How international business can be globalized

1. Globalizationand
International Business

2. Introduction
𝗈 Globalization is the ongoing process that
deepens and broadens the relationships and
interdependence among countries
𝗈 International business is a mechanism to bring
about globalization
𝗈 International business consists of all commercial
transactions—including sales, investments, and
transportation—that take place between two or
more countries
𝗈 increasingly foreign countries are a source of
both production and sales for domestic
companies
1-3

3. Introduction
𝗈 It is important to study international business
because
𝗈 Most companies are either international or
compete with international companies
𝗈 Modes of operations may differ from those
used domestically
𝗈 The best way of conducting business may
differ by country
𝗈 An understanding helps you make better
career decisions
𝗈 An understanding helps you decide what
government policies to support
1-4

4. Introduction
Factorsin International Business Operations
1-5

5. ForcesDriving Globalization
1
. Increase in and application of technology
2. Liberalization of cross-border trade and
resource movements
3. Development of services that support
international business
4. Growing consumer pressures
5
. Increased global competition
6. Changing political situations
7. Expanded cross-national cooperation
1-6

6. Measuring Globalization
𝗈 Globalization can be difficult to measure
𝗈 The A.T. Kearney/Foreign Policy Globalization
Index ranks countries by
𝗈 Economic dimensions
𝗈 Technological dimensions
𝗈 Personal contact
𝗈 Political dimensions
𝗈 recently ranked Singapore and Hong
Kong asmost globalized
1-7

7. Costsof Globalization
𝗈 Threatsto national sovereignty
𝗈 lose freedom to “act locally”
𝗈 Economic growth and environmental stress
𝗈 growth consumes nonrenewable natural resources
and increases environmental damage
𝗈 Growing income inequality and personal stress
𝗈 promotes global superstars at the expense of others
𝗈 Offshoring involves the transferring of production
abroad
𝗈 it can be beneficial because it reduces costs
𝗈 but, it also means that jobs move abroad
𝗈 Yet, offshoring may also create new, better jobs at
home
1-9

8. Why Companies Engage in IB
𝗈 To expand sales
𝗈 pursuing international sales increases the
potential market and potential profits
𝗈 To acquire resources
𝗈 may give companies lower costs, new and
better products, and additional operating
knowledge
𝗈 To diversify or reduce risks
𝗈 international operations may reduce
operating risk by smoothing sales and profits,
preventing competitors from gaining
advantage
1-11

9. Why Companies Engage in IB
𝗈 These three reasons
𝗈 sales expansion
𝗈 resource acquisition
𝗈 risk minimization
guide all decisions about whether, where, and
how to engage in international business
1-12

10. Modesof Operations in I
B
𝗈 Merchandise exports
𝗈 goodsthat are sent out of a country
𝗈 Merchandise imports
𝗈 goodsthat are brought into a country
Sometimes referred to as visible exports and imports
𝗈 Service exports
𝗈 providerand receiverof payment
𝗈 T
u
rnkey Operation and Management Contracts
𝗈 Asset Use
𝗈 L
icensing and Frenchising
𝗈 Service imports
𝗈 recipient and payer of payment
𝗈 Examples
𝗈 Tourism and transportation
𝗈 Service performance
1-14

11. Modesof Operations in I
B
Investments:
𝗈 Foreign DirectI
nvestment (FDI)
in a foreign
𝗈 investor takes a controlling interest
company
𝗈 Joint Venture
𝗈 Portfolio Investment
𝗈 a non-controlling financial interest in another
entity
1-15

12. Typesof
International Organizations
𝗈 Collaborative arrangements
𝗈 Joint ventures
𝗈 Licensing arrangements
𝗈 Management contracts
𝗈 Minority ownership
𝗈 Long-term contractual arrangements
𝗈 Strategic alliance
𝗈 companies that work together, but the
agreement iscritical to at least one partner
𝗈 an agreement that does not involve joint
ownership
1-16

13. Typesof
I
nternational Organizations
𝗈 Multinational enterprises(MNEs)
𝗈 take a global approach to markets and production or
have operations in more than one country
𝗈 Sometimes they are referred to as
𝗈 multinational corporations (MNCs)
𝗈 multinational companies (MNCs)
𝗈 transnational companies (TNCs)
𝗈 In foreign markets, companies may have to adapt their
typical methods of doing business
𝗈 foreign conditionsmay dictate a particularmethod
𝗈 operating modes may be different from those used
domestically
1-17

14. Why I
B isDifferent
𝗈 The external environment affects a
company’sinternational operations
𝗈 Managers must understand social science
disciplines and how they affect functional
businessfields
𝗈 Consider
𝗈 physical factors
𝗈 social factors
𝗈 competitive factors
1-19

15. Physical and Social Factors
𝗈 Geographic influences
𝗈 natural conditions influence production
locations
𝗈 Political policies
𝗈 determines where and how business occurs
𝗈 Legal policies
𝗈 influence how a company operates
𝗈 Behavioral factors
𝗈 may require changes in operations
𝗈 Economic forces
𝗈 explain differences in costs, currency values,
market size
1-20

16. The Competitive
Environment
𝗈 Competitive strategy for products
𝗈 Cost strategy
𝗈 Differentiation strategy
𝗈 Focusstrategy
𝗈 Company resourcesand experience
𝗈 market leaders have more resources for international
operations
𝗈 Competitors faced in each market
𝗈 local or international
𝗈 So, a company’scompetitive strategy influences
how and where it can best operate
𝗈 Itscompetitive situation may differ from country to
country in termsof itsrelative strength and which
competitors it faces
1-21

17. Looking to the Future
𝗈 Three major perspectives on the future of
international businessand globalization
𝗈 Further globalization isinevitable
𝗈 International business will grow primarily
along regional rather than global lines
𝗈 Forces working against further
globalization and international business
will slow down both trends
1-23