balance of trade (sell more goods then buys from foreign nations). Money flows to countries that sell most globally. Encouraged tariffs. |
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Tariffs
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Taxes on imports,making imported goods more expensive.
Two kinds of tariffs: - Protective – Raise the retail price of imports so domestic goods are competitively priced. - Revenue – Raise money for governments. |
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Import Quota
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Limits the number of products in certain categories a nation can import.
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Embargo
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A complete ban on the import or export of a certain product or the stopping of all trade with a particular country.
• Political disagreements can lead to embargos, like the U.S. embargos against Cuba, Iran and North Korea.
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Non-Tariff barriers |
not as specific or formal as tariffs, import quotas, or embargoes. give specific regulations meant to discourage foreign competition from entering the market in a country |
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General Agreement on Tariffs and Trade(GATT)
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A global forum for reducing trade restrictions on goods, services, ideas and cultural problems, agreement started in 1948
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World Trade Organization (WTO)
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Headquartered in Geneva, the WTO is an independent entity of 153 member nations whose purpose is to oversee cross-border trade issues and global business practices. Replace GATT in 1986. Major weakness is that only 20% of membership are developing nations.
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Common Market/ Trading Bloc
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A regional group of countries with a common external tariff, no internal tariffs and coordinated laws to facilitate exchange among members. Might create regional alliances at expense of global expansion.
The European Union (EU), Mercosur, the ASEAN (Association of Southeast Asia Nations) and the COMESA (Common Market for Eastern and Southern Africa) are common markets.
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European Union (EU) |
began in 1950's with 6 countries. Today it includes 27 nations, population of 500 million and a GDP of 16.4 trillion. Adopted Euro in 1999 as common currency, decreased costs by eliminating currency conversions |
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Mercosur |
Includes Brazil, Argentina, Paraguay, Uruguay, Bolivia, Chile, Columbia, Ecuador, and Peru population of 250 million, has goal to establish common currency |
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ASEAN Economic Community |
Established in 1967 in Thailand (other members included Malaysia, Philippines, Singapore). Today includes Brunei, Cambodia, Lao Peoples Democratic Republic Myanmar, and Vietnam Population of 600 million, GDP of $1.8 Trillion |
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COMESA/SADC/EAC |
focused in Africa Population of 533 million, $740 billion GDP |
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North American Free Trade Agreement
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Ratified in 1994, created a free-trade area among the United States, Canada and Mexico.
450 million population, GDP of $17 trillion NAFTA’s objectives are: 1) Eliminate trade barriers and facilitate cross-border movement of goods and services. 2) Promote conditions of fair competition. 3) Increase investment opportunities. 4) Provide effective protection and enforcement of intellectual property rights. 5) Establish a framework for further regional trade cooperation. 6) Improve working conditions in North America.
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Pros and Cons of NAFTA |
Pros: trade volume increased from $289 billion to $1 trillion between 1994 and today Cons: 750,000 US manufacturing jobs disappeared, illegal immigration, working conditions in mexico (especially southern mexico) worsened/became less safe |
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CAFTA: Central American Free Trade Agreement
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Passed in 2005, created a free-trade zone with CostaRica, Dominican Republic, El Salvador, Guatemala,Honduras and Nicaragua.
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NEW FREETRADE AGREEMENTS
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• Today, free trade agreements are being negotiated with South Korea, Colombia and Panama.
• The U.S. is considering an agreement with anine-nation free trade bloc called the TransPacificPartnership. |
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FUTURE of GLOBAL TRADE
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• With over 1.3 billion people, China has transformed the world economic map. Many multinationals invest heavily in China.
• India has seen huge growth in information technology, pharmaceuticals and biotechnology. • Russia is a large oil producing country with many multinationals interested in developing there. • Brazil is expected to be one of the wealthier economies by 2030. |
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Outsourcing
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Process by which a firm contracts with other companies to do some or all of its functions.
U.S. firms have outsourced payroll functions,accounting and manufacturing for years • With the growth of global markets, companies have been shifting to offshore outsourcing – outsourcing with other countries.
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Pros and Cons of Offshore Outsourcing |
Pros: 1. Less-strategic tasks can be outsourced globally, allowing companies to focus on their specialties 2. increases efficiency, leading to increased hiring 3. decreases prices, increased global economic growth Cons: 1. Permanent jobs loss and lower wages due to foreign competition 2. reduces product quality thereby hurting a companies reputation 3. communication within company member, suppliers, and customers becomes more difficult |
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Medical Tourism |
• Some insurance companies encourage patients to seek medical care in foreign countries.
• Procedures are cheaper and involve top-flight doctors at state-of-the-art facilities. • Would it be ethical to force patients to travel to other countries to save money? |
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PLAN for YOUR GLOBAL CAREER
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• Study foreign languages.
• Learn about foreign cultures. • Take global business courses. |
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BLAKE MYCOSKIE, founder TOMS Shoes
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• While appearing on The Amazing Race, Mycoskie saw how badly local children in Argentina needed shoes.
• He founded TOMS in 2006. • TOMS gives a pair of shoes to a child in need for every pair sold. |
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How do we restore trust in the free marketsystem?
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- Punish those who have broken the law.
- Make accounting records more transparent. - Consider what is ethical, not just what is legal. |
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historical examples of unethical corporate behavior. |
• Madoff Investment Securities: Bernie Madoff is serving 150 years behind bars after running his exclusive wealth management firm as a gigantic Ponzi scheme. Stole $75 billion.
• Enron: Jeffery Skilling is serving a 24 year sentence for accounting fraud while Richard Causey, who pled guilty, will be released in October 2011. Former CEO,Kenneth Lay, died before sentencing. • WorldCom: Former CEO, Bernie Ebbers, was convicted of fraud, conspiracy and false filings and sentenced to 25 years. |
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WHAT is a PONZI SCHEME? |
• A fraud by paying returns to existing investors from funds contributed by new investors.
