Global Management การจัดการทั่วโลก

Global

Business

THIRD EDITION

Dr.Samai Hemman  DBA . In Global Management

                          ดร.สมัย เหมมั่น

PART ONE

Introduction to Global

Business Theory

And Practice

CHANGES IN THE WORLD ENVIRONMENT ARE BRINGING TOTALLY NEW OPPORTUNITIES AND THREATS TO FIRMS AND INDIVIDUALS.THE CHALLENGE IS TO COMPETE SUCCESSFULLY IN THE GLOBAL MARKETPLACE AS IT EXISTS TODAY AND DEVELOPS TOMORROW. PART ONE SETS THE STAGE AND THEN PROVIDES THEORETICAL BACKGROUND FOR GLOBAL TRADE AND INVESTMENT ACTIVITIES. KEY CLASSICAL CONCEPTS SUCH AS ABSOLUTE AND COMPARATIVE ADVANTAGE ARE EXPLAINED AND EXPANDED TO INCLUDE MODERN-DAY REALITIES.THE INTENT IS TO ENABLE THE READER TO UNDERSTAND BOTH THE THEORETICAL AND PRACTICAL RATIONALLE FOR GLOBAL BUSINESS ACTIVITIES.

CHAPTER 1

The Global Business

Imperative

Dr.Samai Hemman DBA.in Global Management

Leaning objectives

·       To understand the history and importance of global business.

·       To learn the definitions of domestic, global, and multinational businesses.

·       To recognize the growth of global linkages today.

·       To understand the U.S. position in world trade and the impact international business has on the country.

·       To appreciate the opportunity offered by global business.

Why STUDY GLOBAL BUSINESS?

                Welcome to the world of global business. You are about to begin the study of one of the most important aspects of business. Although the United States has always engaged in some degree of international business, most U.S. business firm have ignored global markets in favor of a growing U.S. market. However, since the 1950s and particularly over the past 20 years, the U.S. market has become saturated with foreign-made products. Accordingly, U.S. market has become saturated with crease their share of the domestic market and are also beginning to seek new markets abroad.

                Today’s business students must recognize that the legal system underlying a nation’s laws may vary from one country to another and can have significant implications upon the preparation of business contracts. Accounting practice, tax laws labor laws, and regulation banking and direct investment in the country may also vary from nation. In addition, business customs and practices change as one moves about the globe.

                It is understandable, then, that as more and more U.S. business firms “go global,” it will be necessary for their employees to understand how different doing business in the United States is compared with doing business almost anywhere else in the world. Many students think that just because many foreigners speak English, they understand American culture. Nothing could be further from the truth! Behavior and actions that seen perfectly acceptable in the United States can be an insult in a foreign country and ruin a business deal.

                Global business causes the flow of goods, services, culture, and ideas around the world as Global Learning Experience 1.1 indicates.

                Continuous changes in the economies of countries have made isolationism for them impossible. No nation can go it alone or exist without interacting with other nations, and a nation’s failure to become part of the global community and participate in global markets virtually ensures that it will suffer declining economic influence and a lower standard of living for its citizens. On the other hand, a country’s successful participation in global business and global markets should lead to better life and society for its citizens.

                Table 1.1 will give you some idea of the importance of global operations to many of the largest U.S. multinational companies.

                As you can see from Table 1.1, these 100 U.S. companies had combined sales in 1998 of $2,450,658 million, 39.1 percent of which was from foreign in world markets to stay competitive. There are many reasons for doing business internationally, including creating new markets and/or increasing profits; finding and acquiring new products and technology for use in the home market; protecting domestic markets; improving intracompany communications; finding new sources of supply; developing geographic diversification; and maximizing shareholder wealth.

                Even if a U.S. company cannot enter foreign markets for some reason, its officers and employees should be well schooled in global business. Because so many foreign will be the rare U.S. business that does not have foreign competition in United States.

                Understandably, foreign ownership of a portion of U.S. manufacturing assets could raise concerns as to whether those assets were being managed in the best interested of the U.S. economy. It also raises concerns for the job stability of individuals employed by foreign – owned businesses in the United States.

               

GLOBAL LEARNING EXPERIENCE 1.1

The World According to McDonald’s

McDonald’s is a classic example of a U.S. business organization that capitalized on the opportunities available through global expansion. The first McDonald’s opened in Des Plaines, llinois, in 1955. The Big Mac was introduced in 1968 and the rest is history. The company begins the new century with 25,341 restaurants, serving 40 million customers daily on six continents, in 117 countries-12,490 in the U.S.; 4,556 in Europe; 5,261 in the Asia/Pacific area; 1,554 in Latin America; and 1,478 in Canada and other locations.

                The only continent without a McDonald’s is the 5,400,000 square miles of Antarctica, Which is essentially uninhabited. The northernmost McDonald’s is on the Arctic Circle in Rovaniemi, Finland; the southernmost is in Invercargill, NewZealand. The largest McDonald’s is located in Beijing , China; it seats 700 Big Mac lovers at a time and is considered a gourmet restaurant. In Japan, about 10 percent of the nation’s beef goes into McDonald’s hamburgers.

                Internationally, McDonald’s restaurants offer standard U.S. menu items, but occasionally develop other items which appeal to the host country’s cultural preferences. For example:

Canada-cheese, vegetable, pepperoni, and deluxe pizza

Uruguay-McHuevo, a hamburger with a poached egg on top

Thailand-Samurai Porkburger, a sandwich marinated with

                Teriyaki sauce

Philippines-McSpaghetti, pasta in a sauce with frankfurter bits

NewZealand-Kiwi burger, a hamburger with a fried egg and

                A slice of beet

Japan-Chicken Tatsuta, a fried chicken sandwich spiced

                With soy sauce and ginger

German-frankfurters, beer, and a cold four-course meal \

Saudi Arabia and other Islamic countries-a halal menu

India-Maharaja Mac, the traditional Big Mac with lamb instead of beef patties, out of respect of the Hindu population

                McDonald’s is not a global business story-it is also a cultural phenomenon. As the company expands, it is spreading American culture and standards to distant lands and peoples. A case in point: with McDonald’s located in so many foreign countries one might consider the problem of translating Big Mac into all those foreign languages an overwhelming task. It’s really not. Folks around the world have learned to say Big Mac in English. Regardless of where you travel, just ask for a Big Mac and French fries and that’s what you’ll get. Who said learning to speak foreign languages was difficult?

                Notwithstanding the U.S. economic boom of the 1990s, stable long-term employment is of concern to many Americans today. Even in the best of economic times U.S. firms are constantly restructuring themselves to be more competitive in the global marketplace. In that process thousands of jobs are being eliminated in some sectors of the economy, while new jobs are being created in other sectors. Table 1.2 provides an interesting perspective of employment in U.S. manufacturing                      industries, where average wages have been traditionally higher than in most areas of the U.S. economy.

