ch01-introduction to international usiness
Post on 07-Apr-2018
245 Views
Preview:
TRANSCRIPT
-
8/3/2019 CH01-Introduction to International Usiness
1/41
International Business
Chapter 1
1
-
8/3/2019 CH01-Introduction to International Usiness
2/41
-
8/3/2019 CH01-Introduction to International Usiness
3/41
Growth in world trade
Fig 1.1
3
-
8/3/2019 CH01-Introduction to International Usiness
4/41
Growth in fdi
Fig 1.2
4
-
8/3/2019 CH01-Introduction to International Usiness
5/41
Reasons for increased
internationalisation
More open global markets
More globally dispersed value chains
Move from bi-polar to tri-polar (triad) Growth of Regional Trading Arrangements
(RTAs)
Growth of bilateral treaties Bilateral Investment Treaties (BITs)
Double Taxation Treaties (DTTs)
5
-
8/3/2019 CH01-Introduction to International Usiness
6/41
More open global markets
Item 1993 1995 1997 1999 2001 2003 2005 2007
Number of countries
that introducedchange
56 63 76 65 71 82 92 58
Number of regulatory
changes
100 112 150 139 207 242 203 98
More favourable to
fdi
99 106 134 130 193 218 162 74
Less favourable to fdi 1 6 16 9 14 24 41 24
6Source: Adapted from World Investment Report(2008)
-
8/3/2019 CH01-Introduction to International Usiness
7/41
More globally dispersed value chains
(1)Average annual growth rates (%)
2007 ($bn) 198690 199195 19962000
Sales of foreign
affiliates of MNEs
31,197 19.3 8.8 8.4
Total exports of
goods and
services
7,430 15.8 8.7 4.2
Employment of
Foreign affiliates
(thousands)
81,615 5.3 5.5 11.5
Total assets of
foreign affiliates
68,716 17.7 13.7 19.3
7
Source: Adapted from World Development Report2008
Source: Adapted from World Development Report2008
-
8/3/2019 CH01-Introduction to International Usiness
8/41
More globally dispersed value chains
(2)Region 1990
95
(annual
average)
1996-
2000
2001 2002 2003 2004 2005 2006 2007
Developed
countries
145 581 610 484 364 410 680 920 1,248
Developing
countries
74 198 206 220 220 265 310 405 495
South and
CIS
6 8 10 11 20 30 31 58 87
8Source: Adapted from World Development Report 2008
-
8/3/2019 CH01-Introduction to International Usiness
9/41
Bi-polar to tri-polar (triad)
Fig 1.3
9
-
8/3/2019 CH01-Introduction to International Usiness
10/41
Transnationality index (TNI)
TNI is the average of three ratios:
Foreign sales : total sales
Foreign employment: total employment
Foreign assets : total assets
10
-
8/3/2019 CH01-Introduction to International Usiness
11/41
World top 5 multinationals ranked by
foreign assets (and TNI)Ranking
Foreign
assets
Transnationality
index
Company Country Industry Transnationality
index (%)
1 71 General
Electric
USA Electrical and
Electrical Equipment
53
2 14 British
Petroleum
UK Petroleum 80
3 87 Toyota Motor Japan Motor Vehicle 45
4 34 Royal
Dutch/Shell
UK/Netherla
nds
Petroleum 70
5 84 Exxon/Mobil
Corporation
USA Petroleum 68
Source: Adapted from World Development Report2008 11
-
8/3/2019 CH01-Introduction to International Usiness
12/41
Worlds top 5 multinationals ranked by the transnationality
index (and foreign assets), 2006
Ranking
Transnationality
index
Foreign assets Company Country Industry Transnationality
index (%)
1 92 Barrick Gold
Corporation
Canada Gold/Mining 94
2 37 Xstrata plc UK Mining and
quarrying
92
3 48 Linde AG Germany Industrial trucks /
trailers
89
4 77 Pernard Ricard
SA
France Beverages 87
5 68 WPP Group UK Business
Services
87
12Source: Adapted from World Development Report2008
-
8/3/2019 CH01-Introduction to International Usiness
13/41
Transnationality Index for the worlds largest 100
MNEs in their home economies, 1990 and 2006
Average TNI (%) Number of MNEs
Economy 1990 2006 1990 2006
European Union 56.7 74.7 48 52
France 50.9 63.8 14 15
Germany 44.4 54.8 9 14
UK 68.5 72.8 12 13
North America 41.2 60.2 30 25
US 38.5 57.8 28 22
Canada 79.2 78.1 2 3Japan 35.5 52.1 12 9
Rest of the World n.a. n.a. 10 14
All Economies 51.1 61.6 100 100
13Source: Adapted from World Investment Report(2008)
-
8/3/2019 CH01-Introduction to International Usiness
