WHY GO GLOBAL?

REASONS FOR GLOBAL MARKETING/BUSINESS

• Need for sales-growth.

• Need to reduce costs by sourcing raw materials, inputs, or final products.

• Need to gain competitive edge--economies of scale or strategic posturing.

SEEKING MARKETS

• The largest single domestic market--the U.S.--is only 25% of the total world market. 75% is outside.

–Coca Cola derives over 70% sales and 80% profits from overseas markets.

• Second largest market is Japan at 15% of the total world market.

• Among the European markets, Germany is the largest at only 6% of the total world market.

• Other countries have even smaller markets.

SEEKING INPUTS

• Minerals

• Farm Produce

• Forest Products

• Labor

STRATEGIC POSTURING

CAT versus KOMATSU

WHAT ARE THE DRIVERS OF GLOBALIZATION

• TECHNOLOGICAL FACTORS– TRAVEL & TRANSPORT– TELE-COMMUNICATIONS– MEDIA

• SOCIO-POLITICAL FACTORS– REDUCTION OF TRADE BARRIERS– MARKET LIBERALIZATION– INTERDEPENDENCE

“A JET GOES SO FAR--IT BRINGS PEOPLE TOGETHER.”--BOEING.

• JET TRAVEL IS ONE OF THE MOST EXCITING DEVELOPMENTS OF OUR TIMES.

• THE FIRST U.S. PASSENGER JET WAS BUILT BY BOEING IN 1958. B-707 COULD CARRY 181 PASSENGERS AT A SPEED OF 550 M/HR.

• THE JUMBO (B-747) SHOWN HERE DEBUTED IN 1969.

AIRCRAFTSTYPE SEATS SPEED RANGE nm

B-747-400 416 565nm/hr 7330 (14 Hr)

B-777-300 365 565 7250 (14 Hr)

B-777-200 301 565 8820 (18 Hr)

B-737-800 162 530 2942

A-340-200 239 578 8000

A-330-200 253 578 6400

DC-10-40 250 600 5000

WORLD TRAVEL FIGURES• IN 2000, NUMBER OF PASSENGERS

ON SCHEDULED DOMESTIC AIRLINES WAS 1.1 B AND INTERNATIONAL AIRLINES WAS 0.5 B.

• IN 1988, THE CORRESPONDING FIGURES WERE 0.8 B AND 0.3 B.

• GROWTH IS EXPECTED TO REMAIN AT ABOUT 5% PER YEAR.

• Source; ICAO (May 2001)

TRAVEL FIGURES FOR U.S.

• NUMBER OF INTERNATIONAL TRAVERLERS HAS INCREASED FROM 5.5M IN 1960 TO 55.5M IN 2000.

• AVERAGE DISTANCE TRAVELED HAS INCREASED FROM 1,510 MILES IN 1960 TO 3,322 MILES IN 2000.

• NUMBER OF DOMESTIC TRAVELERS INCREASED FROM 52.4 M IN 1960 TO 610 M IN 2000, REPRESENTING OVER HALF OF DOMESTIC WORLD TRAVEL.

• Source: air-transport.org

MEGA AIRCRAFTS

• A3XX-100 IS DESIGNED TO CARRY 481-656 PASSENGERS AND FLY 8000 NM.

• BOEING IS CONTEMPLATING A 800-1000 PASSENGER PLANE

TRANSPORTATION

• CONTAINERIZATION HAS BEEN THE BIGGEST SINGLE TECHNOLOGICAL INNOVATION IN SHIPPING.

• OTHERS INCLUDE:– SIZE– SPEED– HANDLING

CONTAINER SHIPS

• A 40’ CONTAINER CAN CARRY 4403 VCRs OR 10,000 PAIRS OF SHOES.

• NEWER SHIPS CAN CARRY 3,300 40’ CONTAINERS. USUAL IS 500-1000.

• A 100 CAR DOUBLE-DECK FREIGHT TRAIN CAN CARRY 200 40’ CONTAINERS.

SPEED

• SINGAPORE-NEW YORK JOURNEY TAKES 21 DAYS WHILE SINGAPORE TO LOS ANGELES TAKES 23 DAYS.

• AVERAGE TIME TAKEN TO HANDLE AND CLEAR A SHIPMENT IS LESS THAN 1 DAY IN SINGAPORE, 3 DAYS IN THE U.S. AND 15 DAYS IN JAPAN.

TRIVIA TIME

• WHICH PORT HANDLES THE LARGEST VOLUME OF CARGO? (‘99: 326 M MT)

• WHICH PORT HANDLES THE SECOND LARGEST VOLUME OF CARGO? (‘99: 304 M MT)

• SOUTH LOUISIANA IS #3 AT 194 M MT• Source: infoplease.com/ipa

TRIVIA TIME

• WHICH PORT HANDLES THE LARGEST CONTAINER TRAFFIC?