• New investors are promised opportunities claimed to generate high returns with little or no risk. • Fraudsters focus on attracting new money to make promised payments. |
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Ethics
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The standards of moral behavior. Behaviors that are accepted by society as right versus wrong. Learned by example.
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BASIC MORAL VALUES
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Right:
Integrity, Respect for human life, Self-control, Honesty, Courage, Self-sacrifice Wrong: Cheating, Cowardice, Cruelty |
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Ethics and Facebook
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• Some scammers pose as military servicemen and establish relationships with women, then request money for phone calls or trips home.
• Surveys can generate money for scammers, but then some also teach others how to scam other users. • Do you think it’s ethical to create a fake account?Why? Why not? |
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Questions to ask yourself when facing ethical dilemmas. |
- Is it legal? Am i violating any law or company policy.
- Is it balanced? Am I acting fairly? Would I want to be treated the same way? - How will it make me feel about myself? Would I feel comfortable with superiors/the public knowing my decision. |
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Management and Ethics |
• Organizational ethics begin at the top.
• Managers can help instill corporate values in employees. • Trust between workers and managers must be based on fairness, honesty, openness and moral integrity |
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FACTORS INFLUENCING MANAGERIAL ETHICS
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Individual: Values, Work Background, Family Status, Personality Organizational: Top Level Management Philosophy, Firm’s Reward System, Job Dimensions Environmental: Competition, Economic Conditions, Social/Cultural Institutions |
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Compliance-Based Ethics Code
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Emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers.
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Integrity-Based Ethics Code
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Define the organization’s guiding values, create an environment that supports ethically sound behavior and stress a shared accountability.
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6 Steps to improve business ethics in America |
1. Top management must adopt and unconditionally support an explicit corporate code of conduct.
2. Employees must understand that senior management expects all employees to act ethically. 3. Managers and others must be trained to consider the ethical implications of all business decisions. 4. An ethics office must be set up with which employees can communicate anonymously. Whistleblowers -- Insiders who report illegal or unethical behavior, should be protected. 5. Involve outsiders such assuppliers, subcontractors,distributors and customers. 6. The ethics code must beenforced. |
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8 ways to prevent unethical behavior in business
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1. Managers must communicate the organization’s vision on ethical behavior.
2. Organizations must have a code of ethics. 3. Policies have to be enforced regarding ethical offences. 4. Ethical responsibility must be taught to all employees. 5. Discussions of ethics must be included in the decision-making process. 6. Accountability must be taken seriously at all levels in the organization. 7. Organizations must act fast when a crisis occurs. 8. Employees must know they have to defend and maintain the company’s reputation. |
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Corporate Social Responsibility (CSR)
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The concern businesses have for the welfare of society.
• CSR is based on a commitment to integrity, fairness, and respect. • CSR proponents argue that businesses owe their existence to the societies they serve and cannot exist in societies that fail.
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• Corporate Philanthropy
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Includes charitable donations.
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Corporate Social Initiatives
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Include enhanced forms of corporate philanthropy directly related to the companies competencies.
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Corporate Responsibility
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Includes everything from hiring minority workers to making safe products,minimizing pollution, using energy wisely, and providing a safe work environment.
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Corporate Policy
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The position a firm takes on social and political issues.
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This company has a program it calls SocialService Leave that allows employees to take up to a year off to work for a nonprofit organization while earning their full salary and benefits, including job security.
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Xerox |
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PRESIDENT KENNEDY’S 4 BASIC RIGHTS of CONSUMERS
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The Right to Safety
• The Right to be Informed • The Right to Choose • The Right to be Heard |
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SOCIAL CUSTOMER CONTACT Do’s and Don’ts of Using Twitter for Business
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Do:
Engage followers in discussion relevant to your industry. Think about your message before tweeting. Deleted tweet scan still be found! Frequently offer new content. Create separate accounts for business and personal use. Don't: Make personal announcements via your company’s Twitter account. Let your account lie dormant. Tweet impulsively. Start political rants. |
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Insider Trading
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Insiders using private company information to further their own fortunes or those of their family and friends.
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RESPONSIBILITY to EMPLOYEES
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• Create jobs and provide a chance for upward mobility.
• Treat employees with respect. • Offer salaries and benefits that help employees reach their personal goals. |
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employee ethics failures |
• Employee fraud costs U.S. businesses about 5% of annual revenue and causes 30% of all business failures.
Disgruntled workers relieve frustration by: - Blaming mistakes on others. - Manipulating budgets and expenses. - Making commitments they intend to ignore.- Hoarding resources. - Doing the minimum.
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RESPONSIBILITY to the ENVIRONMENT
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• Environmental efforts may increase costs, but can offer good opportunities.
• The emerging renewable-energy and energy-efficiency industries account for 9 million U.S. jobs. • By 2030, as many as 40 million “Green” jobs will be created. |
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GREENWASHING Ethical Issues in Going Green
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Some companies are claiming they are more environmentally responsible than they actually are, a practice called “greenwashing.”
• Websites such as Greener Choices and Greenwashing Index screen ads for greenwashing. |
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Social Audit
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A systematic evaluation of an organization’s progress toward implementing socially responsible and responsive programs.
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Five Types of Social Audit Watchdogs
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1) Socially conscious investors, who insist that a company extend its own high standards to suppliers.
2) Socially conscious research organizations 3) Environmentalists 4) Union officials 5) Customers |
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INTERNATIONAL ETHICS
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• In the 1970s, the Foreign Corrupt Practices Act criminalized the act of paying foreign businesses or government leaders in order to get business.• Partners in the Organization of American States signed the Inter-American Convention Against Corruption.
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