                As of 1997, the most recent year for which data is available, about 12.3 percent of the almost 18 million employees in U.S. manufacturing worked for companies that were U.S. affiliates of foreign corporations. Table 1.2 shows the relative degree of employment in those affiliates for selected industries: 34 percent in chemicals, 21.2 percent in nonmetallic mineral products, 20.2 percent in electrical equipment, and 15.5 percent in computer and electronic products, to name just a few.

                It is hoped the reader is beginning to grasp how important an understanding of the basic principles of global business already is and why it will continue to be important in the future. Global business is the future, and a study of it will help the reader prepare for that future.

Dr.Samai Hemman DBA. in Global Management

TABLE 1.1          Total and Foreign Revenues of the 100 Largest U.S. Multinational Companies, 1998 (in millions-ranked by foreign revenues)

		Revenue					Revenue
				Foreign					Foreign
Rank	Company	Foreign ($ mill)	Total ($ mil)	As% of Total	Rank	Company	Foreign ($ mill)	Total ($ mil)	As% of Total
1	Exxon	80,705	100,697	80.1	24	United Technologies	10,3072	25,7152	40.1
2	IBM	46,364	81,667	56.8	25	Caterpillar	10,107	20,977	48.2
3	Ford Motor	43,819	144,416	30.3	26	Delphi Automotive	9,022	28,479	31.7
4	General Motors	40,918	132,863	30.8	27	Chase Manhattan	9,010	32,379	27.8
5	Texaco	31,3134	39,4971	79.3	28	Sara Lee	8,162	20,011	40.8
6	General Electric	31,278	100,469	31.1	29	Minn Mining & Mfg	7,764	15,021	51.7
7	Mobil	28,0092	47,6782	58.7	30	Ingram Micro	7,641	22,034	34.7
8	Citigroup	26,276	76,431	34.4	31	McDonald’s	7,553	12,421	60.8
9	Hewlett-Packard	25,531	47,061	54.3	32	Morgan Stanley, DW	7,400E	31,131	23.8
10	Philip Morris Cos	19,814	57,813	34.3	33	Bristol-Myers Squibb	7,191	18,284	39.3
11	Chevron	19,008	40,216	47.3	34	JP Morgan & Co	7,093	18,425	38.5
12	Procter & Gamble	17,9283	37,154	48.3	35	Eastman Kodak	6,989	13,406	52.1
13	American Intl Group	17,4783	33,295	52.5	36	PepsiCo	6,967	22,348	31.2
14	Compaq Computer	17,188	31,169	55.1	37	Merck	6,699	26,898	24.9
15	Intel	14,610	26,273	55.6	38	Manpower	6,661	8,814	75.6
16	Motorola	13,990	29,398	47.6	39	Alcoa	6,611	15,340	43.1
17	Xerox	12,7671	22,8541	55.9	40	Enron	6,588	16,891	39
18	Wal-Mart Stores	12,247	137,634	8.9	41	Kimberly-Clark	6,506	22,478	28.9
19	Coca-Cola	11,7213	18,813	62.3	42	Dell Computer	6,483	8,972	72.3
20	El du Pont de Nemours	11,692	24,767	47.2	43	Goodyear Tire & Rubber	6,241	10,056	62.1
21	Halliburton	11,221	17,353	64.7	44	Enron	6,013	31,260	19.2
22	Johnson & Johnson	11,095	23,657	46.9	45	Kimberly-Clark	6,009	13,363	45
23	Dow Chemical	11,030	18,441	59.8	46	Dell Computer	5,8233	18,243	31.9
		Revenue					Revenue
				Foreign					Foreign
Rank	Company	Foreign ($ mill)	Total ($ mil)	As% of Total	Rank	Company	Foreign ($ mill)	Total ($ mil)	As% of Total
47	Goodyear Tire & Rubber	5,820	2,626	46.1	77	Nike	4,101	9,553	42.9
48	American Home Prods	5,738	13,463	42.6	78	Unisys	4,090	7,208	56.7
49	Texas Instruments	5,738	8,460	67.8	79	Texas Utilities	4,040	14,736	27.4
50	Lucent Technologies	5,731	30,147	19.0	80	Deere &Co	4,024	13,822	29.1
51	AMR	5,659	19,205	29.5	81	Walt Disney	3,834	22,976	16.7
52	Aflac	5,657	7,104	79.6	82	Dana	3,680	12,637	29.1
53	UAL	5,521	17,561	31.4	83	Monsanto	3,673	8,648	42.5
54	Conoco	5,403	16,995	31.8	84	NCR	3,659	6,505	56.2
55	American Express	5,400E	20,357	26.5	85	Oracle	3,573	7,144	50.0
56	Pfizer	5,339	13,544	39.4	86	Baxter International	3,454	6,599	52.3
57	American Express	5,325	16,109	33.1	87	Avon Products	3,439	5,213	66.0
58	Fluor	5,181	13,505	38.4	88	Paccar	3,428	7,578	45.2
59	Tech Data	5,170	11,529	44.8	89	Sears, Roebuck	3,411	41,322	8.3
60	Crown Cork & Seal	4,963	8,300	59.8	90	Eli Lilly	3,401	9,237	36.8
61	Bestfoods	4,6613	8,374	59.2	91	American Standard	3,398	6,654	51.1
62	Merrill Lynch	4,9614	17,5474	28.3	92	Textron	3,392	9,683	35.0
63	Whirlpool	4,842	10,323	46.9	93	Coca-Cola Enterprises	3,358	13,414	25.0
64	International Paper	4,731	19,541	24.2	94	GTE	3,334	25,473	13.1
65	Microsoft	4,730E	14,484	32.7	95	AlliedSignal	3,248	15,128	21.5
66	Lear	4,646	9,059	51.3	96	Safeway	3,243	24,484	13.2
67	Costco Cos	4,636	2,470	19.1	97	Honeywell	3,225	8,427	38.3
68	Abbott Laboratories	4,559	12,478	36.5	98	Seagate Technology	3,176	6,819	46.6
69	Johnson Controls	4,545	12,587	36.1	99	Toys “R” Us	2,996	11,170	26.8
70	Sun Microsystems	4,441	9,791	45.4	100	Arrow Electronics	2,9943	8,345	35.9
71	Emerson Electric	4,419	13,447	32.9		Totals
72	HJ Heinz	4,336	9,209	47.1
73	Walt Disney	4,327	10,214	42.4
74	Dana	4,260	6,893	61.8
75	Monsanto	4,228	11,886	35.6
76	Baker Hughes	4,116	6,312	65.2

Manufacturing Product Category	Thousand of Employees	Affiliates As a Percent Of  Total U.S.
Chemicals	307.4	34.0
Nonmetallic mineral products	107.9	21.2
Electrical equipment	120.3	20.2
Beverages and tobacco	31.2	17.6
Petroleum and coal products	38.3	16.9
Computer and electronic products	261.4	15.5
Primary metals	92.5	15.2
Machinery	207.9	14.5
Plastics and rubber products	143.9	14.0
Transportation equipment	225.2	11.9
paper	57.5	10.0
Food	139.0	9.3
Textile mills	33.0	8.2
Printing and related activities	60.0	7.1
Fabricated metal products	119.4	6.7
Textile product mills	14.0	6.3
Apparel	35.3	4.7
Furniture and related products	16.9	2.8
Leather and allied products	2.3	2.6
Wood products	11.6	2.0
Miscellaneous-all other	81.4	11.1
Total manufacturing	2,106.5	12.3

Affiliates are U.S. companies owned 10% or more by foreign corporations.

