International Business
GBU 201-001 • CRN 20319 • T,R 1230 to 1345 • Combs 213
Copyright ©2005 C.Siegel
MKT309 • MKT401 • GBU201

Did You Know?

On 12/23/04 the US dollar ($) reached a new low against the euro (€), trading at US$1.35 to the euro. Twelve members of the European Union (EU) use the common euro currency. The euro was introduced in 1999, and initially fell against the dollar, reaching an all-time low of US$0.82 in October 2000. It has risen in value over 60 percent since that time. At the same time, the greenback rose slightly against the Japanese currency, trading around 103.89 yen (¥) to the US$.(16) To see where the currencies are trading today, visit currency converter XE.com. Look for the quick currency cross-rates.

Remittances are transfer payments sent by people (often immigrant workers) in one country to family and friends in their home country. Every year, millions of immigrant workers in the United States send remittances home. In 2002, over US$10 billion was sent by Mexican immigrants working in the United States to relatives in Mexico, up from US$800 million in 2001. Remittances represent the second largest source of income for Mexico, behind oil revenues. Hati receives over half its annual GDP from remittances. Mexico, El Salvador, Guatemala, Honduras and Nicaragua receive almost half their GDP from remittances, forecast to top US$14.2 billion in 2002. Remittances do not hurt the U.S. economy and help in that recipients can use remittances to purchase US products. Remittances are on the rise due to the decline in cost of wire transfers (to about 10 percent), the rise in the US Hispanic population in the 1990s (a 60 percent increase), and in tighter immigration controls after 9/11 that make it more difficult for illegal immigrants to cross the border. Remittances can be sent through banks, Western Union, and online by purchasing products from stores in the home country for delivery to local addresses. Example of company offering remittances from the U.K. (in pounds sterling) to The Philippines (in pesos).(15)

At the end of 2004, quotas that protect the U.S. textile industry will expire unless they are reauthorized. In July 2003, the U.S. textile industry lost an estimated 8,900 jobs. It is getting more and more difficult for U.S. textile producers to compete with low cost imports. If the quotas are not reauthorized, textile industry spokespeople believe the U.S. will become no more than a niche textile producer. Since April 2003, around 26,000 jobs in textiles and another 21,000 in apparel have been lost. Total number of remaining workers is around 745,000. The end of the quotas is tied to agreements that the U.S. and other developed countries signed through GATT a decade ago to open their markets and help developing nations build their textile exports. China is expected to be the big beneficiary. States that will be particularly hard hit by the loss of jobs are South Carolina, Alabama, and Georgia. U.S. textile workers earn an average US$13.60 per hour (2001 figure) compared to Chinese workers who earn less than US$0.69 per hour.(14)

Outsourcing means exporting work and jobs abroad, out of the home country. While it helps businesses compete globally by lowering costs, it is also very controversial because it costs jobs at home. American employers are expected to outsource around 3.3 million white-collar service jobs and U.S.$136 billion in wages over the next 15 years according to Forrester Research. Some states have passed legislation designed to stop companies from moving offshore. Outsourcing accelerated in the 1990s and mainly involved moving lesser skilled blue collar jobs abroad. Now it has grown to include white collar jobs and smaller companies.(13)

Counterfeit goods are becoming a problem that threatens consumers' health. Counterfeit pharmaceuticals are turning up in some U.S. pharmacies. Counterfeits are traditionally thought of in terms of patent and trademark infringements for handbags, jeans, and Rolex watches. Worldwide, an estimated eight percent of pharmaceuticals are fakes; in poor countries that number can rise to 25 percent according to the World Health Organization. Counterfeit and pirated goods may account for as much as eight percent of world trade, around US$375 billion annually. U.S. Customs reports that fakes confiscated at U.S. borders last year were mostly from China, Taiwan, and Hong Kong, around 78 percent of the total. U.S. businesses are estimated to lose as much as U.S. $200 to 250 billion each year.(12)

