Session 1:

International Business & Globalization

MGT 3403_International Business Management
Batch 20.2 / 20.3
Ms Dilki Hansika
Department of Management

NSBM Green University - Department of

Management
International Business
 The Meaning of International Business

Domestic business: a
business that acquires all its
resources and sells its products or
services within a single country.

International business: a
business that is primarily based in a
single country but acquires some
meaningful share of its resources or
revenues (or both) from other
countries.

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References with Additional Note No. 1 uploaded to N Learn
More and more firms around the world
are going global, including:

Manufacturing firms
Service companies (i.e. banks, insurance, consulting firms)
Art, film, and music companies

• International business relates to any

situation where the production or
distribution of goods or services crosses
country borders. ... International
business encompasses a full range of
cross-border exchanges of goods,
services, or resources between two or
more nations.
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 Globalization

McGraw-Hill/Irwin
 GLOBALIZATION
Free exchange of goods, services, factors of
production, information, and ideas between
individuals and organizations of different
countries.

Different Types of Globalization

This is the globalization
• Economic Globalization relevant to this session.

• Cultural Globalization
• Political Globalization
 What is Globalization?
The world is toward an interdependent,
integrated global economic system

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Globalization refers to the shift toward a more
integrated and interdependent world economy,
including two facets:
• Globalization of markets
• Globalization of production
 Aspect 1:
Globalization of
• Marketsof markets refers
Globalization to merging
historically distinct and separate national
markets into one huge global marketplace.

• The “global market” falling trade barriers make it

easier to sell globally.
• consumers’ tastes and preferences are
converging
• firms promote the trend by offering the
same basic products worldwide

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• consumers’ tastes and preferences are
converging.
• Converging global preferences overpower
differences rooted in national cultures and historic
customs.
 • firms promote the trend by offering the same
basic products worldwide
• Cultures and national societal tastes are moving
toward homogenization
Ethnic foods: Beverages:

Costumes: Esthetic:
 Markets have been globalized

over 100 countries worldwide, United States, United Kingdom, Japan, Korea, Australia,
including the United States, Canada, France, Germany, Japan, China, France, Germany and USA.
Mexico, China, India, Japan, the Australia, India, Brazil, and
United Kingdom, Italy, France, South Africa
Germany, Australia, New Zealand,
South Africa, Brazil, Colombia,
Chile, and more

china (7,166 stores), the

United States (3,943
Europe, the Middle 500 stores, and our products stores), Japan (1,140
East, and Africa are available in 110 stores), South Africa (960
Europe, Middle East & Africa; countries around the world. stores), the United
Latin America; North America; Kingdom (928 stores),
and Asia Pacific. Thailand (853 stores),
Malaysia (770 stores),
Aspect 2:
Globalization of Production

Refers to the sourcing of

goods and services from
locations around the
globe to take advantage
of national differences in
the cost and quality of
factors of production like
land, labour,
and capital.

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 Global Institutions
•Institutions are needed to help, manage, regulate, and
police the global marketplace.

•Promote the establishment of multinational treaties to

govern the global business system.

Examples include
•World Trade Organization (WTO)
•International Monetary Fund (IMF)
•World Bank
•United Nations (UN)

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Activity 01
Get into groups and select any of the institutions
below, write down 10 points on the selected
institution.
World Trade Organization (WTO)
International Monetary Fund (IMF)
World Bank
United Nations (UN)
World Trade Organization (WTO)

International Monitory Fund (IMF)

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World Bank

United Nations

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 Drivers of Globalization
Two macro factors underlie the trend toward
greater globalization:
• Declining trade and investment
barriers
• Technological change
• Declining trade and investment barriers
• 1920s – 1930s – erected formidable barriers to
International Trade and Foreign Direct Investments
(ex: 1930 economic depression, feeling of beggar thy neighbour)
• Since 1950, average tariffs have fallen significantly
and are now at about 4%.
• Countries have opened their markets to FDI and
More favourable environment for FDIs
• Drives both the globalization of markets and the
globalization of products.
• Allows firms to base production at the optimal
location for operational activities.
• Development of international trade services.
• Increased volume in world trade in merchandised
goods 1-20
• Technological changes
Microprocessors and Telecommunications
 Growth of high power
 Low-cost computing
 Vastly increasing the amount of information that can be processed by
individuals and firms
The Internet
 The Internet has developed into the information backbone of the global
economy
 E-commerce
 Makes much easier for buyers and sellers to find each other
 Able to coordinate and control a globally dispersed production system
Transportation Technology
 Major innovations in transportation technology
 Development of commercial aircrafts and containerization – simplifies
transshipment from one mode of transport to another
 Containerization – lowering the cost of shipping goods over long distance
(before it was labour intensive, lengthy and costly)
Global value chains
GVC analysis
 Global value chains

The concepts of a global value chain and refer to

the people, roles and activities involved in the
production of goods and services and their supply,
distribution, and post-sales activities when those

activities must be coordinated across

geographies.
Characteristic of a value chain
 The Globalization Debate
Advantages Disadvantages
 Globalisation challenges
with covid 19.
https://www.youtube.com/watch?v=KJhlo6DtJIk

• The pandemic has caused the largest and fastest

decline in international flows — including trade,
foreign direct investment, and international
travel — in modern history
 Activity 02 - 15 minutes
Discuss the threat of deglobalisation with covid 19?
The process of diminishing interdependence and integration
between the economies of nations
Globalization, Jobs and Income
Since globalization business organizations can move to other
countries where labor rates are much lower, to obtain the labor
for their production activities.

Plus side
• In the organizational side it reduce the labor
cost for them.
• In other country (which obtaining the labor)
it create employment opportunities and high
living standards for them.

Mines side
• Sometimes the organization may exploit the
labor in other countries in a cheep price
without proper payment.
(For more infor: refer additional note)
Globalization, Labor Policies and the
Environment
• The Globalization would encourage firms from
developed nations to move to less developed
countries that lack adequate regulations to protect
labour and environment from abuse.

• Pollute the environment

• Employ child labour
• Ignore workplace safety &
health issues

(For more infor: refer additional note)

Globalization and National Sovereignty
• With the globalization the international organization like
WTO, EU, UN have been created for ensuring the smooth
functioning of the world trade and international business.

Plus side
As the countries they can discuss with each other and
make decisions by considering their betterment in
international business.
Mines side
But sometimes the countries who have memberships of
above organizations have to work under their decisions
by bearing the reluctance create them due to those
decisions.
Globalization & the World’s Poor
• The gap between rich nations and poor nations
is getting wider.
• Critics believe that if globalization was beneficial
there should not be a divergence between rich
and poor nations
• Supporters claim that the best way for the
poor nations to improve their situation is to
• reduce barriers to trade and investment
• implement economic policies based on free
market economies
• receive debt forgiveness for debts incurred
under totalitarian regimes

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 Managing in the Global Marketplace
• Managing IB differs from managing a domestic business
because Countries are different – Cultures, Political Systems,
Economic Systems, Legal Systems, and levels of Economic
Development.
Ex: Marketing a product in USA may require a different approach
from marketing the product in India
Managing US workers might require different skills from managing
Japanese workers

• The range of problems confronted in IB is wider and the

problems more complex than those in a domestic business
• Firms should find ways to work within the limits imposed by
government intervention in the international trade and
investment system
• International transactions involve converting money into
different currencies
(For more infor: refer additional note)