14/41
Transnationality Index of the 100 largest MNEs from
developing economies: by region 2006
Top 100 MNEs from
developing economies
Average TNI
Region/ economy
of which
TNI Number of companies
Africa (South Africa) 45.0 11
South East Asia 52.3 20
East Asia 58.6 56
West Asia 56.5 3
Latin America and the Caribbean 40.1 10
Total 53.9 100
Source: Adapted from World Investment Report2008 14
-
8/3/2019 CH01-Introduction to International Usiness
15/41
Internationalisation Index (II)
Number ofhost economies in which the MNE
has foreign affiliate is a useful indicator of
internationalisation
Internationalisation Index (II)
Ratio of MNE foreign affiliates to total affiliates,
expressed as a percentage
15
-
8/3/2019 CH01-Introduction to International Usiness
16/41
Top 5 MNEs, ranked by number of host
economies in their affiliates
Company Home country No. of host
economies
Internationalisati
on Index (II)%
Transnationality
Index (TNI)%
Deutsche Post AG Germany 111 83 37
Royal Dutch/Shell
Group
Netherlands/Unite
d Kingdom
98 56 70
Nestle SA Switzerland 96 93 83
Siemens AG Germany 89 75 66
BASF AG Germany 88 78 57
16
-
8/3/2019 CH01-Introduction to International Usiness
17/41
Other global patterns and trends
Growth in:
Regional Trading Arrangements (RTAs)
Bilateral Investment Treaties (BITs)
Double Taxation Treaties (DTTs)
Sovereign Wealth Funds (SWFs)
Global security related costs
17
-
8/3/2019 CH01-Introduction to International Usiness
18/41
Regional Trading Arrangements (RTAs)
Free trade areas
Customs unions
Common markets Economic unions
18
-
8/3/2019 CH01-Introduction to International Usiness
19/41
Free trade area
Where member countries reduce or abolish
restrictions on trade with each other while
maintaining their individual protectionist
measures against non-members
19
-
8/3/2019 CH01-Introduction to International Usiness
20/41
Custom unions
Where, as well as freeing trade among
members, a common external tariff is
established to protect the group from imports
from any non-member.
20
-
8/3/2019 CH01-Introduction to International Usiness
21/41
Common market
Where the customs union is extended to
include the free movement of factors of
production as well as products within the
designated area.
21
-
8/3/2019 CH01-Introduction to International Usiness
22/41
Economic union
Where national economic policies are also
harmonised among member states within the
common market.
22
-
8/3/2019 CH01-Introduction to International Usiness
23/41
International competitiveness (1)
Most widely used indicator is Relative Unit
Labour Costs (RULCs)
RULC
Relative Labour Costs x Relative Exchange Rate
Relative Labour Productivity
23
-
8/3/2019 CH01-Introduction to International Usiness
24/41
International competitiveness (2)
Country
Total labour costs ($
per hour)
Total labour costs ($
per hour Index: UK =
100)
Labour productivity
(Index UK = 100)
Mexico 2.6 21.8 35.2
Korea 13.6 20.9 48.4
France 24.6 95.7 118.1
UK 25.7 100.0 100.0
Japan 21.8 84.8 82.4
US 23.7 92.2 116.2
Germany 33.0 128.4 109.7
Source: Adapted from US Department of Labor (2007)Hourly Compensation Costs in Manufacturing: OECD (2007) 24
-
8/3/2019 CH01-Introduction to International Usiness
25/41
International competitiveness (3)
Country Rank
USA 1 Austria 8
Germany 2 Singapore 9
Finland 3 Japan 10
Sweden 4 UK 11
Denmark 5 Hong Kong 12
Switzerland 6 Norway 13
Netherlands 7 Canada 14
Source: Global Competitiveness Report 2007 8 (adapted)25
-
8/3/2019 CH01-Introduction to International Usiness
26/41
Globalisation
Different perspectives
Economists
Political scientists
Sociologists
International relations specialists
26
-
8/3/2019 CH01-Introduction to International Usiness
27/41
Globalisation Definitions (1)
the process of transformation of local phenomena intoglobal ones. It can be described as a process by which the
people of the world are unified into a single society and
function together. This process is a combination of economic,
technological, sociocultural and political forces (Croucher, S.
