# Competing in the Global Marketplace

## Trends in Global Competition

1. What are the trends in the global marketplace?
In this section, we will examine several underlying trends that will continue to propel the dramatic growth in world trade. These trends are market expansion, resource acquisition, and the emergence of China and India.

### Market Expansion

The need for businesses to expand their markets is perhaps the most fundamental reason for the growth in world trade. The limited size of domestic markets often motivates managers to seek markets beyond their national frontiers. The economies of large-scale manufacturing demand big markets. Domestic markets, particularly in smaller countries like Denmark and the Netherlands, simply can’t generate enough demand. Nestlé was one of the first businesses to “go global” because its home country, Switzerland, is so small. Nestlé was shipping milk to 16 different countries as early as 1875. Today, hundreds of thousands of businesses are recognizing the potential rich rewards to be found in international markets.

### Resource Acquisition

More and more companies are going to the global marketplace to acquire the resources they need to operate efficiently. These resources may be cheap or skilled labor, scarce raw materials, technology, or capital. Nike, for example, has manufacturing facilities in many Asian countries in order to use cheaper labor. Honda opened a design studio in southern California to put that “California flair” into the design of some of its vehicles. Large multinational banks such as Bank of New York and Citigroup have offices in Geneva, Switzerland. Geneva is the private banking center of Europe and attracts capital from around the globe.

### The Emergence of China and India

China and India—two of the world’s economic powerhouses—are impacting businesses around the globe, in very different ways. The boom in China’s worldwide exports has left few sectors unscathed, be they garlic growers in California, jeans makers in Mexico, or plastic-mold manufacturers in South Korea. India’s impact has altered how hundreds of service companies from Texas to Ireland compete for billions of dollars in contracts.
The causes and consequences of each nation’s growth are somewhat different. China’s exports have boomed largely thanks to foreign investment: lured by low labor costs, big manufacturers have surged into China to expand their production base and push down prices globally. Now manufacturers of all sizes, making everything from windshield wipers to washing machines to clothing, are scrambling either to reduce costs at home or to outsource more of what they make in cheaper locales such as China and India.
Indians are playing invaluable roles in the global innovation chain. Hewlett-Packard, Cisco Systems, and other tech giants now rely on their Indian teams to devise software platforms and multimedia features for next-generation devices. Google principal scientist Krishna Bharat set up the Google Bangalore lab complete with colorful furniture, exercise balls, and a Yamaha organ—like Google’s Mountain View, California, headquarters—to work on core search-engine technology. Indian engineering houses use 3-D computer simulations to tweak designs of everything from car engines and forklifts to aircraft wings for such clients as General Motors Corp. and Boeing Co. Barring unforeseen circumstances, within five years India should vault over Germany as the world’s fourth-biggest economy. By mid-century, China should overtake the United States as number one. By then, China and India could account for half of global output.
An accelerating trend is that technical and managerial skills in both China and India are becoming more important than cheap assembly labor. China will stay dominant in mass manufacturing and is one of the few nations building multibillion-dollar electronics and heavy industrial plants. India is a rising power in software, design, services, and precision industry.

### Summary of Learning Outcomes

1. What are the trends in the global marketplace?
Global business activity will continue to escalate due to several factors. Firms that desire a larger customer base or need additional resources will continue to seek opportunities outside their country’s borders. China and India are emerging as global economic powerhouses.

### Preparing for Tomorrow’s Workplace Skills

1. How can a country’s customs create barriers to trade? Ask foreign students to describe such barriers in their country. American students should give examples of problems that foreign businesspeople might experience with American customs. (Information)
2. Should the United Kingdom exit the European Union? Why might Britain not wish to exit? (Systems)
3. Do you think that CAFTA will have a major impact on the U.S. economy? Why? (Systems)
4. What do you think is the best way for a small company to enter international trade? Why? (Information)
5. How can the United States compete against China and India in the long run? (Information)
6. Identify some U.S. multinational companies that have been successful in world markets. How do you think they have achieved their success? (Information)
7. Team Activity Divide the class into teams. Each team should choose a country and research its infrastructure to determine how it will help or hinder trade. Include a variety of countries, ranging from the most highly developed to the least developed. (Resources, Interpersonal, Information, Technology)

### Ethics Activity

The executives of a clothing manufacturer want to outsource some of their manufacturing to more cost-efficient locations in Indonesia. After visiting several possible sites, they choose one and begin to negotiate with local officials. They discover that it will take about six months to get the necessary permits. One of the local politicians approaches the executives over dinner and hints that he can speed up the process for an advisory fee of $5,000.
Using a web search tool, locate articles about this topic, and then write responses to the following questions. Be sure to support your arguments and cite your sources.
Ethical Dilemma: Is paying the advisory fee a bribe or an acceptable cost of doing business in that area of the world? What should the executives do before agreeing to pay the fee?
Sources: Eric Markowitz, “The Truth about Bribery and Doing Foreign Business,” Inc., https://www.inc.com, accessed March 19, 2018; Roberto A. Ferdman, “How the World’s Biggest Companies Bribe Foreign Governments,” The Washington Post, https://www.washingtonpost.com, accessed March 19, 2018; David Rising, “The 10 Countries Most Likely to Use Bribery in Business,” Huffington Post, https://www.huffingtonpost.com, accessed March 19, 2018.

