copyright © 2013 pearson education, inc. publishing as prentice hall 1-1 international business...

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

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International Business

Environments & Operations

14e

Daniels ● Radebaugh ● Sullivan


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Chapter 1

Globalization and International Business


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Learning 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 globalization’s future and 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


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IntroductionLearning Objective 1: To define globalization and international business and show how they affect each other


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Introduction Globalization is the ongoing process that

deepens and broadens the relationships and interdependence among countries

International business is a mechanism to bring about globalization


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Introduction International business consists of all

commercial transactions—including sales, investments, and transportation—that take place between two or more countries increasingly foreign countries are a source of

both production and sales for domestic companies


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Introduction It is important to study international

business because Most companies are either international or

compete with international companies Modes of operations may differ from those

used domestically The best way of conducting business may

differ by country An understanding helps you make better

career decisions An understanding helps you decide what

government policies to support


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IntroductionFactors in International Business Operations


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Forces Driving Globalization

1. Increase in and application of technology2. Liberalization of cross-border trade and

resource movements3. Development of services that support

international business4. Growing consumer pressures5. Increased global competition6. Changing political situations7. Expanded cross-national cooperation


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Measuring Globalization Globalization can be difficult to measure The A.T. Kearney/Foreign Policy

Globalization Index ranks countries by Economic dimensions Technological dimensions Personal contact Political dimensions

recently ranked Singapore and Hong Kong as most globalized


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Costs of GlobalizationLearning Objective 3: To discuss globalization’s future and the major criticisms of globalization


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Costs of Globalization Threats to national sovereignty

lose freedom to “act locally” Economic growth and environmental

stress growth consumes nonrenewable natural

resources and increases environmental damage

Growing income inequality and personal stress promotes global superstars at the expense of

others


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Costs of Globalization Offshoring involves the transferring of

production abroad it can be beneficial because it reduces costs but, it also means that jobs move abroad

Yet, offshoring may also create new, better jobs at home


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Why Companies Engage in IB

Learning Objective 2:To understand why companies engage in international business and why international business growth has accelerated


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To expand sales pursuing international sales increases the

potential market and potential profits To acquire resources

may give companies lower costs, new and better products, and additional operating knowledge

To diversify or reduce risks international operations may reduce operating

risk by smoothing sales and profits, preventing competitors from gaining advantage


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These three reasons sales expansion resource acquisition risk minimization

guide all decisions about whether, where, and how to engage in international business


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Modes of Operations in IB

Learning Objective 4:To become familiar with different ways in which a company can accomplish its global objectives


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Merchandise exports goods that are sent out of a country

Merchandise imports goods that are brought into a country

Sometimes referred to as visible exports and imports


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Service exports provider and receiver of payment

Service imports recipient and payer of payment

Examples Tourism and transportation Service performance

turnkey operations and management contracts

Asset use licensing and franchising


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Investments Foreign Direct Investment (FDI)

investor takes a controlling interest in a foreign company

joint venture

Portfolio Investment a non-controlling financial interest in

another entity


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Types of International Organizations

Collaborative arrangements Joint ventures Licensing arrangements Management contracts Minority ownership Long-term contractual arrangements

Strategic alliance companies that work together, but the

agreement is critical to at least one partner an agreement that does not involve joint

ownership


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Multinational enterprises (MNEs) take a global approach to markets and

production or have operations in more than one country

Sometimes they are referred to as multinational corporations (MNCs) multinational companies (MNCs) transnational companies (TNCs)


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In foreign markets, companies may have to adapt their typical methods of doing business foreign conditions may dictate a particular

method operating modes may be different from those

used domestically


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Why IB is Different Learning Objective 5: To apply social science disciplines to understanding the differences between international and domestic business


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Why IB is Different The external environment affects a

company’s international operations Managers must understand social science

disciplines and how they affect functional business fields

Consider physical factors social factors competitive factors


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Physical and Social Factors

Geographic influences natural conditions influence production locations

Political policies determines where and how business occurs

Legal policies influence how a company operates

Behavioral factors may require changes in operations

Economic forces explain differences in costs, currency values, market

size


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The Competitive Environment

Competitive strategy for products Cost strategy Differentiation strategy Focus strategy

Company resources and experience market leaders have more resources for

international operations Competitors faced in each market

local or international


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The Competitive Environment

So, a company’s competitive strategy influences how and where it can best operate

Its competitive situation may differ from country to country in terms of its relative strength and which competitors it faces


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Looking to the FutureLearning Objective 3: To discuss globalization’s future and the major criticisms of globalization


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Looking to the Future Three major perspectives on the 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


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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

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