The Shrinking Globe


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:

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:

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:
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:
300 250 200 150 100 50 0 U.S. Germany U.K. Japan France

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

International Business
• International business consists of transactions that are devised and carried out across national borders to satisfy objectives of individuals, companies and organizations

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 shifts activities to a global level

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.

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?

World Value in Exports and Imports (in billions of dollars) (source:
12000 10000 8000 6000 4000 2000 0 1948 1953 1963 1973 1983 1993 2003 2005 Exports Imports

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.

Interdependence of economies
• As international business increases, economies worldwide become more interdependent • Example one: On February 27, the Shanghai composite index lost 9% of it’s value. In response, the Dow Jones Industrial Average dropped @ 3.5%, and the FTSE 100 dropped 2.86%. • Why? • U.S. and EU consumption helps fuel Chinese business growth • Chinese economic growth is seen as essential to continued growth globally

Interdependence of economies (cont.)
• Example Two: • As of one year ago, China held $194 billion in U.S. treasury securities • China exports to the U.S. far exceed imports from the U.S.

Trade with China : 2006
NOTE: All figures are in millions of U.S. dollars. Month January 2006 February 2006 March 2006 April 2006 May 2006 June 2006 July 2006 August 2006 September 2006 October 2006 November 2006 December 2006 TOTAL Exports 3,494.1 4,087.0 4,955.4 4,343.7 4,542.0 4,347.0 5,064.6 4,764.3 4,637.5 4,941.7 4,858.3 5,188.4 55,224.2 Imports 21,404.9 17,926.5 20,526.1 21,377.2 22,253.6 24,052.4 24,639.6 26,723.4 27,596.8 29,306.8 27,777.1 24,188.4 287,772.8 Balance -17,910.9 -13,839.5 -15,570.7 -17,033.5 -17,711.6 -19,705.4 -19,574.9 -21,959.0 -22,959.3 -24,365.1 -22,918.8 -19,000.0 -232,548.6

•'TOTAL' may not add due to rounding. •Table reflects only those months for which there was trade. •CONTACT: Data Dissemination Branch, U.S. Census Bureau, (301) 763-2311 •SOURCE: U.S. Census Bureau, Foreign Trade Division, Data Dissemination Branch, Washignton, D.C. 20233

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.

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

All this is part of…….

International Business

International Business
• All business transactions • Private or Governmental • That involves • Two or more countries

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

The Changing Pattern of 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 (APEC)

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 standardized products • Globalized production  Cost efficiency

The Changing Pattern of 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

We will be learning more…….

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