Global Business Environment

Study Notes

International Business: Process focusing on global resources and objectives of organizations. Includes global trade of goods/services or investment. Broader than just trade.
Free Trade: Government does not influence imports/exports through quotas or duties.
International Business Nature: Requires accurate and timely information. International businesses tend to be large. Market segmentation is important, especially geographically. Higher potential exists in international markets compared to domestic markets.

Accurate Information: Crucial for successful international operations.
Timely Information: Necessary for effective decision-making.
Large Scale: International businesses usually require larger operations to be profitable.
Geographic Segmentation: Important factor for targeting specific international markets.
Higher Market Potential: Opportunities in international markets often exceed those in domestic markets.

Significance: International business plays a major role in a country's growth and economy. GDP is reliant on international business activities.
Global Activities: Covers various types of business activities that transcend national borders.

Merchandise trade: Exports/Imports of tangible goods.
Service trade: Exports/Imports of intangible services (e.g., licensing, franchising).
Foreign Investment: Investment of funds abroad. Two types: (1) Direct Investment (e.g., building new facilities) and (2) Portfolio investment (e.g., buying stocks/bonds).
Monopoly Power: Patent rights, technological advantages, exclusive market information.
Currency Exchange Advantage: Fluctuations in currency exchange rates can benefit international businesses.

Demographic Trends: Falling birth rates, declining demand can lead to domestic market saturation.
Reduced Market Potential: Smaller domestic markets may lack the scale for growth.
Economic downturns: Domestic recessions can drive firms to seek opportunities in foreign markets.

Pull Factors: Proactive reasons to engage in international business (e.g., greater profitability and growth opportunities in foreign markets).
Push Factors: Reactive reasons to engage in international business (e.g., domestic market saturation or recession).

Globalization: Dynamic interplay of movers and restraining forces.
Culture: An important variable in international business decisions where companies want to operate in similar environments or create a company culture with global vision.
Market Competition: An international firm's performance may suffer if the local market already has major global competitors.
Political Hurdles: Wars, political tensions that reduce business activities.
Domestic Forces: Government restrictions, social customs and norms can affect business operations.
Management Myopia: Inability to adapt to changing global environments by firms that are complacent with their domestic market.

Technological Advancements: Technology facilitates communication and transportation for global trade and investment.
Economic Liberalization: Reduced trade barriers and tariffs, fostering greater global integration.
Multilateral institutions: Institutions such as the WTO and other international groups encourage greater integration.
Deregulation and privatization: Lower obstacles to investment and participation in world markets globally.

Exporting and Importing: Simple and low-risk entry method.
Licensing: Transfer of rights/knowledge to a foreign entity.
Franchising: A broader package of support to franchisees than licensing.
Joint Ventures: Collaborations between domestic and foreign firms.
Direct Investments: Highest commitment, offering maximum control (e.g., wholly owned subsidiaries, acquisitions).

Non-Equity Modes: Lower risks but less control. (e.g., Exporting, Licensing)
Equity Modes: Higher risks, more control (e.g. Joint Ventures, Direct Investment)

Domestic: Limited to local markets.
International: Limited international activities.
Multinational: Operating in multiple countries with local adaptations (products and strategies).
Global: Operating in all or most markets with standardized products and strategies.
Transnational: Global operations with a "geocentric" mindset; balancing local responsiveness and global efficiency.