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Under the umbrella of GATT, eight rounds of negotiations among member states (now numbering 148) have worked to lower barriers to the free flow of goods and services. The most recent round of negotiations, known as the Uruguay Round, was completed in December 1993. The Uruguay Round further reduced trade barriers; extended GATT to cover services as well as manufactured goods; provided enhanced protection for patents, trademarks, and copyrights; and established the World Trade Organization (WTO) to police the international trading system. Table 1.1 summarizes the impact of GATT agreements on average tariff rates for manufactured goods. As can be seen, average tariff rates have fallen significantly since 1950 and now stand at about 4.0 percent.

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According to data from the World Trade Organization, the volume of world merchandise trade has grown faster than the world economy since 1950 (see figure 1.1). From 1970 to 2004, the volume of world merchandise trade expanded almost 26-fold, outstripping world production, which grew about 7.5 times in real terms. (World merchandise trade includes trade in manufactured goods, agricultural goods and mining products, but not services. World production and trade are measured in real, or inflation-adjusted, dollars.) As suggested by Figure 1.1, due to falling barriers to cross-border trade and investment, the growth in world trade seems to have accelerated since the early 1980s.

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The rapid growth of the Internet and the associated World Wide Web (which utilizes the Internet to communicate between World Wide Web sites) is the latest expression of communication technology development. In 1990, fewer than 1 million users were connected to the Internet. By 1995 the figure had risen to 50 million. In 2004 it grew to about 945 million. By 2007, forecasts suggest the Internet may have more than 1.47 billion users, or about 25 percent of the worlds population. In July 1993, some 1.8 million host computers were connected to the Internet (host computers host the Web pages of local users). By January 2005, the number of host computers had increased to 317 million, and the number is still growing rapidly. In the United States, where Internet usage is most advanced, almost 60 percent of the population was using the Internet by 2003 (see figure 1.3). Worldwide the figure was 15 percent and growing fast. The Internet and World Wide Web (WWW) promise to develop into the information backbone of the global economy.

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Internet Extra: To learn the status of current trade issues, hot areas of international trade, and the responsibilities of the WTO, go to {http://www.wto.org/}. Click on Current News. Review the issues that are currently at the top of the agenda for the WTO. Do they affect developed countries or developing countries? What are their implications for global trade? Go to Trade Topics. Click on Disputes Gateway. Explore the disputes currently under review. How do you think they will be resolved? Why?

Multimedia Lecture Support Package to Accompany Basic Marketing Lecture Script 6-14

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Country Focus: Indias Software Sector Summary This feature explores the growth of Indias software industry. Starting from nothing just twentyfive years, the industry now generates revenues of nearly $40 billion, and exports of $31.3 billion. With global spending on information technology expected to be some $260 billion in 2009, Indian companies are primed to capture a significant share of the pie, forcing their Western counterparts to make changes to their strategies. Suggested Discussion Questions 1. What factors have contributed to the growth of Indias software industry? Discussion Points: Four key factors have contributed to the growth of Indias software industry. First is the huge number of engineers in India. Some 400,000 engineers graduate from Indian universities every year. A second factor is Indias low wage structure. Indian engineers make about 12 percent of what an American colleague might make. Third, coordination between Western firms and Indian firms is facilitated by the large number of English-speaking Indians. Finally, because of the differences in time zones, Indian firms operate while American firms are closed. 2. How has Indias software industry changed in recent years? What are the implications of these changes for American companies like IBM and Microsoft? Discussion Points: There has been a gradual shift in the Indian software industry in recent years. Initially, Indian firms focused on the low end of the industry to supply basic software development and testing services to Western firms. Today however, many companies have moved into higher end services to compete for large software development projects, business outsourcing contracts, and information technology consulting services. This new competitive threat is forcing American firms like IBM and Microsoft to rethink their global strategies. Some Western companies are now investing in India with the goal of capturing some of the cost advantages Indian companies like Infosys and Wirpro enjoy. Teaching Tip: The economic slowdown in the United States is beginning to have an effect on Indias information technology sector. To learn more, go to {http://www.businessweek.com/globalbiz/content/may2008/gb20080512_937505.htm?chan=se arch}

Multimedia Lecture Support Package to Accompany Basic Marketing Lecture Script 6-16

Multimedia Lecture Support Package to Accompany Basic Marketing Lecture Script 6-17

Management Focus: Chinas Hisense An Emerging Multinational Summary This feature examines the growth of Hisense which began in 1969 as a state-owned factory with just 10 employees. Over the years, the company emerged as one of Chinas leading makers of television sets. In 1994, China relaxed its hold on the company and Zhou Houijan was appointed CEO. Under Zhous leadership Hisense has become as one of Chinas premier manufacturers of consumer appliances and telecommunications equipment. Suggested Discussion Questions 1. What makes Hisense different from other manufacturers of consumer electronics? What factors have contributed to its success? Discussion Points: The success of Hisense can be attributed to not only its low cost structure, but also the companys skill in product innovation. In fact, Hisense believes that its main strength is its rapid production innovation. The company feels that to be successful in the highly competitive consumer electronics industry, it must be on the cutting edge of innovation. Consequently, the companys strategy is to continuously launch advanced, high quality, and competitively priced products. 2. Why has Hisense established multiple R&D centers? How do these R&D centers fit into the firms global strategy? Discussion Points: In 1994, Hisense established its first R&D center in China. Since then, the company has also established R&D centers in South Africa and Europe, and is scheduled to open an R&D center in the United States in the near future. Being innovative is central to Hisenses strategy. Having multiple R&D centers allows Hisense to be closer to its markets, and should help the company better serve customer needs and preferences. Teaching Tip: To learn more about Hisense go to {http://www.hisense.com/en/index.jsp}.

Multimedia Lecture Support Package to Accompany Basic Marketing Lecture Script 6-18

The past quarter century has seen rapid changes in the global economy. Barriers to the free flow of goods, services, and capital have been coming down. The volume of cross-border trade and investment has been growing more rapidly than global output, indicating that national economies are becoming more closely integrated into a single, interdependent, global economic system. As their economies advance, more nations are joining the ranks of the developed world. But it is always hazardous to use established trends to predict the future. The world may be moving toward a more global economic system, but globalization is not inevitable. Countries may pull back from the recent commitment to liberal economic ideology if their experiences do not match their expectations. Also, greater globalization brings with it risks of its own. This was starkly demonstrated in 1997 and 1998 when a financial crisis in Thailand spread first to other East Asian nations and then in 1998 to Russia and Brazil. Ultimately the crisis threatened to plunge the economies of the developed world, including the United States, into a recession. This slide outlines some of the arguments from the great globalization debate.

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