Business Policy & StrategyChapter 13

Analyzing Global Business

Murdick, Moor, Babson & Tomlinson

Sixth Edition, 2000

Global Opportunities

Benefits of Global Investments

•Leaping over trade barriers •Transportation Efficiencies •Global Integration

Theories of International Business

The Theory of Comparative Advantage The Imperfect Markets Theory The Product Life Cycle

Approaches to Global Business

Exporting and Importing goods & services

Licensing and Franchising Piggybacking/ Strategic Alliances Joint Ventures (IJVs) Foreign Direct Investments and

Acquisitions Mergers

Barriers To Globalization

Tariffs

Quotas

Export, Import, and Investment Laws

Local Content Laws

Barriers To Globalization

Dumping and Price Control Laws

Bribery Laws

Labor Usage Laws

Foreign Exchange Restrictions

Barriers To Globalization

Government Monopolies

Enforcement of Laws

Government Purchasing Policies

Threat of Nationalization and Expropriation

Currency Issues

Changes in the value of the dollar affect:– Exports– Imports– International Investment

Currency Issues

Factors that influence exchange rates– Inflation Rates– Interest Rates– Income Levels– Government Controls– Expectations

Transaction Effect

Period AGerman Product

Euros 4,000Exchange Rate

$1=EU 4Effect: U.S. buyer

pays $1000

Period B

German Product

Euros 4,000

Exchange Rate

$1=EU 2

Effect: U.S. buyer pays $2000

Methods to Avoid Currency Risk

International Loans Forward Market Currency Options Natural Hedging

“Firms, Funds Pay to Hedge Vs. Argentina Devaluation”, www.reuters.com , October 4, 2001.

Global Strategy Global product or multi-domestic

product?– Global products are basically the same

product produced and sold all over the world. Examples include petrochemical refining, pharmaceutical drugs, and airplanes.

– Multidomestic products are tailored for each country market.

Going to Market

Define the concept, then do research, as international arena varies.

Marketing Mix– Product/service– Promotion– Price– Distribution

Examples

Nova - car in South America Gerber’s baby food in Africa Coca Cola in China Got milk?