International Business Part One Background For International Business

International Business
Part One
Background For International Business
Chapter One
Globalization and International
Business
Chapter Objectives
• To define globalization and international business
and show how they affect each other
• To understand why companies engage in
international business and why international
business growth has accelerated
• To discuss the major criticisms of globalization
• To become familiar with different ways in which a
company can accomplish its global objectives
• To apply social science disciplines to understanding
the differences between international and domestic
business
1-2
Definition of Globalization
The broadening set

of interdependent
relationships
among people
from different
parts of a world
that happens to be
divided into
nations 1-3
The globalization of Healthcare
There is a shortage of
radiologists in the United
States and demand for their
services is growing twice as
fast as the rate of graduation
Solution to the problem
Send images over the
Internet to be interpreted by
radiologists in India
Interdependent Economies
In this interdependent global economy, an American
might drive to work in a car designed in Germany that
was assembled in Mexico by DaimlerChrysler from
components made in the United States and Japan that
were fabricated from Korean steel and Malaysian rubber.
She may have filled the car with Gasoline at a BP service
station owned by a British multinational company. The
gasoline could have been made from oil pumped out of
a well off the coast of Africa by a French oil company
that transported it to the United States in a ship owned
by a Greek shipping line.
Definition of International Business
All commercial
transactions—
including sales,
investments, and
transportation—that
take place between
two or more countries
1-6
Factors in International Business
1-7
Factors in Increased Globalization
• Increase in and expansion of technology
(advances in communication and transportation)
• Liberalization of cross-border trade and resource movements
(previously restricted movements of goods and services)
• Development of services that support international business
• Growing consumer pressures
• Increased global competition
• Changing political situations
• Expanded cross-national cooperation
1-8
The Criticisms of Globalization
• Threats to national sovereignty
• Growth and environmental stress
• Growing income inequality
1-9
Reasons That Firms Engage in International
Business
• Expanding sales
• Acquiring resources
• Minimizing risk
1-10
Modes of Operation in International Business
• Merchandise exports and imports
 Merchandise exports and imports are tangible

products/goods that are respectively sent out
and brought into a country
1-11
What’s the first step? Let’s just export
The internationalization process
• Not all international business is done by MNEs.
• Setting up a part- or wholly-owned subsidiary is usually the last
stage of doing business abroad: firms typically follow an
internationalization path/process by which they enter foreign
markets.
• Exporting: selling from the home country.
• International: when a significant proportion of operations are
outside the home country and these operations are managed
as a separate area.
• Global: when a company treats the whole world as one market
and one source of supply.
• Service exports and imports

 Service Export (Receiver of payments)
 Service Import ( Payer of payment)
For instance
Tourism and Transportation, Service
Performance, Asset Use
1-15
• Investment
 Direct Investment ( FDI/ Foreign Direct
Investment)
 Portfolio Investment (Non controlling financial
interest in an other country)
1-16
A typical internationalization process...
• Initially, the firm might license patents, trademarks, or
technology to a foreign company in exchange for a fee or royalty
• The firm sees potential extra sales by exporting and uses a local
agent or distributor to enter a foreign market
• The firm may use exporting as a “outlet” for its surplus
production and might have no long-term commitment to the
international market
• As exports become more important, the MNE will set up an office
for its sales representative or a sales subsidiary
• The firm might set up local packaging and/or assembly
operations
• Finally, the firm will set up a wholly-owned subsidiary (FDI)
Franchises
8-19
Modes of Entry
Exporting
Licensing
Joint ventures and alliances
Foreign direct investment

Types of International Organizations
• Collaborative arrangements
 Joint Ventures, licensing agreements,
management contract
• Strategic Alliance
 Logistic alliances, services alliance
• Multinational Enterprise (MNE)/ Multinational
Corporation or company (MNC)/ Transnational
company (TNC)
1-20
Views on future of international business and
globalization
• 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.
1-21

International Business Part One Background For International Business

Uploaded by

Copyright:

Available Formats

International Business Part One Background For International Business

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

International Business Part One Background For International Business

Uploaded by

Copyright:

Available Formats

International Business

The broadening set

• Merchandise exports and imports

 Merchandise exports and imports are tangible

• Service exports and imports

Joint ventures and alliances

Foreign direct investment

You might also like