Source : U.S. Department of Commerce, Survey of Current Business (Washington, DC): U.S. Government Printing Office, July 199.

Table 8, p. 32. www.bea.doc.gov

ACTIVITIES THAT DEEFINE GLOBAL BUSINESS

One might wonder exactly what business activities are included in the area of global business. Most people initially tend to think of global business as the exporting and importing of merchandise. However, one soon learns that global business may be divided into four much broader categories : goods, services, portfolio capital, and direct investment.

                Goods consist of tangible products such as televisions, VCRs, automobiles, machinery, chemicals, and others.

                When we speak of services, we mean the sale (export) and purchase (import) of all types of services including accounting, advertising, banking, communications, computer programming, distribution rights for motion pictures and TV shows, education a partial list of what is included in the services category and is intended to give you an idea of the vast scope of the global trade in service.

                Portfolio capital is a term used to define flows of capital (money) resulting from the purchase or sale of various types of financial investments. Portfolio capital includes:

1.             Marketable Securities :

·       Bonds and commercial paper

·       Common stock (in amounts that do not constitute control of the business organization)

2.             Nonmarketable Investment :

·       Bank accounts (for example, an American citizen who has a Swiss bank

Direct investment refers to the ownership (or control) of a company in a foreign land. In place of total (100 percent) ownership, control is said to exist when U.S. shareholders of any type own more than 50 percent of the combined voting power of the foreign company. A U. S. shareholder is defined as a U.S. person owning 10 percent per more of the voting power of a foreign company sufficient to exercise some degree of control over the company and considers it to be a direct investment.

The Export of Culture and Ideas

Another aspect of global business activity relates to the exportation (and importation) of culture and ideas. There is probably no way anyone can keep figures on how people around the globe interact with each other, but it is nevertheless a significant and important aspect of global activity.

Exporting and Importing Culture

Over the past few decades, the U.S. culture and “way of life” have been exported extensively about the globe. In a similar manner, the United States has imported various aspects of\ foreign cultures. This has been the result of merchandise and service trade activities undertaken for business reasons. Intended, or unintended, these activities have had the result of exposing citizens of foreign lands to U.S. culture and the American way of life, and vice versa.

                It is indeed difficult to go to a foreign land and not find a McDonald’s fast-food restaurant, be it City Hall Park in Toronto, Canada; on the Champs Elysées in Paris ; in Moscow, Russia; Beijing, China; or Tokyo, Japan. Levi Strauss jeans are “in” clothing around the world, while U.S. television and motion picture industry film and video presentations have been well received and have exposed hundreds of millions of foreign citizens to the American way of life and U.S. culture. A classic example is given in Global Learning Experience 1.2. “Baywatch Hawaii” is the most watched television program in the world.

                In the United States, a growing portion of the population with Mexican origins has led to an appreciation for Mexican-style food products and cooking techniques. Indicative of how the United States has adopted Tex-Mex is the Taco Bell restaurant chain, with over 5,500 locations in the Unites States, serving flavorful tacos, fajitas, and other Mexican inspired treats.

Exporting Ideas

As businesses and people around the glove travel and interact with each other, there is an exchange of ideas with respect to fundamental institutions that have an impact on there quality of life. Two examples are the ideas of a “free market economy” and the concept of “democracy.”

                It was not too many years ago that many foreign nations were operating under a communist form of government. Americans were thought to be “capitalistic warmongers” and referred to as “ugly Americans.” Over time as companies began to do business on a global scale, people traveled internationally, and with student exchange and other similar programs, people from nondemocratic countries began to understand what a free market economy was all about : that the thing called democracy (with all its imperfections) had some advantages after all, and that those “ugly Americans” were really nice people.

GLOBAL LEARNING EXPERIENCE 1.2

“Baywatch Hawaii” – The Most Watched TV Show on Earth

Amidst the exotic beauty and splendor of one of the earth’s most challenging and treacherous coastal terrains Hawaii-a small band of the world’s greatest lifeguards faces tremendous professional and personal obstacles. The team must be ready to respond to any call, which leads to dramatic rescues throughout the islands. From Kauai’s rugged mountainous terrain, to Maui’s monstrous waves and the dangers of active volcanos, these lifesaving heros battle the power and fury nature. Their days are packed with action while their off-duty hours are filled with matters of love, relationships, and compelling human drama. Through it all the world is watching. On every continent of the globe, with the exception of Antarctica, an estimated one billion TV viewers in 140 countries follow the challenging adventures of the “Bay-watch Hawaii” team.

                Translated into 33 languages, the show has become a national pastime in North, Central, and South America ; Europe; Africa : Asia ; and Oceania. Amazingly, “Baywatch Hawaii” crosses all cultural barriers, airing in Islamic countries like Saudi Arabia, Iran, and Iraq and in the People’s Republic of China without negative repercussions.

                As viewers around the globe follow the exciting episodes of the show. They are also absorbing U.S. culture, at least the Hawaiian version of it. This is the part of the United States where everyone is athletic, tanned, and attractive and enjoys all the good things of life.

                ANSWER            Mount Everest, in the Himalayas Range between Tibet and Nepal, rises to 29, 108 feet or about 5.5 miles high. The second highest mountain is K-2 in the Karakoram Range of nearby Pakistan. The Himalayas and Karakoram Ranges hold almost all of the tallest mountains in the world. The volcanic Mauna Kea in Hawaii measures 33,746 feet high, taller than Mount Everest, but only 13,680 feet is visible above the surface of the ocean.

                Regarding democracy, in a prophetic statement Sir Winston Churchill once noted, “No on pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.”

                Once the ideas of free markets and democracy became understood around the globe, Soviet-Dominated communist portion of the world disintegrated and began the task of embracing free market and democratic concepts.