Expatriates (expats) are people living in countries other than the one where they maintain citizenship. Many American expats live abroad while working for a U.S. company; a smaller number work for internationals; some are retirees. Roughly 4.1 million (M) Americans live abroad in addition to over a half million military and government workers, many with dependents. In 2000, the top countries where American expats live are Mexico (1.036M), Canada (0.688M), U.K (0.224M), Germany (0.210M), Israel (0.184M), and Italy (0.169M). Some U.S. expats have organized online communities where they share concerns and information.(11)

Wal-Mart, the largest retailer in the world, has stores in only ten countries, yet just 12 years from its entry into international business, Wal-Mart Store's international sales are large enough to rank it number 33 on the Fortune list of the largest U.S. businesses. There is plenty of room for international expansion. In China, Wal-Mart only has 26 stores and none in India, Australia, Spain, or Eastern Europe. Britain and Germany are the only two Western European countries with Wal-Mart stores. This is about to change as Wal-Mart adopts a more aggressive international entry strategy, including opening around 130 new stores abroad in 2003. Wal-Mart often uses an acquisition strategy for entering foreign markets, purchasing a local retailer with an established customer base. Wal-Mart is Mexico's largest retailer. It has also recently opened its first store in Beijing, seven years after opening its first store in China. Wal-Mart is the single largest purchaser of products made in China and well on the way of becoming the largest seller to the Chinese. "If Wal-Mart were a nation, it would be China's eight-largest export destination!"(10)

In 2001, around a quarter of a million jobs left Mexico with about 70 percent going to China. Low wages are a magnet for foreign investment. China is also offering tax breaks, technical support, and sometimes free land to companies that set up manufacturing plants there. The average Mexican worker in a maquiladora earns around US$9 a day. In China, average wages are around US$1 a day. There are over 11,000 maquiladoras, foreign-owned manufacturing plants located along the U.S.-Mexican border. Most, but not all, are U.S.-owned. Others are owned by Japanese or European companies.(9)

Japan is suffering from an invasion of loan words, mostly English words that are creeping into the language because there is no Japanese equivalent. Because of the unique Japanese writing system (pictograms originally derived from the Chinese), Kanji, loan words are written in a different script, Katakana. Words like word processor and baby sitter are being adopted. Some words evolve. For example, digital camera became degitaru kamera and later, digi kamey. About 10 percent of the words in Japanese dictionaries now are loan words.(8)

An estimated 5,000 languages are spoken in the world today, not including dialects. However, one language is "lost" every two weeks. The expectation is for a monoglot planet in less than 200 years. Global language loss is happening at least in part because political units are forcing their languages on citizens, communication technology(particularly television) is standardizing speech, and English is colonizing trade. English is likely to become the dominant world language. The struggle is between language diversity and uniformity.(7)

The world's top 10 most valuable brands are Coca-Cola, Microsoft, IBM, GE, Intel, Nokia, Disney McDonald's, Marlboro, and Mercedes. All are headquartered in the US with the exception of Nokia (Finland) and Mercedes (Germany). Value is defined as the power of the brand to generate revenue. Global means that 20 percent or more of sales are outside the home country.(6)

The United States is the world's only remaining superpower. For several centuries before World War II, many European states (particularly Germany, England, and France) had roughly equivalent power in a multipolar world system with multiple superpowers. After WWII, two superpowers were left in a bipolar world -- the U.S. and U.S.S.R. Since the fall of the Soviet Union, it is a unipolar world, which makes the US the world's number one economic, political, and military power, as well as the world's number one target. To place this in perspective, the US spends more on its military than the next largest 15 countries combined. The US economy is larger than the next three largest (Japan, Germany, Britain) combined.(5)

