International Business in English

BUS 460

CHAPTER 1INTERNATIONAL BUSINESS

IN THE TWENTY-FIRST CENTURY

Introduction:The broad environment includes:The economy, the political and technological

world, and sociological issues.The specific environment includes:Customer-supplier relations, investor

requirements, workplace issues and individual financial and operational requirements.

Introduction:Companies entering international business in

the next decade face challenges that are any different from to those which they would have encountered in the 1950s, 70s, or 90.

The answer is, Almost inevitably, yes.

The Role of HistoryHistory colours the present and nurtures the

future.The distribution of wealth across the world

today is a consequence of several thousand years of economic change.

Over the course of history:We have witnessed an increasing

internationalization of business activity, particularly during the twentieth century.

The Role of HistoryCompanies may manufacture components in

several different countries.Assemble them in another .and then sell the finished product globally.

The Political EnvironmentSome political factors that would influence

business:1- The integration of Less Developed

Countries (LDC’s) and formally centrally planned economies into the international economy.

2- The difficulties and the opportunities raised by economic inequalities across the world.

3- The sheer size of the world’s largest multinational companies (MNCs), raises issues of where the center of control?

In the boardroom or in government.

The Political EnvironmentSome political factors that would influence business:

4 -The role of major world institutions such as the

Organization for Economic Cooperation and Development (OECD), World Bank, World Trade Organization (WTO), the European Commission and the International Monetary Fund (IMF).

In relation to:The direction of international trade and investment.5- The twentieth-century division of the world into

geographic areas which were ‘the home’ countries of MNC’s and ‘the host’ countries is now: disappearing.

The Political EnvironmentSome political factors that would influence

business:6- Environmental concerns:As consumers and governments recognize

the direct environmental impact of greater industrial production resulting from higher level of general consumption,

The question of whether market or regulatory mechanism should be used to limit levels of:

International pollution.

Economics:Internalization – or Globalization of business

over the last 100 years can be said to have re-drafted the world economic map.

In particular, over the last 50 years, we have witnessed international economic agreements which:

Liberalized trade and capital flows, andLed to the establishment of regional

economic groupings.

Economics:The process of trade liberalization was set in

motion by the General Agreement on Tariff and Trade (GATT), established in 1947.

After 8 different rounds of multilateral trade negotiations over 50 years:

The conclusion of the Uruguay Round of GATT in December 1993 marked the end of the GATT achievements in:

Cutting import duties and tariffs. AndCreating a new multinational framework for

world trade.

Economics:In January 1995,GATT was replaced by :The World Trade Organization (WTO), a

regulatory body which now defines and enforces rules.

Which cover 90% of world trade.

Economics: (Challenges)Challenges which will be need to be faced by

organizations seeking to expand their international operations:

1- The increased competition arising from a greater freedom of world trade.

2- The changing distribution of economic activity across the globe arising from the importance of regional trading blocks.

Economics: (Challenges)3- The threat created by increased level of

foreign direct investment, made easier by highly efficient international financial markets.

4- The need to devise strategies which take the maximum advantage of trading and investment opportunities within regional trading blocks.

5- Acceptance of changes in corporate structures in order to match the strategic changes required to survive the global marketplace.

The Technological EnvironmentTechnological changes drove the first industrial

revolution in the 19th century.And, seems set to drive a second one some two

centuries later.The impact of technology upon international

business can be classified under three separate headings:

1- Transportation.2- Communication.3- Product and process innovation, and sales and

marketing.

The Technological Environment1- TransportationTransportation has , over the centuries, led to

global shrinkage.In the 19th century the railways and steamships

made it much easier for goods to be transported over long distances relatively quickly.

The 20th century developments of the jet engine and containerized shipping speeded the process still further.

The usefulness of such technology from a business prospective is the extent to which it facilitates geographic specialization.

The Technological Environment2- CommunicationCommunication technology has been revolutionized

over the last 50 years. Firstly, by satellites and more recently by the use of optic fiber and digital systems.

The time required to send data from one side of the world to the other has shrunk to almost nothing.

Example:It is now possible for a multinational company to

run its design office at the other side of the world from its production units. Because it is simple to transmit data through high tech technology and videoconferencing.

The Technological Environment3- Product and ProcessSince the mid 20th century, the key change in

production technology has been the progress from traditional automated mass productions,

Via, numerically controlled methods (CNC) and Computer-Aided Design and Manufacturing (CAD-CAM),

Into flexible manufacturing systems (FMS).

The Technological Environment3- Product and ProcessThe use of FMS offers benefits in terms of

product design, because it makes design modification easier and lower cost.

As a result, where the competitive environment has created a short product life cycle which demands regular innovation,

The firm using the flexible technology are at an advantage.

The Technological Environment3- Product and ProcessLarge-scale multinational producers tend to

be the main users, ..Because the cost, risks and complexity of

investing in the technology mean that ..Large markets need to be available in order

to earn a reasonable return on investment (ROI).

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