A Definition of Global Business

Having just identified some of the activities associated with global business, we now define the term global business. To do so, we will consider three different type of companies : domestic, global, and multinational A domestic company is one that operates  within its own national borders. A global company is a business organization that operates beyond its national border; that is, it operates in more than one country. The use of the term global implies a company with a global orientation-one that recognizes that its activities may influence and be influenced by situations around the world.          It does not mean that the company operates in every market or in every country of the world. It does not imply that the company sells standard products in world markets; rather, the definition suggests that to be successful the company must think globally and act locally.

                A multinational company (MNC), generally speaking, refers to a company that operates internationally, but with important differences. A multinational company not only operates in many countries but also conducts itself in such a manner that it owes allegiance to no country, views itself as a citizen of the world, and seek to earn profits on a global basis. (Note : at this point, it is important to understand that there are many definitions enterprise (MNE), and worldwide company (WWC) are essentially interchangeable.)

                Multinational companies have advantages not available to the typical company doing business on an international basis, which will be discussed in detail later in the text. Until then, it is sufficient to summarize a few of them.

                1. Advanced technology-Generally speaking, MNCs have access to advanced levels of technology that makes it possible for them to be extremely competitive when entering new foreign markets.

                2. Product development-MNCs can capitalize on the development of products levels of technology that makes it possible for them to be extremely competitive when entering new foreign markets.

                3. Financial strength-Because of their sheer size (many MNCs are financially stronger than for the governments of some of the countries in which they operate?, MNCs are able to obtain capital easier, and at lower cost, than smaller, local, foreign competitors.

                4. Management-Being large organizations. MNCs have depth in their management ranks. They also can afford to employ individuals with specialized business skills to enhance company profits and/or effectiveness.

                5. Reduced political risk-Doing business in a foreign land carries some degree of risk due to changes in a country’s political system. Because MNCs tend to do business in many countries, the political risk is spread over many locations, thus lessening the relative degree of risk in any one location.

GLOBAL LINKAGES TODAY

Global business has forged a network of linkages around the world that binds us all countries, institutions, and individuals-much closer than ever than ever before. These linkages tie together trade, financial markets, technology, and living standards in an unprecedented way. They were first widely recognized during the worldwide oil shock of the 1970s and have been apparent since then. A freeze in Brazil and its effect on coffee production are felt around the world. The sudden decline in the value of the Mexican peso affected financial markets in all emerging economies and had an impact in Poland, Hungary, and the Czech Republic. Iraq’s invasion of Kuwait and the resulting Persian Gulf War affected oil prices, stock markets, trade, and travel flows in all corners of the earth.

                International business has also brought a global reorientation in production strategies. Only a few decades ago, for example, it would have been thought impossible to gies. Only a few decades ago, for example, it would have been thought impossible to produce parts for a car in more than one country, assemble it in another, and sell it in yet other countries around the world. Yet such global strategies, couples with production and distribution sharing, are common today. Firms are also linked to each other through global supply agreements and joint undertakings in research and development. The Ford Motor Co. Focus program as discussed in Global Learning Experience 1.3, is one example of the scope and complexity involved in worldwide supply, production, and marketing.

                Firms and governments are recognizing production’s worldwide effects on the environment common to all. For example, high acid production in one area may cause acid rain in another. Pollution in one country may result in water contamination in another. These concerns result in global action by some firms and heightened awareness by governments and consumers.

                It is not just the production of products that has become global. Increasingly, service firms are part of the global scene. Banks and their financial services, insurance companies, software firms, and universities are participating to a growing degree in the global marketplace. In the past, most of the global business conducted by U.S. companies was done by the largest firms. Now, aided by the continuing weakness of the U.S. dollar, small and midsize U.S. companies are beginning to see the profit potential in foreign markets.

                The level of international investment is at an unprecedented high. Multinational corporations making these investments have become corporate giants which, in terms of annual sales, can be greater than the gross national product of some nations. If one were to rank the large multinational companies, using annual sales, together with the countries of the world, using gross national product, it would be evident that General

ANSWER            Asia, which measures 17 million square miles, nearly one – third of the Earth’s land surface, with a combined population of about 2.5 billion people. North America is the Mexico, Greenland, and the Caribbean Islands.

Motors, Ford. And IBM, to mention only a few companies, are probably larger than half the nations of the world.

                The United States, after having been a net creditor to the world for many decades, has been a world debtor since 1985. This means that the United States owes more to foreign institutions and individuals than it owes to U.S. entities. The shifts in financial flows have had major effects on international direct investment into plants as well. As

GLOBAL LEARNING EXPERIENCE 1.3

The Ford Focus

The introduction of the Ford Focus is a good example of the use of the global integration of suppliers and corporate resources (employees and equipment) to design and produce automobiles for global markets. The Focus replaces the company’s highly successful Escort, first introduced in Europe over 30 year 30 years and 20 million satisfied customers ago.

                The Focus is the first Ford product to have been totally conceived and developed under the Ford 2000 global development strategy. The Focus will be manufactured at Saarlouis, Germany; Valecia, Spain; Hermisillo, Mexico; and Wayne, Michigan. The automobile is to be marketed in excess of 100 countries worldwide (including as many as 19 in West Europe, 25 in East Europe and the former Soviet Union, three in North America, and 14 in Central and South America). Worldwide production volume will exceed one million vehicles per year.

                A key strategy in designing the Focus for global markets was the development of a global platform (85 percent of the car under the exterior sheet metal) rather than a global product. This strategy allows the sheet metal exterior of the car to be modified, thereby extending choice and present customers around the world with the exciting style alternatives that are right for that particular market and in line with regional tastes and market needs. The Focus will be available in three body styles, and with two different engines with manual or automatic transmissions. The result is that the Focus can be configured to appeal to the target customers of each market.

                Figure 1.1 gives an indication of the complexity involed in the integration of sources of supply by country and major component, manufacturing plants, and markets.

The Ford Focus is being assembled in four countries, but is marketed in over 100 countries. Because the Focus is available in several body styles and powertrain alternatives. It can be configured to reflect the needs of consumers in individual markets.

Component	Sources of Supply
Design	Germany, Great Britain, and United States
Engineering	Germany, Great Britain, and United States
Air bags	Germany, Spain, and United States
Air conditioning, Heat	France, Mexico, and United States
Brake systems	Germany, Great Britain, and United States
Bumpers	Germany and United States
Carpet	France and United States
Engines	Great Britain, Mexico, and United States
Electrical	Honduras, Hungary, Mexico, Philippines, Poland, Portugal , and Spain
Electronics	Germany and United States
Exhaust systems	Germany and United States
Fuel handling	Germany and United States
Glass	Germany ,Mexico, Spain, and United States
Instrument panel	Germany ,Mexico, Spain, and United States
Paint	Germany ,Mexico, Spain, and United States
Radiators	Germany ,Mexico, Spain, and United States
Radios	Brazil
Seats	Germany, Mexico, Spain, and United States
Suspension systems	Germany and United States
Steering systems	Germany and United States
Stamping	Germany, Spain, and United States
Tires	France, Germany, Mexico, and United States
Transmissions	Brazil, Germany, and United States
Trim	Germany, Spain, and United States
Weatherstrips	Germany, Spain, and United States
Wheels	Italy and United States
Assembly Plants
Saarlouis, Germany; Hermisillo, Mexicco; Valencis, Spain; Wayne, Michigan.
Markets
More than 100 worldwide
SOURCE : Ford Motor Co.

