GMS 200 Lecture Notes - Lecture 3: Kfc, Insourcing, Protectionism

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Lecture 3
- Airplane best example for parts being made worldwide
- Exporting; selling locally made products in foreign markets
- Importing; buying foreign made products and selling them domestically
- $ value exports - $ value imports= balance of trade
- Companies aim to
- US bought a lot because they can’t be self sufficient since they can’t supply their citizens with all
the goods they need/want just based off American products. They can’t self sustain
- Hello kitty; phenomenom licensing in the world
- FDI; foreign direct investment is building, buying all or buying part ownership of a business in
another country (direct investing strategy)
- Insourcing; job creation through FDI
- Joint ventures; operates in foreign country through co-ownership by foreign and local
partners…risk sharing-need complex contracts- less control0sometimes takeover
- Global strategic alliances- partnership in which foreign and domestic firms share resources and
knowledge for mutual gains---potential win win for local partner and outside partner.
- Foreign subsidiaries- local operation completely owned by a foreign firm. Greenfield
investement- builds an entirely new operation in foreign country
- In the past; countries tried to protect local economy so it doesn’t affect local businesses. You
want your own people to do well instead of foreigners.
- Canadians should eat their own chicken (TRQ impact) tariff rate quotas (source; chicken
international trade)
Criteria for choosing joint venture partner;
- Familiarity with your firms major business
- Strong local workforce
- Future expansion possibilities
- Values customers
- Strong local market for partners own products
- Good profit potential
- Sound financial standing
Risks on going global
- Political instability (war, economy)
- Local legal systems (too complex and unfamiliar)
- WTO resolves trade/tariff disputes
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