AIDS is reshaping Africa. Over 42 million people are infected with HIV and AIDS worldwide, 75 percent in Africa. A 15-year old boy in Botswana has an 80 percent chance of dying from AIDS. The disease is destabilizing countries, reducing life expectancy, orphaning many (often abandoned and disruptive) children, and undermining economies. AIDS is spreading most rapidly in Eastern Europe and Central Asia where approximately 1.2 million people are affected, a number that increased 26.3 percent from 2001 to 2002.(4)

On 1 January 2002, the Euro became the common currency in 12-EU countries -- Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Portugal, and Spain but not in Britain. However, some stores in Britain that cater to visitors from the EU accept the Euro.(3)

Pantone, a New Jersey company, maintains a standard color palette of over 1,932 colors as a consistent reference so colors can be matched worldwide. This ensures that colors like IBM blue are the same, no matter the country in which IBM products are manufactured or sold. Each color carries a six-digit reference code, which is a unique international identifier.(2)

McDonald's plans to open over 100 new restaurants in China each year. McDonald's already has 523 restaurants there, while Yum Brands, Inc. has over 700 KFC's in China.(1)

Sources:
(1) Leslie Chang, "McDonald's Still Plans Growth in China, Despite Cuts in US," Wall Street Journal, 14 November 2002, p.B10.
(2) Shelley Emling, "True Colors," St. Petersburg Times, 16 November 2002, p.F1.
(3) David Fairlamb, "A Dollars-and-Cents Guide to the Euro," BusinessWeek, 21 January 2002, pp.79-80.
(4) Staff, "AIDS: Forty Million Orphans," The Economist, 30 November 2002, p.41; Rachel Zimmerman, "AIDS's Spread Inflames Other Crises," Wall Street Journal, 27 November 2002, p.D3.
(5) Fareed Zakaria, "Our Way," The New Yorker, 14 and 21 October, 2002, pp.72-81.
(6) Gerry Khermouch, "The Best Global Brands," BusinessWeek, 5 August 2002, pp.92-94.
(7) Robert Macfarlane, "A Crossroads with Two Signposts: Diversity and Uniformity," The Spectator, 25 May 2002, pp.46-47.
(8) Mark Magnier, "Glut of Imports Has Many Japanese Lost for Words," Wall Street Journal, 1 December 2002, p.A12.
(9) Eduardo Moncada, "Jobs Leave Mexico for Lower-Wage China," Lexington Herald Leader, 16 December 2002, p.A13.
(10) Reuters, "Wal-Mart Has Rapid International Expansion in Mind," Fox News, 5 July 2003, http://www.foxnews.com/story/0,2933,91079,00.html, accessed 7/05/03; Fox News, "Wal-Mart Opens First Store in Beijing," FoxNews.com, 11 July 2003, http://www.foxnews.com/story/0,2933,91691,00.html, accessed 7/11/03.
(11) Jeffrey Zaslow, "The Fourth WIthout Fireworks: American's Quiet Patriotism Abroad, Wall Street Journal, 3 July 2003, p.D1.
(12) Matthew Benjamin, "A World of Fakes," U.S. News, 14 July 2003.
(13) Clare Ansberry, "Outsourcing Abroad Draws Debate at Home," Wall Street Journal, 14 July 2003, p. A2.
(14) Emery P. Dalesio, "U.S. Textiles, Apparel Face Uphill Battle," Lexington Herald Leader, 18 August 2003, p.C12.
(15) Source: Sandra Marquez, "Immigrants Send Billions to Mexico," Lexington Herald Leader, 1 January 2003, http://www.kentucky.com/mld/heraldleader/business/4852152.htm, accessed 1/1/03.
(16) Staff, "Dollar Falls Further Against the Euro in Light Holiday Trading, Wall Street Journal, 23 December 2004, http://online.wsj.com/article/0,,SB110388018447109242,00.html, accessed 12/24/04; Tom Burroughes, " Global Markets: Stocks Near 4-Yr Highs, Dollar Soft," Reuters, 24 December 2004, http://www.fxstreet.com and http://www.reuters.com, accessed 12/24/04.