Table 1.2 shows, the U.S. affiliates of foreign companies employ 12.3 percent of U.S. manufacturing employees. Many U.S. office buildings are owned by foreign landlords. The opening of plant of plants abroad and in the United States increasingly takes the place of trade. All these developments make us more and more dependent on one another.

                This interdependence, however, is not stable. On virtually a daily basis, realignments take place on both micro and macro levels that make past orientations at least partially obsolets. For its first 200 years, the United States looked to Europe for markets and sources of supply. Despite the maintenance of this orientation by many individuals, firms, and policymakers, the reality of trade relationships is gradually changing.

This, the fourth largest continent in the world with and area of 6,883,000 square miles, is home to 302 million people. (Hint : virtually the whole continent lies east of Savannah, Georgia.)

South America.

                At the same time, entirely new areas for international business activities have opened up. While the East-West juxtaposition had for more than 40 years effectively separated the Western economics from the centrally planned ones, the lifting of the Iron Curtain presented a new array of trading and investment partners. As a result, trade and investment flows may again be realigned in different directions. Already, new products and services are being exchanged, and the volume is likely to increase.

                Concurrently, an increasing regionalization is taking place around the world, resulting in the split-up of country in some areas of the world and the development of country and trading blocs in others. Over time, firms may find that the free flow of goods, services, and capital encounters more impediments as regions become more inward-looking

                Not only is the environment changing, but the pace of change is acceleration. “A boy who saw the Wright brothers fly for a few seconds at Kitty Hawk in 1903 could have watched the Apollo II land on the moon in 1969. The first electronic computer was built in 1946; today, the world rushes from the mechanical into the electronic age. The double helix was fires unveiled in 1953; today biotechnology threatens to remake makind.”

                These changes and the speed with which they come about significantly countries, corporations, and individuals. During the past few decades, the United States was seen as the hub of world trade. While the United States is still the locomotive that drives market flows, its participation in world trade measured as a portion of world market share in exports has declined. As a result, from a global perspective, the United States has lost some of its importance as a supplier to the world but has gained importance as a market for the world.

                THE CURRNT SU. INTERNATIONAL TRADE POSISION

Table 1.3 indicates the dollar value of U.S. exports and imports and import of good and services for 1970 through 1999 and an estimate for the year 2000. As shown in the table, U.S. exports of goods and services have increased from $56.7 billion in 1970 to more than $958.5 billion in 1999. Imports of goods and services, on the other hand, have increased more rapidly, rising from $54.4 billion in 1970 to $1,229.8 billion in 1999. The result is that the United States, which had realized a trade surplus in the early to mid-1970s, is now experiencing a significant trade deficit in goods, $347.1 billion in 1999, partially offset by a $75.8 billion surplus in services – a net deficit of $336.1 billion.

                Table 1.3 also provides an estimate of the U.S. Trade situation for the year 200. As the United States enters the new century, it is estimated that the nation’s trade deficit will increase even further. For the year exports of goods and services are projected to rise to $1,008.7 billion. However, it is anticipated that imports of goods and services will increase to levels above those of 1999 and reach $1,344.8 billion. Accordingly, it is expected that the United States will realize a record trade deficit of $336.1 billion.

                The merchandise trade deficit declined from a temporary high point of $159.6 billion in 1987 (not shown) to approximately one-half, $74.1 billion, in 1991. Since 1991, the merchandise trade deficit grew significantly to $347.1 billion in 1999-an increase of $273.0 billion in just 8 years.

TABLE 1.3 U.S. International Goods and Services Transactions, 1970, 1980, 1990, and 1995-2000(in billions of dollars)

Transaction	1970	1980	1990	1995	1996	1997	1998	1999	2000 est.
Exports
Goods	42.5	224.4	389.3	575.8	612.1	679.7	670.2	683.0	725.1
Services	14.2	47.6	146.8	217.6	237.7	258.8	263.7	275.5	283.6
Total	56.7	271.9	536.1	793.4	849.8	938.5	933.9	958.5	1008.7
Imports
Goods	39.9	249.8	498.3	749.6	803.3	876.4	917.2	1030.1	1142.0
Services	14.5	41.5	117.7	141.4	150.8	166.9	181.0	199.7	202.8
Total	54.4	291.3	616.0	891.0	954.1	1043.3	1098.2	1229.8	1344.8
Trade surplus/
(deficit)
Goods	2.6	-25.5	-109.0	-173.8	-191.2	-196.7	-247.0	-347.1	-416.9
Services	-0.3	6.1	29.1	76.2	89.9	91-9	82.0	75.8	80.8
Total	2.3	-19.4	-79.9	-97.6	-104.3	-104.8	-164.3	-271.3	-336.1

Sources : u.s. Department of Commerce, Survey of Current Business (Washington, DC:U.S. Government Printing Office, July 1999), pp.68, 69; 1599 Preliminary data, U.S.

Department of Commerce Report FT-900 , February 2000 . Estimate of 2000 data provided by authors.

                Essentially, the data in Table 1.3 indicate that the United States is buying more from foreigners than it is selling to them. The result is that the United Stated has experienced an overall trade deficit every year since 1976-a total of 22 years of consecutive trade deficits – reaching a level of $271.3 billions in 1999. The implications of this situation for the future of the Unites States will be covered in detail in Chapter 4.

                An occasional merchandise trade deficits of the large amounts shown in Table 1.3 can become a major problem for the United Stated States for two reasons. First, large trade deficits add to the U.S. international debt, which must eventually be repaid. Second, and of more immediate significance, is the loss of potential jobs for U.S. citizens. It is estimated that $1 billion in exports creates approximately 15,500 jobs. Thus, an increase estimated that $1 billion in exports creates approximately 15,500 jobs. Thus, an increase in exports is not only good for the United States in the long run, but would help to reduce unemployment as well. U.S. exports are increasing, but not fast enough. In a study of 1997 export and import data, the U.S. Department of Commerce concluded that 2,618 U.S. multinational companies were associated with 64 percent of U.S. exports and 40 percent of imports. The large percentage of exports by a relatively small number of firms stands in sharp contrast to the tens of thousands of U.S. companies that are capable of entering export markets, but are not doing so.³ As noted in Global Learning Experience 1.4, the Avon Company has found that there are profits to be made overseas in the most unlikely business ventures.

