Chapter 1 - 2
• Describe globalization
• Explain how globalization affects markets and production
• Identify the drivers of globalization
• Discuss the globalization debate
• List types of firms in international business
• Define the global business environment
Chapter PreviewChapter Preview
Chapter 1 - 3
E-Biz SurpriseE-Biz Surprise
eBay expanded all typesof product markets
Eli Lilly hired a virtualR&D “workforce”
Expedia moved travelbooking online
Dell pioneered onlinebuying of custom PCs
Chapter 1 - 5
The nature of IB?The nature of IB?
• Foreign Business denote the domestic operation within a foreign company.
• Multi Domestic Company is an organization with multi country affiliate, each of which formulate its own business strategy based on perceived market differences.
• Global Company is an organization that attempts to standardize and integrated operations worldwide in all functional area.
• International Company refers to both global and Multi Domestic Company.
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Advice of Global ManagersAdvice of Global Managers
Know the customer
Emphasize global awareness
Develop world-class products
Market effectively
Improve logistics
Analyze problems correctly
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GlobalizationGlobalization
Trend toward greater economic, cultural, political and technological interdependence among national institutions and economies
Globalization of markets
Convergence in buyer preferences in
markets around the world
Globalization of production
Dispersal of production activities
worldwide to minimize costs or maximize quality
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Benefits of GlobalizationBenefits of Globalization
GlobalizationGlobalizationof marketsof markets
GlobalizationGlobalizationof productionof production
• Reduces marketing costs
• New market opportunities
• Levels income stream
• Reduces marketing costs
• New market opportunities
• Levels income stream
• Access low-cost labor
• Acquire technical expertise
• Obtain production inputs
• Access low-cost labor
• Acquire technical expertise
• Obtain production inputs
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Globalization Drivers IGlobalization Drivers I
Regional tradeRegional tradeagreementsagreements
GATTGATT
WTOWTO
Remove barriers to trade and investment
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Globalization Drivers IIGlobalization Drivers IITechnological InnovationTechnological Innovation
Email and videoconferencing
Internet, intranetsand extranets
Transportationadvancements
Better coordination and control
Improved communications and management
More efficient, dependable
shipping
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Globalization Drivers IIIGlobalization Drivers IIIMarketMarket
- As companies globalize, they also - As companies globalize, they also become global customer.become global customer.
-Avoid the competitor stealing their -Avoid the competitor stealing their customerscustomers
-Market Saturate-Market Saturate
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Globalization Drivers IVGlobalization Drivers IVCostCost
-Economic scale to reduce unit -Economic scale to reduce unit cost cost
-Reduce development, -Reduce development, production, inventory cost.production, inventory cost.
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Globalization Then Globalization Then andand Now Now
Highly mobileHighly mobilelabor marketlabor market
Highly mobileHighly mobilelabor marketlabor market
Fear of jobs Fear of jobs moving abroadmoving abroad
Fear of jobs Fear of jobs moving abroadmoving abroad
Backlash amongBacklash amongthe disaffectedthe disaffected
Backlash amongBacklash amongthe disaffectedthe disaffected
Free-flowing Free-flowing capital and tradecapital and trade
Free-flowing Free-flowing capital and tradecapital and trade
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Challenges to BusinessChallenges to Business
Physicalsecurity
Digitalsecurity
Reputationalrisk
Assess companyvulnerability andcreate a disaster
recovery plan
Guard proprietaryinformation and
confidentialcommunications
Require ethical andlawful behavior from
all employees andbusiness partners
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From Carnage to CivilityFrom Carnage to Civility
ViolenceViolenceViolenceViolence
Rage Rage Rage Rage
CarnageCarnageCarnageCarnage
ExclusionExclusionExclusionExclusion
LegitimacyLegitimacyLegitimacyLegitimacy
ReasonReasonReasonReason
CivilityCivilityCivilityCivility
DebateDebateDebateDebate
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Jobs and WagesJobs and Wages
Eliminates jobs in developed nations
Forces wages lower in developed nations
Exploits workers in developing nations
Increases wealth and efficiency
Generates labor market flexibility
Creates jobs in developed countries
Advances economies of developing nations
SupportersSupportersOpponentsOpponents
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Labor and EnvironmentLabor and Environment
– Globalization lowers labor standards
– Weakens protection of the environment
– Exploits workers in poor nations
+ Investment raises labor standards
+ Open economies most environment friendly
+ Companies concerned for future markets
Opponents Supporters
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Income Inequality Income Inequality debate debate
Inequality within nationsPoor people in developing nations benefit most from
open economy
Inequality between nationsNations open to world trade and investment grow faster
than rich nations
Global inequalityInequality has fallen, but experts disagree on the
extent of the decline
Income InequalityIncome Inequality
32
1
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National SovereigntyNational Sovereignty
SupportersSupporters
Globalization has Globalization has benefited societies by benefited societies by
helping to spread helping to spread democracy worldwidedemocracy worldwide
OpponentsOpponents
Supranational Supranational institutions reduce institutions reduce
autonomy of national, autonomy of national, regional and local regional and local
governmentsgovernments
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Impact on CultureImpact on Culture
Opponents
• Destroys cultural diversity
• Homogenizes our world
• Bankrupts local small businesses
Supporters
• Specialize and trade to obtain other
goods
• Import cultural goods from other nations
• Protects deeper moral and cultural norms
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International Business PlayersInternational Business Players
Business that has direct investments abroad in multiple
countries
Small companies and individuals becoming increasingly active in
international trade and investment
Takes a global perspective on its
market and engages in international business
from or near its inception
MultinationalCorporation
Small Businesses
and Entrepreneurs
Born-Global Firm
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How They Stack UpHow They Stack Up
Comparing revenue of the world's 10 most global firms to the gross domestic product of nations
Chapter 1 - 26
Teaming upTeaming up• Imagine that you and a group of your fellow
classmates own a company that manufactures cheap sunglasses. To lower production costs, you want to move your factory from your developed country to a low-wage country. Choose a prospective country to which you will move. What elements of the national business environment will affect your move? Are there any obstacles to overcome in the international business environment? How will managing your company be different when you undertake international activities? What challenges will you face in managing your new employees?
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Teaming upTeaming up• This may be a good time to get students
working on their Market Entry Strategy Simulation project, if this has been assigned. This project gets students to begin pondering the types of elements that must be considered when selecting a country for investment. At a minimum, students’ responses should consider: (1) The presence of investment barriers in the country; (2) Resources needed to carry out production, as well as their availability and cost’ (3) Availability of modern telecommunications to facilitate communication with the home office; and (4) How the expansion might be financed.
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Chapter SummaryChapter Summary
• This chapter defines the scope of international business within the context of globalization. Globalization lets firms standardize marketing practices, enter new markets, access resources worldwide, and increase production efficiency. Fueling globalization are falling barriers to trade and investment, and rapid innovation in communication and transportation technologies. Globalization also affects a nation, whose level of globalization depends on political engagement, technological connectivity, personal contact, and economic integration. Yet because globalization’s impact is not always uniform, nor always positive, it has sparked debate. Disputes include globalization’s affect on jobs and wages; labor and environmental protection laws; income inequality; national sovereignty; and cultural diversity. Large multinationals, small firms, and entrepreneurs engage in international business. Each of these must navigate the global business environment—the dynamic, integrated global system that weaves together four distinct elements: (1) the forces of globalization, (2) national business environments, (3) the international business environment, and (4) international firm management.