(‘99: 8.10 M 40’ CONTAINERS)

• WHICH PORT HANDLES THE SECOND LARGEST CONTAINER TRAFFIC?

(‘99: 7.97 M 40’ CONTAINERS)

• LA IS #6 AT 2.2 M 40’ CONTAINERS• Source: infoplease.com/ipa

WORLD AIR CARGO

• IN 1999, THE WORLD AIR CARGO WAS ABOUT 28.2 m mt (67.5 b ton-mile), OF WHICH 17.2 m mt (57.9 b ton-mile) COMPRISED OF INTERNATIONAL FREIGHT.

• A JUMBO SHOWN HERE CAN CARRY UP TO 124 mt OF CARGO OR ABOUT 5 40’ CONTAINERS.

• Source: icao.int/icao/en/nr/pio200106..htm

AIR TRANSPORT IN THE U.S.

• U.S. INTERNATIONAL AIRCARGO INCREASED FROM 1.30 b ton-miles IN 1970 TO 13.2 b ton-miles IN 2000.

• U.S. DOMESTIC AIRCARGO INCREASED FROM 2.2 b ton-miles IN 1970 TO 7.9 b ton-miles IN 2000.

• WHILE ONLY 5% OF U.S. TRADE BY WEIGHT IS HANDLED BY AIR, IT CONSTITUTES 25% OF TRADED VALUE.

•Source: air-transport.org

TRUCKING• CONTAINERIZATION HAS

REVOLUTIONALIZED TRUCKING TOO.• U.S. IMPORTS FROM MEXICO 20.7 M MT

(2000) BY TRUCK VALUED AT $88.7 B• U.S. IMPORTS FROM CANADA 65.7 M MT

(2000) BY TRUCK VALUED AT $127.8 B• Source: bts.gov/ntda/tbscd/reports/nat_m2000.html & 2000.html• Source: bts.gov/transborder/reports/weight/new_mlb20001.html & clb2001.html

RAIL

• U.S. IMPORTS FROM MEXICO 6.6 M MT (2000) BY RAIL VALUED AT $21.1 B

• U.S. IMPORTS FROM CANADA 60 M MT (2000) BY RAIL VALUED AT $49.7 B.

CAPACITY

• EVEN IN 1960, TRANSATLANTIC CABLE COULD CARRY ONLY 138 CONVERSATIONS SIMULTANEOUSLY.

• NOW A FIBER OPTIC CABLE CAN CARRY UP TO 1.5M CONVERSATIONS.

• WHAT DO YOU THINK HAPPENED TO COST??

MEDIA

• THE REACH OF TELEVISION AND PRINT MEDIA HAS BECOME GLOBAL.

• ADVERTISING COMPANIES HAVE BECOME GLOBAL.

• IT IS EASY TO REACH PEOPLE IN DIFFERENT COUNTRIES MORE COST EFFECTIVELY.

SOCIO-POLITICAL FACTORS

• REDUCTION OF TRADE BARRIERS

• MARKET LIBERALIZATION

• INTERDEPENDENCE

TRADE LIBERALIZATION

• EXPORT VOLUME HAS INCREASED OVER 17 TIMES SINCE 1950 (FROM $420B IN 1950 TO $7300B IN 1999)

• INVESTMENT HAS INCREASED OVER 25 TIMES SINCE 1950 (FROM $14B IN 1950 TO $350B NOW).

• TARIFFS AND RESTRICTIONS HAVE FALLEN WORLDWIDE. GATT/ WTO

• Source: worldbank.org/data/databytopic/databytopic.html#INTERNATIONAL%20ECONOMICS

Emerging Market Access IndexOpenness to Trade

• Singapore• Chile• Hong Kong• Estonia• Peru• Slovenia• South Africa

Lithuania

Venezuela

Taiwan

Kuwait

Latvia

Romania

Israel

Mexico

Zimbabwe

Hungary

Argentina

Colombia

Turkey

Czech Rep.

Egypt

Philippines

Poland

South Korea

Bulgaria

Thailand

Slovakia

BENEFITS OF FREE TRADE• SPECIALIZATION LEADS TO

EXPLOITATION OF COMPARATIVE ADVANTAGE.

• CONSUMERS HAVE GREATER CHOICE.

• AN OPEN DOMESTIC MARKET IS A SOURCE OF COMEPTITIVE STRENGTH.

• COUNTRIES WITH OPEN TRADE HAVE DEVELOPED MUCH FASTER.

INTERDEPENDENCE

TRADE AND INVESTMENT LIBERALIZATION HAS LED TO DEEPER FORMS OF ECONOMIC INTERDEPENDENCE AMONG

NATIONS.