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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
6000 Exports
4000 Imports

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.
Exports Imports Balance
Month
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
•'TOTAL' may not add due to rounding.
4,858.3 27,777.1 -22,918.8
•Table reflects2006
December only those months for which there was trade. 5,188.4 24,188.4 -19,000.0
•CONTACT: Data Dissemination Branch, U.S. Census Bureau, (301) 763-2311
•SOURCE:
TOTALU.S. Census Bureau, Foreign Trade Division, Data 55,224.2 287,772.8
Dissemination Branch, Washignton, D.C. 20233 -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
 Tastesand
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