Test Bank for International Business Competing in the Global Marketplace, 18th Edition by Charles Hill.pdf

COMPETING INTHE GLOBAL MARKETPLACE
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Introduction




Exhibitr3.1r(Credit:rXiquinhorSilvar/Flickr/rAttributionr2.0rGenericr(CCrBYr2.0))




Afterrreadingrthisrchapter,ryourshouldrberablertoranswerrtheserquestions:

1. WhyrisrglobalrtraderimportantrtortherUnitedrStates,randrhowrisritrmeasured?
2. Whyrdornationsrtrade?
3. Whatrarertherbarriersrtorinternationalrtrade?
4. Howrdorgovernmentsrandrinstitutionsrfosterrworldrtrade?
5. Whatrarerinternationalreconomicrcommunities?
6. Howrdorcompaniesrenterrtherglobalrmarketplace?
7. Whatrthreatsrandropportunitiesrexistrinrtherglobalrmarketplace?
8. Whatrarertheradvantagesrofrmultinationalrcorporations?
9. Whatrarerthertrendsrinrtherglobalrmarketplace?




Mike Schlater, Domino’s Pizza
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,Domino’srPizzarhasrmorerthanr14,000rstoresrworldwide.rAsrexecutivervicerpresidentrofrD
omino’srPizza’srinternationalrdivision,rMikerSchlaterrisrpresident
ofrDomino’srCanadarwithrmorerthanr440rstores.rOriginallyrfromrOhio,rSchlaterrstartedrhisrca
reerrwithrDomino’srasrarpizzardeliveryrdriverrandrworkedrhisrwayruprintormanagement.rSchl
aterrsavedrhisrearnings,randrwithrsomerhelprfromrhisrbrother,rherwasrablertoracceptrtheroppo
rtunityrtorhavertherfirstrinternationalrDomino’srfranchiserinrWinnipeg,rManitoba,rinr1983.rWit
hinrweeks,rSchlater’srstorerinrCanadarreachedrhigherrsalesrthanrhisrpreviousrstorerinrOhior
hadreverrattained.rHowever,ritrwasrnotranreasyrstart.rSchlaterrhadrtoridentifyrtherinternation
alrsuppliersrandrgetrthemrapprovedrtorsellrtheirrproductsrtorDomino’s.rThisrshowsronerofrther
challengesrthatrorganizationsrfacerwhenrenteringrnewrglobalrmarkets.rTormeetrqualityrstan
dardsrdesignedrtorprotectrarbrand,rcompaniesrmustrundertakeranrextensiverreviewrofrpoten
tialrnewrsuppliersrtorensurerconsistentrproductrquality.rByr2007,rSchlaterrandrarpartnerrunifi
edrallrofrtherfranchisesrunderronercorporaterumbrella,randrSchlaterrisrnowrpresidentrofrDomi
no’srofrCanada,rLtd.,rwhichroperatesrmorerthanr440rstoresrlocatedrinreveryrprovince,rasrwel
lrasrtherYukonrandrNorthwestrTerritories.




Exhibitr3.2rDomino’srstore.r(Credit:rMr.rBluerMaurMau/rFlickr/rAttributionr2.0rGenericr(CCr
BYr2.0))
Suchranrimpressivercareerrpathrmightrseemrlikerluckrtorsome,rbutrSchlaterrachievedrhisrsucc
essrduertordeterminationrandrattentionrtordetail.rLuckrdidrplayrarrolerinrarrecentreventrinrhisrlif
e,rthough.rSchlaterrmanagesrdoughrinrhisrbusinessrbutralsorcamerintor“dough”rbyrwinningr$
250,000rinrarlottery.rSincerSchlaterrbelievesrinrphilanthropy,rherdonatedrtherentireramountrt
orCardinalrCarterrHighrSchoolrinrhisrhometown.rOverrtheryears,rSchlaterrhasrdonatedrmillio
nsrofrdollarsrtorfoundationsrandrcharities,rsuchrasrthe

,LondonrHealthrSciencesrFoundation,rbecauserhernowrhasrtherabilityrtorindulgerafterrspendi
ngrdecadesrclimbingrthercorporaterladderratrDomino’srPizza.rArfatherrofrthree,rhermovedrtorE
ssexrCountyrfromrWinnipegrafterrbuyingrtherDomino’srmasterrfranchiserforrCanada.rHerwan
tedrtorliverclosertortherborderrbecauseronerofrhisrdaughtersrwasrinrarprivaterschoolrinrOhioran
dranotherrwasrheadedrtoruniversityrthere.