                The authors take the position that the realities of economic life will force most of these export-capable firms to “go global”; they will either “export or die.” This is the basis for our belief that global business is the future and that students who prepare for global business careers now will be well rewarded in the years ahead.

                Another way to look at how competitive the United States is in the global export market is to compare the dollar value of exports and imports per capita (for each person in a country) with those of other countries. Figure 1.2 indicates the 1998 per capita exports and imports for the United States and selected countries. The data make the point clear that the value of U.S. exports for each person in the country is lower than most of the other countries shown. While the United States exports $2,551 per capita,

GLOBAL LEARNING EXPERIENCE 1.4

When the Avon Lady Calls Globally

Avon began in 1886 as a regional U.S. company. Today it is a global enterprise serving the cosmetic and beauty needs of consumers in 135 countries. When many companies are just beginning to discover the virtues of going global, Avon can speak from experience about the inherent benefits of being a global enterprise.

                A key to Avon’s global success is the strategy of using and building on the remarkable strength of direct selling to customers in 135 countries. Throughout the world, there are nearly 2,800,000 Avon representatives ; 465,000 in the Unites States alone.

                In 1998, Avon representatives around the world generated over 650 million customer transactions, earning nearly $2 billion for themselves in the process. In some developing countries, many Avon representatives are the principle source of family support and often earn well above the median income level.

                Supporting the global direct selling effort is the Avon “store,” the sales brochure that representatives bring to customers for each selling campaign. Avon prints more than 600 million brochures annually in more than a dozen different languages. The company has also opened 39 retail beauty centers in the United States at retail mall locations, and offers women the opportunity to purchase its products on the Internet. The website is visited by 300.000 individuals each month.

                Notably, Avon is an outstanding example of the capabilities of women in corporate America-33 percent of its executives and 83 percent of its executives and 83 percent of its management personnel are women.

                Avon’s strategy of aggressive global expansion anticipates increased growth in emerging markets like the Balkans, Belarus, Bulgaria, Kazakhstan, South Korea, Uzbekistan, and Vietnam.

                Eventually every woman in the world will probably be called on by an Avon representative, and someday in the future, should humans inhabit distant planets, don’t be surprised if the cellular telephone in outer space rings and the voice says, “Avon calling.”

               
                the Germans export $6,236, the Canadians $6,903, and the Netherland Dutch $12,357, In terms of percentages, the United States exports only 37 percent of what Canada does on a per capita basis and 20 percent of what the Netherlands does. These data do not paint a pretty picture of U.S. export activity, at least at the moment. If and when U.S. businesses aggressively embrace the “export or die” philosophy, they can take advantage of the tremendous amount of potential business that is possible, as shown by the data in Figure 1.2. For example, based on the data presented so far in this chapter, if proximately 4,000,000 new jobs would be created in the United States – more than enough to solve this country’s unemployment problems.

FIGURE 1.2        Exports and Imports Per Capita for Selected Countries, 1998

The U.S. Merchandise Trade Deficit

To further understand the nature of the U.S. merchandise trade deficit, the reader is directed to Table 1.4 As analysis of 1999 trade data reveals, most of the U.S. merchandise trade deficit originates in countries commonly referred to as the Pacific Rim.

                The total 1999 U.S. trade deficit with the entire world was $347.1 billion. Table 1.4 shows that the U.S. merchandise trade deficit with the Pacific Rim countries was $249.4 billion, or 72 percent of the total. Over 41 percent of the total deficit is the result of trade with Japan and China. Another area of interest is trade with Canada and Mexico; combined they accounted for approximately 15.8 percent of the U.S. merchandise trade deficit. The United States had 1999 trade deficits with other countries, but those deficits were smaller than those with Japan and China, and Canada and Mexico.

                In 1997, a series of financial crises struck a number of the Asian economies (covered in some detail in Chapter 5, Foreign Exchange). Almost overnight the currencies of the countries involved in the “Asian meltdown” dramatically declined in value against the U.S. dollar, with the result that Asian-made goods became real bargains. As noted in Global Learning Experience 1.5, U.S. consumers went on an Asian buying spree and caused a significant increase in imports and trade deficit with the Pacific Rim countries.

Trade with Japan and China

Figure 1.3 presents the record of U.S. merchandise trade with Japan and China for 1986-1999. The deficit with Japan, which was $42.6 billion in 1990, increased to a record level of $73.9 billion in 1999. During the 1980s and 1990s, the Japanese spread financial influence, investment, technology, and manufacturing know-how to many of its Pacific Rim neighbors. In effect, the United States is not dealing with one Japan, but a number of Japans of various sizes, Indeed the trade data hide the fact that many Japanese companies have invested in manufacturing facilities in other Pacific Rim countries that export to the United States. However, those exports are not identified as Japanese

Table 1.4 Analysis of 1999 U.S. Merchandise Trade Surplus/(Deficit)(in millions of dollars)

	U.S. Exports	U.S. Imports	Surplus/ (Deficit)	Percent of U.S. Deficit
Pacific Rim Countries
Japan	$ 57,483.5	$ 131,403.6	$ (73,920.1)	21.3%
China	13,117.7	81.785.9	(68,668.2)	19.8
Subtotal	70,601.2	123,189.5	$(142,588.3)	41.1%
Other Pacific Rim
Australia	$ 11,810.7	$ 5,290.4	$ (6,520.3)	-1.9%
Brunei	66.7	389.0	(322.3)	0.1
Hong Kong	12,647.1	10,531.4	(2,115.7)	0.6
Indonesia	1,938.9	9,514.0	(7,575.1)	2.2
Korea	22,954.0	31,262.0	(8,308.0)	2.4
Macao	41.8	1,124.4	(1,082.6)	0.3
Malaysia	9,079.0	21,428.6	(12,349.6)	3.6
New Zealand	1,933.9	1,749.0	(184.6)	-0.1
Papua New Guinea	37.1	144.5	(107.4)	0.0
Philippines	7,226.2	12,379.7	(5,153.5)	1.5
Singapore	16,246.4	18,187.7	(1,941.3)	0.6
Taiwan	19,121.1	35,198.5	(16,077.4)	4.6
Thailand	4,983.5	14,323.8	(9,340.3)	2.7
Subtotal	$ 108,086.4	$ 161,523.0	($ 53,439.6)	15.4%
Total Pacific Rim	$ 178,687.6	$ 636,235.0	($ 249,461.5)	71.9%
NAFTA Countries
Canada	166288.6	198,324.0	(32,095.4)	9.2%
Mexico	86865.8	109,706.5	(22,840.7)	6.6%
Total NAFTA Countries	253094.4	308,030.5	(54,936.1)	71.9%
Other Major Countries
Germany	$ 26,788.9	$ 56,093.5	($ 28,304.6)	8.2%
Italy	10,094.0	22,438.0	(12,344.0)	3.6
France	18,838.5	25,909.6	(7,071.1)	2.0
India	3,707.4	9,083.3	(5,375.9)	1.5
Venezuela	5,372.9	11,269.2	(5,896.3)	1.7
Ireland	6,374.7	11,002.4	(4,627.7)	1.3
Russia	1,844.7	5,805.0	(3,960.3)	1.1
Nigeria	628.3	4,361.1	(3,732.8)	1.1
Sweden	4,238.6	8,110.7	(3,872.1)	1.1
	U.S. Exports	U.S. Imports	Surplus/ (Deficit)	Percent of U.S. Deficit
Iraq	9.5	4,193.2	(4,183.7)	1.2
Colombia	3,532.0	6,275.8	(2,743.8)	0.8
Norway	1,439.7	4,051.3	(2,611.6)	0.8
Subtotal	$ 82,869.2	$ 167,593.1	($ 84,723.9)	24.4%
All Other Countries	$ 60,283..4	$ 18,292.9	($ 41,990.5)	-12.1%
Total United States	$ 683,021.0	$ 1,030,152.0	($ 347,131.0)	100.0%

