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by: Arlie Rowe


Arlie Rowe
GPA 3.94

Jean Snavely

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Jean Snavely
Class Notes
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This 26 page Class Notes was uploaded by Arlie Rowe on Wednesday September 30, 2015. The Class Notes belongs to FIN 261 at Western Kentucky University taught by Jean Snavely in Fall. Since its upload, it has received 66 views. For similar materials see /class/216694/fin-261-western-kentucky-university in Finance at Western Kentucky University.




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Date Created: 09/30/15
International Business Week 12 Regional and Global Strategy Grading Two ncass Tests 200 points Final Exam 150 points Comprehensive Three case presentations 150 points Three IB strategy analysis reports 150 points Participation 100 points 90 A 80 B 70 C 60 D Below 60 F MNEs on the list of Fortune Global 500 WaIMartUS BP Britain Exxon Mobile US Royal DutchShell Group BritainNetherlands General Motors US Ford US DaimlerChrysler Germany Toyota Japan General Electric US Coke CocaCola 285th on Fortune Global 500 2007 Headquartered in Atlanta GA Sales 14 from EU 14 from the AsiaPacific 13 from North America and the rest from the others Now CocaCola is making it more locally responsive 1 Think Local Act Local 2 Focusing itself as a pure marketing company 3 Getting involved in civic and charitable activities Regional and Global Strategy Introduction World business a brief overview Today s international environment Globalization and strategic management Introduction International business the study of transactions taking place across national borders for the purpose of satisfying the needs of individuals and organizations Multinational enterprises MNEs a company headquartered in one country but having operations in other countries MNE activity Most MNE activity can be classified into two major categories 1 Trade exports and imports More than 50 of all trade is made by the world s largest 500 MNEs 2 Foreign direct investment FDI 80 of all FDI is made by the world s largest 500 MNEs Trade and investment International Trade the exchange of goods and services across international borders Exports goods and services produced in one country and then sent to another country Imports goods and services produced in one country and bought in another country Foreign Direct Investment equity funds invested by MNEs to exercise control of their foreign affiliates imports Exports Countryregion Billions of US of total Billions of US of total North America 20999 2032 15429 144 United States 16166 1564 9630 90 Canada 3047 295 3644 34 Mexico 1786 173 2155 20 European Union 15 40006 3871 37969 354 Asia including Japan 26148 2530 32497 303 Japan 4644 449 6570 61 Other Asia 21503 2081 25928 242 All others 81844 7919 81259 758 Total 103347 10000 107186 1000 Table 11 World Trade 2005 Note Data for European Union include intra EU trade Exports are calculated by including freight and insurance while imports do not include freight and insurance As a result data might not be consistentwith other data in this book Source Adapted from International Monetary Fund Direction of Trade Statistics Yearbook 2006 Washington DC IMF 2006 pp 2 5 Year 2005 Intraregional exports EU NAFTA 664 560 2000 672 581 1980 535 336 Cumulative Average Annual Change 1980 2005 001 002 2000 2005 000 7001 Asia 531 424 273 003 006 Tabe12 Intraregional trade in the triad 1980 2005 i data Were No e caicuiated using information for exports from Austraiia to the Asian region and the Worid Data forEU are forintrarEU exports Source A i1 rs caicuiatiuns based an the NF Direction of Trade Statistics Yearbook 2006 and ii i 2000 and 2005 and ii iti39arEEC Exports ii i 1980 7985 Japan China indie indonesia South Korea Maiaysia Singapore Thaiiand and Countryregion Millions of US quot0 of total All countries 1635291 1000 Canada 144033 88 Europe 1143614 699 France 143586 88 Germany 184213 113 Luxembourg 116736 71 Netherlands 170770 104 Switzerland 122399 75 UK 282457 173 Latin America and other Western hemisphere 82530 50 Bermuda 1517 01 Mexico 8653 05 Panama 11470 07 UK islands Caribbean 26501 16 Venezuela 6730 04 Africa 2564 02 Middle East 9965 06 Asia and Pacific 252584 154 Australia 44061 27 Japan 190279 116 Table 13a Foreign direct investment in the United States 2005 Note Data are on a historicalcost basis Numbers might not add up due to rounding Sources Authors calculations and US Department of Commerce Survey of CurrentBusiness June 2007 p D67 Countryregion Millions of US of total All countries 2069983 1000 Canada 234831 113 