Seminar 3 Introduction to Business -

Part 1: Conducting Business in the Global Economy

Chapter 3
Competing in the Global Economy
Learning Objectives
1.
Discuss why nations trade
2.
Explain why nations restrict international trade and list four forms of trade restrictions
3.
Highlight three protectionist tactics nations use to give their domestic industries a competitive edge
4.
Explain how trading blocs affect trade
5.
Highlight the opportunities and challenges of conducting business in other countries
6.
List five ways to improve communication in an international business relationship
7.
Identify five forms of international business activity
8.
Discuss terrorism’s impact on globalization

Answers to End-of-Chapter Questions
Test Your Knowledge

Questions for Review
1.

How can a company use licensing agreements to enter world markets?
By licensing, a company can negotiate an agreement that entitles it to produce or market another company’s product in return for a royalty or fee. The company that obtains the license is responsible for the product quality, promotion, and distribution, and it must pay the other company a percentage of its sales. On the other hand, the company that grants the license avoids shipping costs, trade barriers, and other problems associated with international trade, while still receiving a portion of the revenue from overseas sales.

2.

What two fundamental product strategies do companies choose between when selling their products in a global marketplace?
Should products be standardized, selling the same brand everywhere in the world, or customized to accommodate local target markets?

3. What is the balance of trade, and how is it related to the balance of payments?
The balance of trade is determined by the relationship between the value of a country’s imports and the value of its exports. It is not as broad as the balance of payments, which measures the total flow of money into a country minus the flow of money out of the country over a period of time. The balance of payments includes not only the balance of trade but also payments of foreign aid by governments and direct investment in assets.

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4.

What is dumping, and how does the United State report this practice?
Dumping occurs when a company sells products at prices lower than the production cost or lower than the company would charge in its home market. The US government can file antidumping suits, and it can pursue or negotiate settlements with the foreign government. 5.

What is a floating exchange rate?
A floating exchange rate is a system of foreign currency exchange whereby currency values fluctuate in response to the forces of global supply and demand.

Banking on the World Bank
The World Bank plays an important role in today’s fast-changing, closely meshed global economy. Do you know what this organization of five closely associated institutions does? Do you know who runs the bank, where the bank gets its money, and where the money goes?
Learn how this organization’s programs and financial assistance help poorer nations as well as affluent ones. Log on to the World Bank website and find out why global development is everyone’s challenge.

www.worldbank.org
1.
What is the purpose of this website?
This site will help you find information about IBRD, IDA, IFC, MIGA and ICSID - the institutions that comprise the World Bank Group, learn about projects, services and products the Bank Group offers, and procedures and safeguards that guide this work.
2.

What kinds of information does this website contain? Please be specific.
Student answers may vary, but may include any of the following:
This website provides information on all of the following:
•
General information about the World Bank
•
The World Bank Group consists of five institutions that specialize in different aspects of development, but use their comparative advantages to work collaboratively toward the same overarching goal---poverty reduction
•
The main strategies guiding the work of the World Bank Group as it assists developing countries in fighting poverty.
•
Established policies and procedures that help ensure its operations are economically, financially, socially, and environmentally sound. Policies and procedures are codified in the Bank's Operational Manual. They are subject to extensive review while being formulated, and to compliance monitoring once approved. 3.

How is the information provided at this website useful for businesspeople?
Consumers?
Student answers may vary, but may include any of the following:
Refer to above for ways in which this website is useful for businesspeople.
The World Bank Group is one of the world's largest sources of development assistance.
In fiscal year 2002, the institution provided US$19.5 billion in loans to its client countries. It works in more than 100 developing economies with the primary focus of

