International Business and Trade: The World Is Flat

Introduction to International Business and Trade

• Thomas Friedman, an American journalist, author, and columnist, is known for his book "The World Is Flat" which shares insights on the flat world from his experiences in Bangalore, India.

The World Is Flat

• The book highlights the idea of a "flat world" where job security is affected by globalization and technology has flattened the world, making it a global neighborhood.
• Friedman met with CEOs of companies in India to understand how business has changed, and learned that technology advancements and increased computing power have made information travel around the world in seconds.

Globalization 3.0

• Globalization 1.0 was pre-World War 1, launched by a drop in trade costs with the use of steam and mechanical power.
• There was no global governance, and little domestic policy to help share the gains and pains of international arbitrage in goods.
• The internet created a platform for connectivity, and the web made information sharing possible.

Ten Flattening Forces

• Workflow software enabled collaboration and remote work.
• Uploading provided free access to community-developed software.
• Outsourcing involved performing specific functions or tasks at a lower cost.
• Offshoring moved entire operations to a different location with lower labor costs and taxes.
• Supply chaining involved collaboration among suppliers, retailers, and customers to create value during production and distribution.
• Insourcing allowed small and mid-sized companies to provide services to large supply chains without prohibitive expense.
• Informing provided universal access to knowledge and information.
• Wireless connectivity created a mobile society, allowing work to be done remotely.

International Business

• International business involves the production or distribution of goods or services beyond country borders.
• It is described as a transition towards a more collective and blended global economy, creating greater opportunities for international business.
• It includes commercial negotiations, exchanges of goods and services, and transfers of resources such as people, intellectual properties, and contractual assets or liabilities.

Importance of Studying International Business

• It comprises a large growing portion of the world's total business.
• All companies are affected by global events and competition.

Differences of Multinational, Global, and Transnational Companies

• Multinational companies have branches, offices, or production facilities in more than one country and focus on adapting products and services to each individual local market.
• Global companies have a niche in multiple countries, but the product or service offerings and processes are the same in each country.
• Transnational companies have invested in foreign operations, have a central corporate facility, and give decision-making, R&D, and marketing powers to each individual foreign market.

Nature of International Business

• International restrictions, such as foreign exchange, trade blocs, and trade barriers, can affect international business.
• Benefits to participating countries include getting richer and more developed, receiving foreign capital, latest technology, rapid industrial development, and employment opportunities.
• Large-scale operations involve production and marketing of goods and services on a global scale.
• Integration of economies involves utilizing labor, resources, finance, and establishments of other countries.
• Developed countries dominate international business due to their large financial capacity, best technologies, and large research and development centers.
• Market segmentation involves producing goods according to the demand of consumers of different market segments.
• International business is highly affected by political environment, changes in economic policies, and upgrades in technologies.

Goals of International Business

• Expand sales by catering to potential markets and increasing sales.
• Acquire resources such as capital, technologies, and information.
• Minimize risk by seeking out foreign markets and reducing swings in sales and profits.

Problems of International Business

• Political and legal differences.
• Cultural differences.
• Economic differences.
• Differences in currency units.
• Differences in language.
• Differences in marketing infrastructure.
• Trade restrictions.
• High costs of distance.
• Differences in trade practices.