ThermasterrfranchiseesrofrDomino’srPizza’srinternationalrbusinessrarerindividualsrorrentitie
srwho,runderrarspecificrlicensingragreementrwithrDomino’s,rcontrolrallroperationsrwithinrarsp
ecificrcountry.rTheyroperatertheirrownrstores,rsetruprardistributionrinfrastructurertortransportr
materialsrintorandrthroughoutrthercountry,randrcreatersubfranchisees.rOnerparticularrbenefi
trofrmasterrfranchiseesrisrtheirrlocalrknowledge.r Asrdiscussedrinrthisrchapter,rarmajorrchalle
ngerwhenropeningrarbusinessronrforeignrsoilrisrnegotiatingrtherpolitical,rcultural,randrecono
micrdifferencesrofrthatrcountry.rMasterrfranchiseesrallowrDomino’s,randrtherfranchisee,rtorta
keradvantagerofrtheirrlocalrexpertiserinrdealingrwithrmarketingrstrategies,rpoliticalrandrregul
atoryrissues,randrtherlocalrlaborrmarket.rItrtakesrlocalrexperiencertorknow,rforrexample,rthatr
onlyr30rpercentrofrtherpeoplerinrPolandrhaverphones,rsorcarryoutrneedsrtorbertherfocusrofrthe
rbusiness;rthatrTurkeyrhasrchangedritsrstreetrnamesrthreertimesrinrtherpastr30ryears,rsordeliv

eryrisrmuchrmorerchallenging;rorrthat,rinrJapanese,rthererisrnorwordrforrpepperoni,rthermostr
popularrtoppingrworldwide.rTheserarerjustrarfewrofrtherchallengesrthatrDomino’srhasrhadrtor
overcomeronrtherroadrtorbecomingrtherworldwiderleaderrinrtherpizzardeliveryrbusiness.rUnd
errtherleadershiprofrpeoplerlikerSchlater,randrwithrtherhelprofrdedicated,rlocalrmasterrfranchi
sees,rDomino’srhasrbeenrablertornotronlyrcompeterinrbutrleadrtherglobalrpizzardeliveryrmark
et.

Sources:r“Domino’srPizzarCorporaterFacts,”rhttp://phx.corporate-
ir.net,raccessedrJuner20,r2017;rDomino’srCanadarwebsite,rhttps://www.dominos.ca,racces
sedrJuner20,r2017;rTrevorrWilhelm,r“Domino’srCEO,rwhorlivesrinrLeamington,rwillrdonater$2
50Krlottorwinningsrtorhighrschool,”rWindsorrStar,rFebruaryr27,r2015.

This chapter examines the business world of the global marketplace. It focuses
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on the processes of taking a business global, such as licensing agreements and
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franchisees; the challenges that are encountered; and the regulatory systems g
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overning the world market of the 21st century.
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Today, global revolutions are under way in many areas of our lives: management,
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politics, communications, and technology. The word global has assumed a new m
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eaning, referring to a boundless mobility and competition in social, business, and i
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ntellectual arenas. The purpose of this chapter is to explain how global trade is con
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ducted. We also discuss the barriers to international trade and the organizations th
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at foster global trade. The chapter concludes with trends in the global marketplace
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.

3.1 Global Trade in the United States r r r r r

, WhyrisrglobalrtraderimportantrtortherUnitedrStates,randrhowrisritrmeasured?

No longer just an option, having a global vision has become a business imperative.
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Having a global vision means recognizing and reacting to international business o
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pportunities, being aware of threats from foreign competitors in all markets, and eff r r r r r r r r r r r r


ectively using international distribution networks to obtain raw materials and move
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finished products to the customer. r r r r




U.S. managers must develop a global vision if they are to recognize and react to int
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ernational business opportunities as well as remain competitive at home. Often a
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U.S. firm’s toughest domestic competition comes from foreign companies. Moreo
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ver, a global vision enables a manager to understand that customer and distributi
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on networks operate worldwide, blurring geographic and political barriers and ma
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king them increasingly irrelevant to business decisions. Over the past three deca
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des, world trade has climbed from $200 billion a year to more than $1.4 trillion.1 U.
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S. companies play a major role in this growth in world trade, with 113 of the Fortun
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e 500 companies making over 50 percent of their profits outside the United States
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. Among these companies are recognizable names such as Apple, Microsoft, Pfiz
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er, Exxon Mobil, and General Electric.2
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Starbucks Corp. is among the fastest growing global consumer brands and one
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of the most visible emblems of U.S. commercial culture overseas.
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Of Starbucks’s 24,000 total stores, almost 66 percent are international stores that
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contribute a substantial amount to the company’s revenues, which have grown fro
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m $4.1 billion in 2003 to $21.3 billion in 2016.3
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Go into a Paris McDonald’s and you may not recognize where you are. There are n
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o Golden Arches or utilitarian chairs and tables and other plastic features. The res
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taurants have exposed brick walls, hardwood floors, and armchairs. Some Frenc
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h McDonald’s even have faux marble walls. Most restaurants have TVs with conti
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nuous music videos. You can even order an espresso, beer, and a chicken on foc
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accia bread sandwich. It’s not America.
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Global business is not a one- r r r r r


way street, where only U.S. companies sell their wares and services throughout th
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e world. Foreign competition in the domestic market used to be relatively rare but n
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ow occurs in almost every industry. In fact, U.S. makers of electronic goods, camer
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as, automobiles, fine china, tractors, leather goods, and a host of other consumer
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and industrial products have struggled to maintain their domestic market shares a
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gainst foreign r