Download Globalization and International Business

International
Business
Environments & Operations
15e
Daniels
●
Radebaugh
●
Copyright © 2015 Pearson Education, Inc.
Sullivan
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Chapter 1
Globalization and
International
Business
Copyright © 2015 Pearson Education, Inc.
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Learning Objectives
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Define globalization and international business
and explain how they affect each other
Grasp why companies engage in international
business and why its growth has accelerated
Discuss globalization’s future and the major
criticisms of it
Illustrate the different ways a company can
accomplish its global objectives
Recognize the need to apply social science
disciplines to understand how international and
domestic business differ
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Introduction
Globalization is the widening set of
interdependent relationships among
people from different parts of a world
divided into nations
 The term sometimes refers to the
elimination of barriers to international
movement of goods, services, capital,
technology, and people that influence the
integration of world economies
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Introduction
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International business consists of all
commercial transactions—including sales,
investments, and transportation—that
take place between two or more countries
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increasingly foreign countries are a source of
both production and sales for domestic
companies
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Introduction
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It is important to study international
business because
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Most companies are either international or
compete with international companies
Global events and competition affect almost all
companies, regardless of industry
International companies have more complex
environments than domestic firms.
An understanding of IB helps you make better
career decisions
An understanding helps you decide what
government policies to support
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Introduction
Factors in International Business Operations
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Forces Driving Globalization
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Increase in and application of technology
Liberalization of cross-border trade and
resource movements
Development of services that support
international business
Growth of consumer pressures
Increased global competition
Changing political situations and
government policies
Expanded cross-national cooperation
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Costs of Globalization
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Threats to national sovereignty
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Economic growth and environmental
stress
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lose freedom to “act locally”
growth consumes nonrenewable natural
resources and increases environmental
damage
Growing income inequality and personal
stress
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promotes global superstars at the expense of
others
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Costs of Globalization
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Offshoring, a type of outsourcing,
involves the transferring of production
abroad
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it can be beneficial because it reduces costs
but, it also means that jobs move abroad
Yet, offshoring may also create new,
better jobs at home
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Why Companies Engage in IB
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To expand sales
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To acquire resources
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pursuing international sales increases the
potential market and potential profits
may give companies lower costs, new and
better products, and additional operating
knowledge
To diversify or reduce risks
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international operations may reduce operating
risk by smoothing sales and profits, preventing
competitors from gaining advantage
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Modes of Operations in IB
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Merchandise exports
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Merchandise imports
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goods that are sent out of a country
goods that are brought into a country
Sometimes referred to as visible exports
and imports
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Modes of Operations in IB
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Service exports
 provider and receiver of payment
Service imports
 recipient and payer of payment
Examples
 Tourism and transportation
 Service performance
 turnkey operations and management
contracts
 Asset use
 licensing and franchising
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Modes of Operations in IB
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Investments
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Foreign Direct Investment (FDI)
 investor takes a controlling interest in a
foreign company
 joint venture
Portfolio Investment
 a non-controlling financial interest in
another entity
 Mutual funds often include international
companies
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Modes of Operation in IB
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Collaborative arrangements
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Joint ventures
Licensing arrangements
Management contracts
Minority ownership
Long-term contractual arrangements
Strategic alliance
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companies that work together, but the
agreement is critical to at least one partner
an agreement that does not involve joint
ownership
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Types of International
Organizations
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Multinational enterprises (MNEs)
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take a global approach to markets and
production or have operations in more than
one country
Sometimes they are referred to as
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multinational corporations (MNCs)
multinational companies (MNCs)
transnational companies (TNCs)
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Types of International
Organizations
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In foreign markets, companies often have
to adapt their typical methods of doing
business
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foreign conditions may dictate a particular
method
operating modes may be different from those
used domestically
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Why IB is Different
The external environment affects a
company’s international operations
 Managers must understand social science
disciplines and how they affect functional
business fields
 Consider
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physical factors
social factors
competitive factors
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Physical and Social Factors
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Geographic influences
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Political policies
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influence how a company operates
Behavioral factors
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countries determine where and how business occurs
within their borders
Legal policies
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natural conditions influence business locations
may require adaptation in to local conditions
Economic forces
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explain differences in costs, currency values, market size
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The Competitive Environment
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Competitive strategy for products
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Company resources and experience
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Cost strategy
Differentiation strategy
Focus strategy
market leaders have more resources for
international operations
Competitors faced in each market
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local or international
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Future of Globalization
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Three major perspectives on the future of
international business and globalization
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Further globalization is inevitable
International business will grow primarily along
regional rather than global lines
Forces working against further globalization
and international business will slow down both
trends
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Global Governance
Politics/Peace- United Nations
 Trade- World Trade Organization (WTO)
 Money/Finance- International Monetary
Fund (IMF)
 Development- World Bank
 Overall- G8 Nations (USA, Canada, UK,
France, Germany, Italy, Japan, and
Russia)
 Other international organizations and
bodies
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Chapter 1: Discussion Questions
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Define globalization and explain the forces
driving globalization.
Define globalization and explain the cost and
future of globalization.
What is global governance? Explain the role of
each institution in Global Governance.
What is Globalization Index? Explain the
construct and methodology in evaluating the
countries.
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