International Business Management

Introduction to International Business Management

• International business refers to commercial transactions across national borders.

• Multinational enterprises (MNEs) have a global approach to foreign markets and an integrated philosophy.

• International management involves coordinating resources within and across national boundaries to achieve global objectives.

• Globalization refers to the worldwide movement towards economic, financial, trade, and communications integration.

• Globalization has led to the merging of historically distinct national markets into one global marketplace.

• The advantages of international business include product flexibility, less competition, protection from national trends, and learning new methods.

• The disadvantages of international business include different problems in different nations, superficial similarities between nations, and difficulty in global execution.

• Internationalization of business involves transactions that cross national boundaries and include product presence, production bases, human resources, investment in international services, and transactions involving intellectual properties.

• Studying international business is important because companies are sourcing human resources globally, most products are supplied by global businesses, managing a global business is complex, it impacts government policies, and international business executives play a powerful role in determining the relative competitiveness of countries.

• The economic benefits of greater openness to international trade include faster growth, cheaper imports, access to new technologies, spur of foreign competition, and increased consumer income.

• International strategic management involves standardization vs differentiation, strategic options, global portfolio management, global entry strategies, organizational issues, controlling international business, and performance evaluation systems.

• Production, marketing, financial, and human resource management of global business involve global production, location decisions, cost of production, supply chain issues, globalization of markets, marketing strategy, challenges in product development, investment decisions, sources of funds, exchange rate risk and management, strategic orientation, selection and training of expatriate managers, and compensation.Globalization and International Business

• Globalization of the economy refers to the reduction of import duties, removal of non-tariff barriers, and allowing companies to expand beyond national boundaries.

• Multinational corporations (MNCs) account for over 33% of world output and 66% of world trade.

• Globalization offers increased investment opportunities, allows for the free flow of technology, and lowers transportation and communication costs.

• There are five stages of globalization identified by Kenichi Ohmae, ranging from an arm's length service activity to a genuinely global mode of operation.

• Essential conditions for globalization include business freedom, government support, competitiveness, and orientation.

• The negative drivers of globalization include cultural and market barriers, corporate strategy, and war.

• International business differs from domestic business due to differences in currency, legal systems, culture, and resource availability.

• Liberalization refers to the relaxation of government restrictions, often in areas of social or economic policy.

• Privatization refers to the transfer of ownership or management of an enterprise from the public to the private sector.

• Ways of privatization include divestiture, contracting, government withdrawal, and privatization of management.

• Privatization benefits society by reducing fiscal burden, enabling the government to raise funds, and encouraging entrepreneurship.

• Country attractiveness analysis considers market and industry opportunities as well as political and economic risks, which influence the attractiveness of a country as a market or investment site.Understanding Country Risk Analysis, International Business, and Globalization

• Country risk analysis involves evaluating the potential risks and profitability of investing in a foreign country, including political, operational, competitive, and economic risks.

• The environment of international business includes domestic, foreign, and international spheres of impact and is affected by political, legal, cultural, technological, and economic factors.

• The political environment of a country affects international business through its system of government and judiciary, stability, and protection of property rights.

• The legal system of a country refers to the rules and laws that regulate behavior and conduct of organizations, individuals, and systems of law, including Islamic, common, civil, and Marxist legal systems.

• The cultural environment of a country consists of the thought and behavioral patterns learned through language and other forms of symbolic interaction, including national, business, occupational, organizational, mechanistic, organic, authoritarian, participative, dominant, sub-cultures, strong, weak, and unhealthy cultures.

• Technology has social and economic implications, including increased productivity, intellectual jobs, techno-structure problems, increased regulation, and redefined boundaries.

• The economic environment of a country can affect international business through its income classification, economic system, regional trade block, rates of growth, inflation, savings and investment, fiscal stability, balance of payments, and economic policies.

• International business is driven by the availability, natural advantage, acquired advantage, and comparative advantage of resources, and is impacted by globalization, which deepens relationships and broadens interdependence among people from different countries.

• Foreign direct investment (FDI) results in foreign control of a domestic enterprise and is made possible by technological developments, rising incomes, liberalization of cross-border movements, and cooperation among countries.

• Globalization has advantages, including increased productivity, consumer choices, and transfer of productivity developments, and challenges, including employment disruption, environmental concerns, monetary and fiscal conditions, and sovereignty issues.

• Regional trade blocks have advantages and disadvantages, including increased trade, investment, and economic integration, and challenges with political, economic, and cultural differences.

• International business is different from domestic business because companies must operate in diverse foreign environments, engage in specialized types of transactions, and face unique challenges, such as currency conversion and cultural differences.Challenges of Global Business: Legal-Political, Economic, Cultural Environments and Promotion Strategies

• Companies must adapt their business practices to the varying national environments in which they operate.

• The legal-political environment affects international business as companies are subject to the laws of each country and political relationships between countries also influence what companies can do.

• The economic environment differs across countries, with many having low average incomes, smaller markets, less educated populations, higher unemployment, poor health conditions, and more foreign exchange problems.

• The cultural environment varies from country to country, with specific learned norms based on attitudes, values, beliefs, and frameworks for processing information and tasks.

• Mobility impediments are more pronounced among countries than within them, affecting the movement of goods and inputs to produce them.

• Promotional tools such as advertising, price promotions, sponsorships, point-of-purchase displays, and other methods can be used to influence consumer purchases in global business.

• Promotional objectives involve what the firm hopes to achieve with a campaign, such as increasing awareness, trial, attitude toward the product, and temporary sales increases.

• Constraints on global communications strategies include language barriers, cultural barriers, differences in values and attitudes toward advertising, media infrastructure, and advertising regulations.

• Directness vs. indirectness, comparison, humor, gender roles, explicitness, and sophistication are some cultural dimensions that affect advertising effectiveness across countries.

• Comparative advertising is banned in most countries and would be counterproductive in Asia even if allowed, while in the US, it has proven somewhat effective.

• Europeans tend to allow for more explicit advertisements, often with sexual overtones, than Americans.

• Sophistication demands are higher in Europe, particularly in France, while Americans may react more favorably to emotional appeals in advertising.