Chapter 3 Summary

The world is one big marketplace today. Almost invariably every firm in the U.S. is somehow operating in the global marketplace. In doing so, many of the variables and decisions that must be analyzed and made are more complicated than when working only in a domestic market. Many countries have developed trade blocs to accommodate global trade such as the North American Free Trade Agreement (NAFTA), comprised of Canada, Mexico, and the U.S.; the European Union (EU) an organization of 15 countries; and the Association of Southeast Asian Nations (ASEAN), made up of numerous Southeast Asian countries. Their purpose is to encourage free trade exchange among their respective member nations.

For a firm deciding which countries to export from and import to, a number of external environmental variables need to be analyzed. These include the economic environment, the political and legal environment, the social environment, the natural environment, the technological environment, and the competitive environment. Each contains many elements to consider when deciding if a particular country or region is advantageous to pursue.

Having evaluated the external environmental variables, a firm must then decide how to enter a country or region. It could simply begin exporting or enter into a licensing agreement with the country/region. Another possible mode of entry is through a joint venture. Some firms prefer direct ownership over the other options. Some firms may use combinations of these entering techniques.