Europe 1059443 512 France 60860 29 Germany 86319 42 Ireland 61596 30 Netherlands 181384 88 Switzerland 83424 40 UK 323796 156 Latin America and other Western hemisphere 353011 171 Bermuda 90358 44 Brazil 32420 16 Mexico 71423 35 UK Islands Caribbean 85295 41 Africa 24257 12 Middle East 21591 10 Asia and Pacific 376849 182 Australia 113385 55 Hong Kong 37884 18 Japan 75491 36 Singapore 48051 23 Table 13b Foreign direct investment by the United States 2005 Note Data are on a historicalcost basis Numbers might not add up due to rounding Sources Authors calculations and US Department of Commerce Survey of Current Business June 2007 p D65 Thet ad Most global transactions take place within and between three major trading and investment blocks the United States the European Union and Japan These are referred to as the triad The triad the United States US The US has the largest economy in the world with a GDP of over 10 trillion The US is part of the North American Free Trade Agreement NAFTA with Canada and Mexico The US economy is significantly larger than that of its two trading partners in NAFTA and is therefore a triad member on its own The triad the European Union EU The EU or EU27 is composed of the countries in the EU15 Austria Belgium Denmark Finland Germany Greece France Ireland Italy Luxembourg the Netherlands Portugal Spain Sweden and the UK and twelve new mainly Central European countries thatjoined in 2004 and 2007 The collective GDP of the EU is greater than that of the US and Japan The EU27 is the world s largest importer and expo er Thet adJapan Japan is the largest economy in Asia Japan is the 4th largest importer and 4th largest exporter in the world International business environment The international business environment has changed rapidly in recent years as a result of an overall slowdown of triad economies increased trade liberalization through trade agreements improvements in technology the emergence of small and mediumsized enterprises SMEs Slowdown of triad economies In the late 1990s and early 2000s the United States the EU and Japan all experienced a reduction in economic activity which in turn decreased international business activity International trade regulation An important international business trend has been the emergence of regional and global trade and investment liberalization and international regulation The World Trade Organization VVTO General Agreement on Tariffs and Trade GATT The World Trade Organization WTO Established on January 1 1995 An international organization that deals with rules of trade among member countries Enforces the provisions of the General Agreement on Tariffs and Trade GATT Acts as a disputesettlement mechanism and can enforce its decisions The General Agreement on Tariffs and Trade GATT Established in 1947 to liberalize trade and to negotiate trade concessions among member countries Today the WTO is the successor to the GATT and is enforcing the provisions of the GATT Improved technology More powerful and affordable technology has promoted fast easy worldwide communication and improved production capabilities enabling organizations to operate more effectively in the international marketplace Small and mediumsized enterprises SMEs The definition of SMEs varies according to the nation In general it refers to companies with between 11 and 500 employees with sales of less than 5 billion MNEs often purchase from SMEs This is because their specialized workforces innovation and technology allows SMEs to provide goods and services more efficiently than if the MNE were to source these internally Misconceptions about MNEs Common misconceptions about MNEs MNEs have farflung operations or earn most of their revenues overseas MNEs are globally monolithic and excessively powerful in political terms MNEs produce homogeneous products for the world market and through their efficient techniques are able to dominate local markets everywhere Misconceptions about MNEs cont In fact MNEs earn most of their revenues in their home regions or by selling in nearby locales The largest 500 MNEs are not spread around the world but clustered around the triad These MNEs engage not in global competition but in triadregional competition this rivalry effectively eliminates enduring political advantage MNEs adapt their products for the local market Porter s determinants of national competitive advantage Why are some firms able to innovate consistently while others are not Factor conditions Demand conditions Related and supporting industries Firm strategy structure and rivalry Each of these determinants depends on the others


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