Lecture 1 globalisation & international business (3)

International Business Management (IBM)

Lecture 1: Globalization and International Business

Unit Expectations - Attendance

• Exception – is extreme weather

• Lectures start on the hour• Lectures finish at 10 mins to the hour• Doors shut across all years at 15 mins past the

hour.• Scanning – you come back at the end of the

session to be scanned in i.e. 10 mins to the hour

My expectations

• Work together, mutual respect, mutualresponsibility

• Room etiquette – phones, food, arrival – maintaining a good learning environment for your colleagues.

• Participation – Getting the best from us,Preparation

• Review the lecture / seminar material on BREO after the sessions

• Read the recommended readings• Be alert to the issues in news and read

Today we will…

• Introduce the Unit Essential text

• And the Assessments!

• And start thinking about why we include the study of

international business management in your course• Looking at Globalization and International Business Management (IBM)

ESSENTIAL TEXT!

John Daniels et al, (2015)International Business; Environments and Operations

Assessments

Assignment 1 (50%)• Individual assignment, Max 2,000.• You will be looking at doing business in other countries –

especially risks and entry modes• Deadline in week commencing 9th of May • Late submission accepted only with mitigation circumstances.

Otherwise…. Repeat the unit next year!Assessment 2 – Exam (50%)• 2 hour exam

International Business Management

Learning Objectives

• To define international business and globalization and showhow 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

International business

1-9

• International business includes all commercial transactions—including sales, investments, and transportation—that take place between two or more countries– including private companies trading for profitAnd national Governments undertaking transactions for profit or other reasons

Why study international business?

1-10

• Because:– Most companies are either international or compete

with international companies– Modes (ways) 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

governmentpolicies to support

Globalization

1-11

• Globalization is– the ongoing process that deepens and broadens

the relationships and interdependence among people from different parts of the world that happens to be divided into nations

– the integration of world economies through the reduction of barriers to the movement of trade, capital, technology and people (Daniels et al. 2015, P.47).

Forces Driving Globalization

1-12

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

Forces Driving Globalization (Cont..)

Increase in and Application of Technology : Vast improvements in transportation and communications technology including the development of the Internet

Liberalization of Cross-Border Trade and Resource Movement: Over time most governments have lowered restrictions on trade and foreign investment in response to the expressed desires of their citizens and producers.

Forces Driving Globalization (Cont..)

Development of Services that Support International Business: Services provided by government, banks, transportation companies, and other businesses greatly facilitate the conduct and reduce the risks of doing business internationally.

Growing Consumer Pressures: Now consumers are well-informed about and often able to access foreign products. Thus competitors the world over have been forced to respond to consumers’ demand for increasingly higher quality, more cost-competitive offerings.

Increased Global Competition The pressures of increased foreign competition persuade firms to expand internationally to gain access to foreign opportunities and to improve their competitiveness.

Changing Political Situations The transformation of the political and economic policies of Eastern Europe, Vietnam, and China has led to increases in trade between those countries and the rest of the world

Forces Driving Globalization (Cont..)

Expanded Cross-National Cooperation: Governments

have increasingly entered into cross-national treaties and

agreements in order to gain reciprocal advantages for

their own firms, to jointly attack problems and to deal

with areas of concern that lie outside the territory of all

countries.

Forces Driving Globalization (Cont..)

Costs of Globalization

1-17

• Threats to national sovereignty– lose freedom to “act locally”

• Economic growth and environmental stress

It has both positive and negative consequences, including

damage to society and the environment. While it can support

the sustenance of natural resources.

• Growing income inequality

It may speeds up the process of altering the relative economic

differences between the two countries involved.

Costs of Globalization

1-18

• 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

(see the debate on p56-58 good or bad)

Factors in International BusinessOperations

1-29

Physical and Social Factors

1-20

• Geographic influences– natural conditions influence production locations

• Political and legal policies– determines where and how business occurs

• Cultural factors– may require changes in operations

• Economic forces– explain differences in costs, currency values, market size

The Competitive Environment

1-21

• 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

Why Companies Engage in IB

1-30

• 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

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

Modes of Operations in IB

1-23

• Exports and imports of both goods and services• 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• Collaborative arrangements

– Joint ventures– Licensing and franchising arrangements– Management contracts– Strategic alliance

Multinational Enterprises

1-38

• 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)

Looking to the Future

1-40

• Three major perspectives on the future ofinternational business and globalization– Further globalization is inevitable– International business will grow primarily along

regional rather than global lines– Forces working against further globalization

andinternational business will slow down both trends

Further reading

• Daniels et al. (2015). Chapter 1.