### Working the Net

1. Go to the Trade Compliance Center site at http://tcc.export.gov. Click on Foreign Trade Barrier Examples, and then search the reports. Pick a country that interests you from the index, and read the most current available reports for that country. Would this country be a good market for a small U.S. motor scooter manufacturer interested in expanding internationally? Why or why not? What are the main barriers to trade the company might face?
2. While still at the Trade Compliance Center site, http://tcc.export.gov, click on Trade Agreements and then List All Agreements. Select one that interests you, and summarize what you learn about it.
3. Review the historical data about exchange rates between the U.S. dollar and the Japanese yen available at http://www.x-rates.com. Pull up charts comparing the yen to the dollar for several years. List any trends you spot. What years would have been best for a U.S. company to enter the Japanese marketplace? Given current exchange rate conditions, do you think Japanese companies are increasing or decreasing their exporting efforts in the United States?
4. Visit Foreign Trade Online, http://www.foreign-trade.com, and browse through the resources of this international business-to-business trade portal. What types of information does the site provide? Which would be most useful to a company looking to begin exporting? To a company who already exports and wants to find new markets? Rate the usefulness of the site and the information it offers.
5. Go to http://www.fita.org, which is the Federation of International Trade Associations. Click on Really Useful Links for International Trade. Follow five of those links, and explain how they would help a U.S. manufacturer that wanted to go global.
6. Go to the World Trade Organization site at http://www.wto.org. Next, click on WTO News. Inform the class about current activities and actions at the WTO.
7. Go to http://www.worldbank.org and then to http://www.imf.org. Compare the types of information available on each website. Pick one example from each site, and report your findings to the class.

### Creative Thinking Case


### We Want Our MTV (International)

MTV, a division of Viacom International Media Networks and a mainstay of American pop culture, is just as popular in Shanghai as it is in Seattle and Sydney, or in Lagos (Nigeria) as it is in Los Angeles. MTV is a division of Viacom, and their international divisions are called the Viacom International Media Networks. London-based MTV Networks International, the world’s largest global network, has taken its winning formula to 167 foreign markets on six continents, including urban and rural areas. It reaches 4 billion homes in 40 languages through locally programmed and locally operated TV channels and websites. While the United States currently generates about 70 percent of MTV’s profits, 85 percent of the company’s subscriber base lives outside the United States.
The MTV brand has evolved beyond its music television roots into a multimedia lifestyle, entertainment, and culture brand for all ages. In addition to MTV and MTV2, its channel lineup includes Nickelodeon, VH1, Comedy Central, LOGO, TMF (The Music Factory), Game One, and several European music, comedy, and lifestyle channels, as well as Paramount Channel, Spike, and a growing number of flagship local networks such as Channel 5 in the UK, Telefe in Argentina, and COLORS in India. Adding to the complexity is MTV’s multimedia and interactive nature, with gaming, texting, and websites, as well as television. Another challenge is integrating acquisitions of local companies such as South American Telefe, which it purchased in 2016.
The company also has an international insights team that gathers the latest consumer insights from around the world. You can get some insight into this initiative at https://insights.viacom.com. The local perspective is invaluable in helping the network understand its markets, whether in terms of musical tastes or what entertainment children like. For example, Alex Okosi, a Nigerian who went to college in the United States, is chief executive for MTV Base, which launched in sub-Saharan Africa in 2005. Okosi recommended that MTV consider each country as an individual market, rather than blending them all together.
One reason for MTVNI’s success is “glocalization”—its ability to adapt programs to fit local cultures while still maintaining a consistent, special style. “When we set a channel up, we always provide a set of parameters in terms of standards of things we require,” an MTV executive explains. “Obviously an MTV channel that doesn’t look good enough is not going to do the business for us, let alone for the audience. There’s a higher expectation.” Then the local unit can tailor content to its market. MTV India conveys a “sense of the colorful street culture,” explains Bill Roedy, former MTV Networks International president, while MTV Japan has “a sense of technology edginess; MTV Italy, style and elegance.” In Africa, MTV Base features videos from top African artists as well as from emerging African music talent. According to company executives, the goal is to “provide a unique cultural meeting point for young people in Africa, using the common language of music to connect music fans from different backgrounds and cultures.”
2. Do you think that MTV’s future lies mostly in its international operations? Explain your reasoning.
3. What types of political, economic, and competitive challenges does MTV Networks International face by operating worldwide?
4. How has MTV Networks International overcome cultural differences to create a world brand?
Sources: MTV Viacom Blog, http://blog.viacom.com, accessed June 30, 2017; MTV International website, http://www.mtv.com/, accessed June 30, 2017; MTV Consumer Insights website, https://insights.viacom.com, accessed June 30, 2017.

### Hot Links Address Book

1. A good starting place for help in doing business in foreign markets is the U.S. government’s export portal. Here you will find links to export basics, regulations, exchange rates, country and industry research, and much more. http://www.export.gov
2. For links to a wealth of statistics on world trade, go to the U.S. International Trade Administration’s (ITA) Office of Trade and Economic Analysis website, http://www.ita.doc.gov.
3. Check out the current U.S. balance of trade with various countries at http://www.bea.gov.
4. Get up-to-the-minute exchange rates at http://www.xe.com.
5. The World Trade Organization tracks the latest trade developments between countries and regions around the world. For the most recent global trading news, visit the WTO’s website at http://www.wto.org.
6. Gain additional insight into the workings of the International Monetary Fund at http://www.imf.org.
7. For the latest information about NAFTA, visit http://www.naftanow.org.
8. Think you’d like to work overseas? For information about jobs in foreign countries, visit http://www.internationaljobs.com.