SOURCE : U.S. Department of Commerce, Report FT-900, December 1999.

GLOBAL LEARNING EXPERIENCE 1.5

U.S. Consumer Spending Supports Recovery

of Foreign Economics

As evidenced by the ever mounting tide of imported goods arriving at U.S. retail stores, it is becoming clear that American consumer¢ purchases are an important reason for the recovery of many foreign economies suffering from the depressing effects of the Asian financial crisis.

                When the Asian financial crisis began in mid-1997, the value of many Asian currencies plummeted along with the prices of their goods. American consumers recognize shopping values when they see them and set in motion the shop’till you drop mentality that, along with low levels of inflation, has been a major reason for the U.S. economic boom of the 1990s. In the process they also provided financial life support for countries hard hit by depressed currency values.

                As the global economy begins in the new millennium, the question is whether the spending boom by U.S. consumers will continue. Signs of weakness are now starting to appear on the American economic scene. In the past year oil prices have risen significantly. With unemployment at a 30-year low, the shortage of workers is putting upward pressure on wages. The Federal Reserve Board’s response has increased interest rates three times in 1999, once in early 2000, and left the door open for additional increases. All these events suggest increases in the prices of consumer goods.

                If the U.S. consumer reacts unfavorably to this scenario and reduces spending, it could have a serious negative impact on foreign economies that are depending on exports to the United States for their survival.

Exports, and the result is that the total amount of exports to the United States that is under Japanese control is probably much greater than the trade data indicate.

                Of equal importance is U.S. trade with the Peoples Republic of China. In 1986, the United States had a trade deficit of $1.6 billion with China that grew dramatic ally to the 1999 level of $68.7 billion . As  illustrated in Figure 1.3, the rate of growth in the deficit with China suggests that it will soon be greater than that of Japan.

                China, with its large supply of low-cost labor and improving technologic base, is becoming increasingly competitive in global markets and, as noted in Global Learning Experience 1.6, is showing its newly found global financial and trade power.

Trade with Canada and Mexico

Figure 1.4 illustrates the magnitude of U.S. merchandise trade deficits with Canada and Mexico from 1985 through 1999. In the evaluation of these data, the reader is asked to consider that NAFTA (the North American Free Trade Agreement, among the United States, Canada and Mexico) went into effect on January 1, 1994.

                U.S. merchandise trade with Canada, during the period, resulted in a U.S. trade deficit in each of the 15 years – increasing from $14.8 billion in 1985 to a record high of $32.1 billion in 1999.

                Merchandise trade with Mexico during the same period followed a pattern similar to that of Canada, but was much more dramatic. In 1985, the United States realized a merchandise trade deficit with Mexico of $5.7 billion. Following a decline to trade surpluses in the 1991-1994 period, the deficit surged to $22.8 billion in just five years.

                The combined deficits with Canada and Mexico in 1999 amounted to $54.9 billion, or 15.8 percent of the U.S. merchandise trade deficit.

Dr.Samai Hemman DBA. in Global Management

Figure 1.3 The Growth of the U.S. Merchandise Trade Deficit with Japan and China, 1986-1999 (in billions of dollars)

Figure 1.4 The Growth of the U.S. Merchandise Trade Deficit with Canada and Mexico, 1985-1999 (in billions of dollars)

GLOBAL LEARNING EXPERIENCE 1.6

The World’s Tallest Building-in Shanghai ?

Americans, and particularly New Yorkers, have long regarded New York City as the only appropriate place to erect the world’s tallest buildings. The Empire State Building and the Twin Towers of the World Trade Center symbolize New York as a place of power and influence; a place where big deals are put together by the financial wizards of Wall Street and the most powerful people in the United States. This demanded,  not just tall buildings, but the tallest in the world, consistent with the city’s image.

                Now the centers of power are moving to the Pacific Rim and with them the symbols of that power-tall buildings. The new tall buildings in Asia are reminders that the economies of the Pacific Rim are more robust and growing faster than any other area of the globe. They signal the rise of dynamic forces that are propelling the Pacific Rim economies to the center stage of global business. Construction of the tallest skyscraper in the world, the Shanghai World Financial Center, has just begun and will be completed in 2004.

                The 10 tallest buildings in the world are listed in the following table.

The Shanghai World Financial Center. The 95-story tower is under construction and scheduled for completion in 2004.

Dr. Samai Hemman DBA. in Global Management

Rank	Building	City	Year Completed	Stories	Height (in feet)
1.	Shanghai World Financial Tower	Shanghai, China	2004	95	1,509
2.	Petronas Tower 1	Kuala Lumpur, Malaysia	1996	88	1,483
3.	Petronas Tower 2	Kuala Lumpur, Malaysia	1996	88	1,483
4.	Sears Tower	Chicago, USA	1974	110	1,450
5.	Jin Mao Building	Shanghai, USA	1998	88	1,379
6.	World Trade Center, One	New York, USA	1972	110	1,368
7.	World Trade Center, Two	New York, USA	1973	110	1,362
8.	Empire State Building	New York, USA	1931	102	1,250
9.	Central Plaza	Hong Kong, China	1992	78	1,227
10.	Bank of China Tower	Hong Kong, China	1989	70	1,209

TRADING PARTNERS

In this final section of Chapter 1, we briefly consider those countries with which the United States does most of its international business. The large volume of business that  the United States does with its trading partners can have important implications for a variety of U.S. commercial and foreign policies relative to those countries.

                Table 1.5 indicates the total volume of merchandise trade between the United States and its major trading partners during 1999. The data at the very top of Table 1.5 are the basis for some of the most important U.S. initiatives in commerce and diplomacy. Of the three top U.S. trading partners, Canada and Mexico are the United States’ neighbors to the north and south. The large dollar value of business among the United States, Canada, and Mexico is the basis for the North American Free Trade Agreement. This agreement has been accepted by the North American Free Trade Agreement. This agreement has been accepted by the three governments and it is thought that it will have a for-reaching impact on employment in the United States.

