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CH 21] Business 101 21-9

local, in-country, firm or government, sharing the operation's costs, risks,
management, and profits with its local partner. The Chevrolet Prizm is produced by a
joint venture between General Motors and Toyota, called New United Motors 21
Manufacturing Inc., at a plant in Fremont, California. Chrysler and Mitsubishi
Motors opened a joint venture in Bloomington-Normal, Illinois, to produce a new
car. Beretta USA, an Italian company, opened its manufacturing facilities in
Accokeek, Maryland, as a requirement of the US Department of Defense to
manufacture the M9 pistol used by US military forces.
When firms contract production outside the home country, they are engaged in
outsourcing. Ford's Probe illustrates the extent of this trend. The Probe is the outsourcing
Contracting of production to
product of a Ford-Mazda joint venture. The car was designed in Detroit, engineered foreign firms.
in Hiroshima, Japan, and assembled in Flat Rock, Michigan. Sixty percent of the

Probe's parts were made overseas.

Countertrade
Instead of simply selling its product, an exporter may also buy something as well.
This is known as countertrade, a form of international bartering through countertrade
International bartering
agreements. Some degree of countertrade is involved in an estimated 30 percent of agreement.
all international trade. Countertrade is usually used when the buyer has limited
foreign currency, so payment is made in terms of other goods. The foreign currency
in greatest demand in international trade is U.S. dollars. Though trade does occur
with Duetche Marks (DM), and Pounds Sterling (₤). These currencies are generally
considered the most stable and acceptable, along with U.S. dollars, for foreign trade.
On occasion, however, the buyer pays for the goods and the seller agrees to
purchase other merchandise from the buyer, or finds a customer for the buyers’
products. In an effort to head off protectionist legislation in the United States, many
Japanese companies import American products. Once Honda unloads its ships in the
United States, it reloads them for the return trip to Japan with American soybeans,
hay, small airplanes, aluminum scrap, and cattle. Honda is now the United States'
leading exporter of live cattle.
Monsanto Company has two offices coordinating countertrade worldwide, with
countertrade specialists in seven other offices. It sold more than $100 million using
countertrade in a recent year. The company's use of countertrade is almost
exclusively with customers that lack foreign currency, such as Dollars U.S., Duetche
Marks, or Pounds Sterling, in predominantly Eastern European countries and Latin
American debtor nations such as Brazil and Argentina.
One typical countertrade agreement involved the sale of rubber chemicals to
Brazil. The Brazilian government insisted it would not issue an import permit unless
something were exported, so Monsanto bought $3 million worth of tin and sold it on
the world market. In Monsanto's trade with Eastern Europe, countertrade is involved
in a phenomenal 60 percent of its sales. Even though countertrade is a small fraction
of its multi-billion dollars of annual sales, Monsanto’s position is that they are
working toward future growth in potential markets. Monsanto recognizes that it takes
years to build relationships in foreign countries, and Monsanto intends to be there
when the doors open wider for more of our sophisticated products.

The Multinational Corporation
It is important to distinguish between an international firm and a multinational
corporation. An international firm is limited to the first two levels of international
business—selling abroad either through exports or overseas marketing. A multinational corporation
Corporation that operates
multinational corporation, by contrast, operates both production and marketing production and marketing
facilities on an international level. The multinational corporation considers the world facilities on an international
its market. level.

Who Are the Multinationals and How Do They Operate?
As Table 21.3 shows, oil, auto, and chemical companies dominate the list of the
largest U.S. multinational corporations in terms of foreign revenues. All the firms on

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