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
 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: www.wto.org)

12000
10000
8000
6000 Exports
4000 Imports

2000
0
1948 1953 1963 1973 1983 1993 2003 2005
 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.

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 4,858.3 27,777.1 -22,918.8
December 2006 5,188.4 24,188.4 -19,000.0
TOTAL 55,224.2 287,772.8 -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…….