                Another area of policy concern for the United States is that with China. As previously noted, the U.S. China benefits from a growing volume of trade with the United States. In exchange for access to U.S. markets, American diplomats are putting pressure on China to correct what are believed to violations of human rights by the Chinese government; for example, political suppression and slave labor. These matters are of concern to democratic governments around the world and are reported widely in the press and on radio.

TABLE 1.5 Major U.S. Trading Partners Based on 1999 Merchandise Exports and Imports (in millions of dollars)

               

Country	Rank	U.S. Exports	U.S. Imports	Total Merchandise
Canada	1	166,228.6	198,324.0	364,552.6
Mexico	2	86,865.8	109,706.5	196,572.3
Japan	3	57,483.5	131,403.6	188,887.1
China	4	13,177.7	81,785.9	94,963.6
Germany	5	26,788.9	55,093.5	81,882.4
United Kingdom	6	38,337.8	39,109.8	77,447.6
Taiwan	7	19,121.1	35,198.5	54,319.6
Korea	8	22,954.0	31,262.0	54,216.0
France	9	18,838.5	25,909.6	44,748.1
Singapore	10	16,246.4	18,187.7	34,434.1
Malaysia	11	9,079.0	21,428.6	30,507.6
Netherlands	12	19,412.1	8,472.7	27,884.8
Brazil	13	13,249.0	11,313.8	24,562.8
Hong Kong	14	12,647.1	10,531.4	23,178.5
Belgium	15	12,384.9	9,208.3	21,593.2
Philippines	16	7,226.2	12,379.7	19,605.9
Thailand	17	4,983.5	14,323.8	19,307.3
Switzerland	18	8,364.7	9,596.3	17,961.0
Israel	19	7,694.5	9,869.8	17,564.3
Ireland	20	6\,74.7	11,002.4	17,377.1
Australia	21	11,810.7	5,290.4	17,101.1
Venezuela	22	5,372.9	11,269.2	16,642.1
Saudi Arabia	23	7,901.7	8,237.3	16,139.0
India	24	3,707.4	9,083.3	12,790.7
Indonesia	25	1,938.9	9,514.0	11,452.9

SOURCE : U.S. Department of Commerce, Report FT-900, December 1999.

                With respect to Japan, scarcely a day goes by without some mention in newspapers or on radio of U.S. efforts aimed at getting the Japanese  to open their markets to American-made goods.

STRUCTURE OF THE BOOK

This book was written to help students become more knowledgeable and thus better prepared for careers in a globally oriented business world. It is also the author’s intention that the text serve as a foundation for other individuals seeking to expand their understanding of the world around them. The text blends theory and practice in an easy-to-read and understand style of writing. It provides a balance between theoretical concepts and practical knowledge that can be useful in understanding how global business firms function day to day. The book addresses the needs of not just the large global and multinational business firms but also the many thousands of small U.S. businesses that will be entering the global marketplace in the years to come.

SUMMARY
Although trade among nations has been conducted for thousands of years, the importance of international trade to U.S. business firms, both large and small, is something that has been recognized in just the past few years. As markets in the United States have become saturated with U.S. and foreign-made goods, American companies are being forces to look for new markets. The reality of the saturation is that if U.S. firms do not involve themselves in global business, they probably will not survive. Rallying under the battle cry of “export or die,” more and more U.S. companies are turning their attention to global business opportunities. However, the total number of companies involved is still too few.

                On a national policy level, increased exports will mean more jobs for American workers which in turn will help improve the standard of living for all Americans. The pressure of having large U.S. trade deficits with its trading partners (and the related loss of U.S. jobs) has placed political pressures on the current administration. These pressures have led to variety of commercial and diplomatic initiatives by the U.S. government intended to create a more level balance of trade.

KEY TERMS AND DONCEPTS

isolationism                                                         services                                 multinational company

affiliates of foreign corporations                   portfolio capital                  per capita

exporting                                                              direct investment                Pacific Rim

importing                                                             domestic company             NAFTA

goods                                                                     global company                  trading partners

São Paulo is a major industrial city in this country.                                                QUESTION

ANSWER   Brazil.

QUESTIONS FOR DISCUSSION

1.             Will future expansion of global business be similar to that in the past? Why or why not?

2.             Discuss the reasons for the decline in the U.S. world trade market share.

3.             Does increased global business mean increased risk?

4.             Is it beneficial for nations to become dependent on one another?

5.             With wages in some countries at one-tenth of U.S. wages, how can the United States compete?

6.             \What makes a multinational firm different from a global firm?

7.             What contribution could increased exports make in lowering unemployment in the United States?

8.             Look in your local newspaper and find an article on global business and bring it to class for discussion.

9.             Go to the Department of Commerce website at data. Is the unfavorable trend in most recent trade data. Is the unfavorable trend in the trade deficit continuing? Where does the U.S. trade deficit stand relative to trade with Japan, China, Canada and Mexico?

RECOMMENDED READINGS

Czinkota, Michael R., and Masaaki Kotabe, eds. Trends in International Business. Oxford : Blackwell, 1998. Cxinkota, Michael R., Ilkka A. Ronkainen, and John J. Tarrant. The Global Marketing Imperative. Chicago : NTC, 1995.

Jones, Geoffrey. The Evolution of International Business. New York: Routledge, 1996.

Marquardt, Michael J., and Angus Reynolds, The Global Learning Organization. Burr Ridge, IL :Irwin, 1994.

Naisbitt, John. Global Paradox. New York : William Morrow, 1994.

Porter, Michael E. The Competitive Advantage of Nations. New York : The Free Press, 1990.

Reich, Robert B. The Work of Nations : Preparing Ourselves for 21st-Century Capitalism. New York : Random House, 1992.

Rodrik, Dani. Has Globalization Gone Too Far ? Washington, DC: Institute for International Economics, 1997.

Svetlicic, Marjan, and H.W. Singer, eds. The World Economy : Challenges of Globalization and Regionalization. New York :St. Martin’s Press, 1996.

NOTES

1.             Oxford Dictionary of Quotations, New Edition, New Edition, 4^th Ed. Edited by A. Partinghton (Oxford, England : Oxford University Press, 1992), 202-203

2.             Arthur M. Schlesinger, Jr., The Cycles of American History (Boston : Houghton Mifflin, 1996), xi.

3.             U.S. Jobs Supported by Exports of Goods and Services (U.S. Department of Commerce, Washington DC), June 17, 1996; U.S. Department of Commerce-The Big Emerging Markets:1996 Outlook and Source Book (Washington, DC: Bernan Press, 1996), 27.

                  By  Dr.Samai Hemman  DBA. In Global Management