Business w03 Competing in a Global Market @1

Universitas Multimedia Nusantara (UMN) Wisma BNI 46, 2nd Floor, Jakarta

Week 3

Content :
Competing
The rise of
international business
in A Global Market
International
business management

Barrier to
international trade

Jakarta, September 2007

Exclusively prepared & presented by: Anna Riana Putriya, SE, MSi e-mail: anna@unimedia.ac.id


What is globalization ?

Intro …

Process by which
the world economy is becoming
a single interdependent system
(Griffin, 2004)



Which one do you like ?

Intro …



Which one you recognize more ?

Intro …



Is this your favorite spot ?

Intro …



What are exports and imports ?

Imports are products made or grown abroad but
Intro … sold domestically;

while exports are products made or grown domestically but
shipped and sold abroad



The Contemporary Global Economy

Several forces have combined to spark & sustain
Intro … globalization:

1. Government and businesses are aware of benefits of
globalization to businesses and shareholders.
2. New technologies make international travel,
communication and commerce much faster and
cheaper.
3. Competitive pressure sometimes force a firm to expand
into foreign markets to keep up with competitors.



Trade Agreements

General Agreements on Tariffs and Trade (GATT)
North American Free Trade Agreement (NAFTA)
Content : European Union (EU)
World Trade Organization (WTO)
The rise of



The North American Marketplace and The Nations of NAFTA

Content :

The rise of



The Major World Marketplace

Per capita income is the average income per person.
Content : 1. High-income countries: those with per capita income
greater than $ 9,386.
The rise of
international business 2. Middle-income countries: those with per capita income
of less than $ 9,386 but more than $ 765.

3. Low-income countries (developing countries): those
with per capita income of less than $ 765.



The Major World Marketplace

NORTH AMERICA
World’s largest marketplace and most
stable economy.
Content : U.S. dominates.

EUROPE
The rise of Western Europe is a mature but
international business fragmented marketplace.
Eastern Europe has gained
importance as a marketplace and a
producer.

PASIFIC ASIA
Nations of the ASEAN are an
important force in the world economy
and a major source of competition for
north American firms.



Europe and The Nations of the European Union

Content :

The rise of



The Nations of ASEAN

Content :

The rise of



Forms of Competitive Advantage

• Absolute advantage is the ability to
Content : produce something more efficiently
than any other country can.
• Comparative advantage is the ability to
The rise of
international business produce some product more efficiently
or better than other products.
• National competitive advantage is an
international competitive advantage
stemming from a combination of factor
conditions; demand conditions; related
and supporting industries; and firm
strategies, structures and rivalries.



Absolute Advantage: Saudi Oil

Content :

The rise of



Absolute Advantage: Brazilian Coffee Beans

Content :

The rise of



Absolute Advantage: Canadian Timber

Content :

The rise of



Absolute Advantage: Mexico Tequila

Content :

The rise of



Comparative Advantage: United States Movies

Content :

The rise of



Bollywood… ???

Content :

The rise of



Comparative Advantage: United States Computer

Content :

The rise of



Comparative Advantage: United States Farming

Content :

The rise of



Comparative Advantage: Guatemalan Textile

Content :

The rise of



Comparative Advantage: South Korea Electronic

Content :

The rise of



National Competitive Advantage: French Wine

Content :

The rise of



National Competitive Advantage: United States Fast Food

Content :

The rise of



National Competitive Advantage: German High-End Car

Content :

The rise of



Attributes of National Competitive Advantage

Content :

The rise of



Import - Export Balances

Balance of trade is the economic value of all products a
Content : country imports minus the economic value of all products it
exports.

The rise of
Trade deficit occurs when a country’s imports exceed its
international business exports (a negative balance of trade), while a trade surplus
occurs when exports exceed imports (a positive balance of
trade)

Balance of payments
is the flow of money into or out of a country.



Exchange Rates

Exchange rate is the rate at which the currency of one nation
Content : can be exchanged for that of another.

1. Fixed exchange rates: the value of any country’s
currency relative to that of another remain constant.
The rise of
international business 2. Floating exchanger rates: the value of one country’s
currency relative to that of another varies with market
conditions.
3. Euro: a common currency shared among most of the
members of the EU



Exchange Rates and Competition

Content : When a country’s currency rises
becomes stronger companies based
there find it harder to export products to
The rise of foreign markets and easier for foreign
international business companies to enter local markets.

When the value of currency declines
becomes weaker companies based there
find it easier to export to foreign markets
and harder for foreign companies to enter
local markets.



Going International

Content :

The rise of



Levels of Involvement

1. Exporters : make product in one country to distribute and
sell in others.
Content :
Importers : buy products in foreign markets and import
them for resale at home.

2. International firms : conduct a significant portion of their
business abroad.
International
business management
3. Multinational firms : design, produce and market products
in many nations.



International Organization Structures

• Independent agents are foreign individuals or organizations
that represent an exporter in foreign markets.
Content :
• Licensing arrangements are arrangements in which firms
choose foreign individuals or organizations to manufacture or
market their products in another country.

• Branch offices are foreign offices set up by an international or
International multinational firm
business management
• Strategic alliance (also called Joint Venture) is an
arrangement in which a company finds a foreign partner to
contribute approximately half of the resources needed to
establish and operate a new business in the partner’s country.

• Foreign Direct Investment (FDI) involves buying or
establishing tangible assets in another country.



Content :

International
business management



1. Social and Cultural Differences

Firms planning to conduct business abroad must understand
the social and cultural differences between host country and
Content : home country.

Differences in:
* Language
* Tastes and preferences
* Sense of value
* Shopping habits
Barrier to
international trade



2. Economic Differences

Economic differences can be pronounced.

Content : • A firm must know how much the
government is involved in a given industry
operating within a mixed economy.
• The impact of economic differences can be
great in planned economies.

Barrier to
international trade



3. Legal and Political Differences

Government can affect international
business in many ways. They can :
Content :
• Set condition for doing business
within their borders and even
prohibit doing business together.
• Control the flow of capital and use
tax legislation to discourage or
encourage activity in a given
industry.
Barrier to
international trade • Confiscate the property of foreign-
owned companies.



Quotas, Tariffs, and Subsidies

• Quotas is a restriction on the number
Content : of products of a certain type than can
be imported into a country.

• Tariff is a tax levied on imported
products.

• Subsidy is a government payment to
help a domestic business compete
with foreign firms.
Barrier to
international trade



What is protectionism ?

Practice of protecting domestic business against
Content : foreign competition.

Barrier to
international trade



4. Legal and Content Laws

Local content laws require that products sold in a particular
country be at least partly made there.
Content :
Firms seeking to do business in a country must either invest
there directly or take on a domestic partner.

Profits from doing business in a foreign country stay there rather
than flowing to another nation.

Barrier to
international trade



5. Business Practice Laws

Business practice laws are laws or regulations governing
business practices in given countries.
Content :
• Cartels are associations of producers that control supply
and prices.
• Dumping is the practice of selling a product abroad for
less than the cost of production.

Barrier to
international trade



Content :

The rise of
international business thank you
International
business management

Barrier to
international trade


Business w03 Competing in a Global Market @1

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