IBM 301 Lecture Notes - Lecture 5: Trade Adjustment Assistance, Gross Domestic Product, Offshoring
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25 Feb 2019
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Chapter 5: Developing a Global Vision
Rewards of Global Marketing and the Shifting Global Business Landscape
● Global marketing: marketing that targets markets throughout the world
● Global vision: recognizing and reacting to international marketing opportunities, using
effective global marketing strategies, and being aware of threats from foreign competitors
in all markets
○ The foundation of a successful global vision is a corporate structure that provides
a continual flow of fresh ideas
● Global marketing is not a one-way street, foreign competitors compete in the U.S. as well
Importance of Global Marketing to the U.S.
● Gross domestic product (GDP): is the total market value of all final goods and services
produced in a country for a given period
○ Final refers to final products that are sold, not to intermediate products used in the
assembly of a final product
○ GDP counts only final goods and services in its valuation of a country’s
production
● More small- and medium-sized companies export goods from the United States
Job Outsourcing and Inshoring
● Outsourcing: sending U.S. jobs abroad
○ Leads to corporate growth, efficiency, productivity, and revenue growth
● Inshoring: returning production jobs to the United States
○ Rapid consumer product innovation forces the need to keep product designers,
marketing researchers, logistics experts, and manufacturers in close proximity
○ Shrinking development and manufacturing timelines have further contributed to
inshoring
Benefits of Globalization
● Expands economic freedom
● Spurs competition
● Raises a nation’s productivity and living standards if it opens itself to the global market
● Offers access to foreign capital, global export markets, and advanced technology
● Promotes higher labor and environmental standards
● Acts as a check on government power
Costs of Globalization
● Countries restrict trade and create barriers to boost exports and limit imports
● Globalization leads to people being laid off from their jobs
○ Workers do not always find jobs in other industries
○ Payments made to workers who have lost their jobs to foreign competition is
called trade adjustment assistance
Multinational Firms
● Multinational corporation: a company that is heavily engaged in international trade,
beyond exporting and importing
○ Moves resources, goods, services, and skills across national boundaries without
regard to the country in which its headquarters is located
● Stages of multinational global business development:
○ Operate in one country and sell into others
○ Set up foreign subsidiaries to handle sales in one country
○ Operate an entire line of business in another country
○ Engage in virtual operation
Are Multinationals Beneficial?
● The role of multinational corporations in developing nations is a subject of controversy
● Ability of multinationals to tap financial, physical, and human resources from all over the
world and combine them economically and profitably can benefit any country
● Capital intensive: using more capital than labor in the production process
● Does not substantially increase employment
● political pressure also causes some U.S. multinationals to bring production back home
Global Marketing Standardization
● Global marketing standardization: production of uniform products that can be sold the
same way all over the world
● Multidomestic strategy: when multinational firms enable individual subsidiaries to
compete independently in domestic markets
○ Companies with separate subsidiaries in other countries can be said to operate
using a multidomestic strategy
Culture
● Culture is the common set of values shared by the citizens of a society that determines
what is socially acceptable
● Culture underlies the family, the educational system, religion, and the social class system
○ Cultural blunders lead to misunderstandings and perceptions of rudeness or even
incompetence
○ language is an important aspect of culture
○ Each country has its own unique customs and traditions that determine business
practices and influence negotiations with foreign customers
Economic Factors
● In general, complex and sophisticated industries are found in developed countries and
basic industries are found in less developed nations
● Gross national income (GNI) per capita is one measure of the ability of a country’s
citizens to buy various goods and services
● Balance of trade: the difference between the value of a country’s exports and the value of
its imports over a given period