2003)
a widening, deepening and speeding up of
interconnectedness in all aspects of contemporary social life
from the cultural to the criminal, the financial to the spiritual(Held et al1999)
27
-
8/3/2019 CH01-Introduction to International Usiness
28/41
Globalisation Definitions (2)
.increasing global interconnectedness, so that events in one
part of the world are affected by, have to take account of, and
also influence, other parts of the world. It also refers to an
increasing sense of a single global whole (Tiplady, R. 2003)
the worldwide movement towards economic, financial,
trade and communications integration. Globalisation implies
opening out beyond local and nationalistic perspectives to a
broader outlook of an interconnected and inter-dependent
world with the free transfer of capital, goods and servicesacross national frontiers (Business Dictionary)
28
-
8/3/2019 CH01-Introduction to International Usiness
29/41
Globalisation Definitions (3)
refers to the shift toward a more integrated andinterdependent world economy*through+ the
merging of historically distinct and separate national
markets into one huge global market place (Hill, C.
2005, p.6)
process by which the whole world becomes a
single market. This means that goods and services,
capital and labour are traded on a worldwide basis,
and information and the results of research flow
readily between countries (Black, J. 2002)
29
-
8/3/2019 CH01-Introduction to International Usiness
30/41
Globalisation Definitions (4)
reflects a business orientation based on the
belief that the world is becoming more
homogenous and that distinctions between
national markets are not only fading but, forsome products, will eventually disappear
(Czinkota, M., Ronkainen, I., Moffat, M. 1999,
p.454)
30
-
8/3/2019 CH01-Introduction to International Usiness
31/41
Globalisation characteristics (1)
Shrinking space
Shrinking time
Disappearing borders
31
-
8/3/2019 CH01-Introduction to International Usiness
32/41
Globalisation characteristics (2)
New markets
New tools of communications
New actors
New rules and norms
32
-
8/3/2019 CH01-Introduction to International Usiness
33/41
New markets
Growing global markets in services banking,insurance, transport.
New financial markets deregulated, globally
linked, working around the clock, with actionat a distance in real time, with new
instruments such as derivatives.
Deregulation of antitrust laws and growth ofmergers and acquisitions.
Global consumer markets with global brands
33
-
8/3/2019 CH01-Introduction to International Usiness
34/41
New tools of communication
Internet and electronic communications
linking many people simultaneously.
Cellular phones and mobile telephony.
Fax machines.
Faster and cheaper transport by air, rail, sea
and road.
Computer-aided design and manufacture
34
-
8/3/2019 CH01-Introduction to International Usiness
35/41
New actors (1)
Multinational corporations integrating theirproduction and marketing, dominating world
production.
The World Trade Organisation the first multilateral
organisation with authority to force nationalgovernments to comply with trade rules.
A growing international network of non-
governmental organisations (NGOs).
35
-
8/3/2019 CH01-Introduction to International Usiness
36/41
New actors (2)
Regional blocs proliferating and gaining
importance European Union, Association of
South-East Asian Nations, Mercosur, North
American Free Trade Association, SouthernAfrican Development Community, among
many others
More policy coordination groups : G-7, G-8,OECD, IMF, World Bank
36
-
8/3/2019 CH01-Introduction to International Usiness
37/41
New rules and norms (1)
Market economic policies spreading around the
world, with greater privatisation and liberalisation
than in earlier decades
Widespread adoption of democracy as the choice ofpolitical regime
Human rights conventions and instruments building
up in both coverage and number of signatories and
growing awareness among people around the world.
Consensus goals and action agenda for development
37
-
8/3/2019 CH01-Introduction to International Usiness
38/41
New rules and norms (2)
Conventions and agreements on the global
environment biodiversity, ozone layer, disposal of
hazardous wastes, desertification, climate change
Multilateral agreements in trade, taking on such newagendas as environmental and social conditions
New multilateral agreements for services,
intellectual property, communications more
binding on national governments than any previous
agreements
38
-
8/3/2019 CH01-Introduction to International Usiness
39/41
Globalisation outcomes
Hyperglobalists: powerless nations at the
mercy of footloose MNEs which grow ever
stronger
Transformationalists: no clear predictions
possible as to eventual outcomes of
globalisation
39
f l f
-
8/3/2019 CH01-Introduction to International Usiness
40/41
Transformationalist view of
globalisation
Conflicting tendencies
Universalisation v particularisation
Homogenisation v differentiation
Integration v fragmentation
40
-
8/3/2019 CH01-Introduction to International Usiness
41/41
Globalisation and Nation State
Issues include:
Loss of competence
Loss of autonomy
Loss of legitimacy
41
top related