Measuring Productivity

Total output of all goods and services divided by total number of hours worked.

Theories of absolute and comparative advantage

1. Absolute Advantage
- When a country has a natural advantage in producing some products such as oil in Saudi
Arabia, gold in South Africa, wheat in the US.
2. Comparative Advantage
- Companies should make (and sell to others) only those products that it makes efficiently. It
should buy from others goods that it does not make competitively such as high end clothing
in Italy, perfume in France, weapons in the US.

Measuring Global Trade

1. Balance of Trade
Total value of imports compared with exports
2. Balance of Payments
Money entering a country from exports versus the money leaving from imports plus money from
tourism, foreign investment, etc.

1. Trade Surplus- when exports exceed imports

2. Trade Deficet- when imports exceed exports
3. Dumping- selling products in a foreign country at lower prices than those charged in the
producing country or selling below the cost of production

Pejorative- bad spin on a word, sounds bad

Euphemism- makes it sound better

International Business
Importing- buying products from another country
Exporting- selling products to another country
Multinational Corporation- a firm that is headquartered in one country but makes and sells its
products in many countries
Outsourcing- taking jobs that were once performed inside a company and shifting them outside to a
usually lower cost supplier.

Activia (yogurt) “the marketing of science”

- Group Danone (Paris) – Evian water
- Bacteria as a point of differentiation
- As a drug/ heathcare product
- Designed to facilitate regularity
- Follows other “drug-like” brands in Europe
 - 2 billions in 2007 sales
- Introduced in US. In 2006
- Twice the price of regular yogurt
- Result-most successful food industry product launch in recent history

A Hint?
- Danone spends 1.25% of revenues on R&D = $240 millions

Entering Global Markets

1. Licensing - When a company “rents” its brand name to a foreign company for a percentage fee-
Gucci watches, D&G sunglasses
2. Franchising- when a company provides an entire package- McDonald’s Dunkin Donuts- to
someone in a foreign market
3. Exporting- selling a product made in one country directly in another country
4. Contract Manufacturing- making a product in another country – as Nike makes its sneakers in
Chinese factories that it does not own.
5. Joint Ventures and Strategic Alliances- a partnership between a firm located in one country with
a firm in another
6. Foreign Direct Investment- when a foreign firm buys a business in the host market (Germany’s
Mercedes buying Crysler), or sets up factories (Toyota, Honda) in the host country (Kentuky,
Chio)

Socio-cultural Differences
Lost in Translation
- “zit” chocolate from Germany
- “Siff” bear
- Donkey king
- “Mist Stic”- Mamnre Wond

Lacoste- Brand
“Harvesting” followed by “Brand Resurrection”
Rene Lacoste –French tennis champ “Le Crocodile” in the 1920.
1933- Lacoste retires and creates first crocodile logo: first “exterior” logo fashion
1952- Lacoste enters U.S. market as a high status, prestige men’s brand

Brand Harvesting (important)

Definition: Harvesting occurs when a firm tries to extract as much cash out of a brand as they can
over a short period w/ no regard for the long-term prospects for the brand

The story
1969- Cereal maker General Mills buys U.S. Lacoste license for $30 millions
1975- General Mills ends imports from France and begins low-cost Asian manufacturing: no more
“capped”

Lacoste and Izod are now Separate brands

French Family’s strategy is to go back up market

- classic luxury good strategy
- made again in France

 Sales soar 1,ooo% between 2000 and 2006

 Back to being a luxury brand
 In 1990s, 90% men buyers
 2006, 55% men and 45% women in USA

Phillips- Van Heusen- As of 2007 it owes :Izod,

Trade Protectionism
Using government and political pressure to limit imports and favor domestic producers and jobs.
1. Protective Tariffs: Taxes on imports to make them more expensive and less competitive
2. Revenue Tariffs: Taxes on imports that raise money for the government
3. Nontariff Barriers: Requiring imports to meet onerous product standards that raise costs.
Requiring imports to go through undermanned or inconvenient custom posts
4. Import Quotas: Allows only a specific number of imports to enter a country.
5. Voluntary Export Restraint: when companies under the threat of formal quotas agree to limit
imports.
6. Embargo: A complete ban on imports or exports from entering a country.

1. Dumping
2. Protective vs. revenue tariffs
3. Nontariff Barriers
- requiring imports to meet onerous standard or go through undermand or inconvenient
custom posts
- Whistleblower: people who report illegal or unethical behavior at their firm

Classifying Business Decisions According to Ethical & Legal relationship

“No interest for 12 months”
 In exactly 12 months you have to pay off balance in full
 If not, you pay interest for the previous 12 months at an interest up to 30%
 40% of all rebates are never redeemed.
Cherny – legal
Compliance- based ethics
 Increases control
 Penalizes wrongdoers
 Compliance from handbook
 Negative tone

Integrity- based ethics

 Bosses are the model
 Ethical behavior by example
 Ethics are guiding value
 A positive tone