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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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Why Companies Engage in IB
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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Why Companies Engage in IB
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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Modes of Operations in IB
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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Modes of Operations in IB
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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Modes of Operations in IB
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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Types of International Organizations
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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Types of International Organizations
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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