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Part 1: Conducting Business in the Global Economy

helping the poorest people and the poorest countries. For all its clients the Bank emphasizes the need for:
•
Investing in people, particularly through basic health and education
•
Focusing on social development, inclusion, governance, and institution-building as key elements of poverty reduction
•
Strengthening the ability of the governments to deliver quality services, efficiently and transparently
•
Protecting the environment
•
Supporting and encouraging private business development
•
Promoting reforms to create a stable macroeconomic environment, conducive to investment and long-term planning
Information concerning all of the above is detailed on the website for both consumers and businesses alike.
The information provided by this website may also provide both consumers and businesses with: resources, knowledge, building capacity, and forged partnerships in the public and private sectors. The publications provided on this website may serve as an informative tool both for businesses and consumers.
The World Bank Institute creates learning opportunities for countries, World Bank staff and clients, and people committed to poverty reduction and sustainable development.
WBI's work program includes training, policy consultations, and the creation and support of knowledge networks related to international economic and social development.
Information on this is provided on the website.
The Development Education Program helps students and teachers around the world explore the meaning of "sustainable development" through exercises, data, research, and case studies. For Schools is a portal to the World Bank's resources, including school Internet projects, scholarships, and learning materials. Development Challenge is an educational game encouraging students to use their imaginations to build a better world.
4.

How did you expand your knowledge of conducting business in the global environment by reviewing the material at this website? What new things did you learn about this topic?
Students’ responses will depend, in large part, on the material currently posted on the website. 64

Chapter 3: Wild World: Competing in the Global Economy

Answers to Boxed Features

Chinaʼs Counterfeit Economy
Questions for Critical Thinking
1.

Honda recently set up a joint venture to make and sell motorcycles with a
Chinese company that used to produce Honda knockoffs. Why would Honda do this?
Honda would want to be involved with helping China make and sell motorcycles to reduce the amount of pirating of fake products. As an insider in the country, Microsoft would have greatest ability to influence policy making and standards.

2.

How might product counterfeiting in China affect consumers in the US?
There are two major negative affects for consumers in the US when China, or any other country, is involved in counterfeiting. First, counterfeit products on the market reduce the sales of legitimate products. This reduction in revenues negatively affects the company designing and manufacturing the legitimate product; thus reducing earnings to shareholders and potentially increasing costs to U.S. consumers. Second, counterfeit products are exported and thus potentially affect markets world-wide; consumers may be purchasing counterfeit unknowingly.

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Seminar 3 Introduction to Business -

Part 1: Conducting Business in the Global Economy

Chapter 4
Business at the Speed of Light:
Information Technology and E-Commerce
Learning Objectives
1.
2.
3.
4.
5.
6.
7.

Differentiate data, information, and insight
Explain how information quality is measured
Identify four key areas where business use information
Discuss five important ways the Internet is changing business
Explain the differences between search engines, web directories, and research databases Differentiate between operations information systems and professional and managerial systems Identify seven current challenges businesses that managers face with respect to information technology

Innovating for Business Success – LivePerson Puts a Pulse on the Web
Questions for Critical Thinking
1.

How can a service such as LivePerson help Internet retailers gain a competitive advantage?
Services, such as LivePerson, help Internet retailers gain a competitive advantage by providing a high level of customer service. Reps can help customers with their unique product questions and selections. They also can supply customers with valuable information about their past purchases and previous visits to the website. They
“embrace the customer and help them through the process of shopping.”

2.

A business is a profit-seeking activity that provides goods and services that satisfy customer needs. What needs does LivePerson try to satisfy?
LivePerson meets the needs of information and clarification for the customer.

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Minding Your Own Business – David Competes with Goliath Online
Questions for Critical Thinking
1.

Why do web surfers have a short attention span?
Web surfers have short attention spans for several reasons, including:
•
the wide variety of information available – the website they are viewing currently is not the only one
•
photos and graphs can take “too long” to download, prompting the web user to move somewhere else
•
moving among the pages of one website may be cumbersome

2.

If you’re a tiny company competing against much larger firms, should you play up or play down your size? Explain your answer.
Similar to brick and mortar businesses, smaller size can be both beneficial and detrimental to a business. A smaller size may mean that you are able to provide greater customer service since there are not as many levels in the organizational hierarchy between employees interacting directly with the customer and those in the decisionmaking positions. However, a smaller size may also mean that you do not have the staff or financial resources to provide the level of customer service that your competitor does. E-commerce allows companies to be more discrete about their size, but the same benefits and drawbacks can still exist.
Small companies may do well to play up their smaller size, indicating that they are more in tune with their customers and that their large bureaucratic size does not limit their ability to respond to customers. Caution needs to be exercised that the smaller size of the company does not indicate lack of professionalism or resources.

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