International Business Overview

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Questions and Answers

What main advantage do lower barriers to trade and investment provide firms?

Firms can view the world as a single country for their market. (correct)

Firms can standardize products for all markets.

Firms can limit their production to one location.

Firms can monopolize local markets.

What effect do technological changes have on production?

They reduce the importance of global media.

They lead to higher transportation and communication costs.

They increase the need for localized production.

They enable firms to disperse production across geographically separate locations. (correct)

What is a significant challenge faced by managers of international businesses compared to domestic businesses?

They must navigate different currencies for transactions. (correct)

They deal with less complex problems.

They only focus on a single supply chain.

They have fewer cultural differences to consider.

Which factor differentiates the management of an international business from a domestic one?

The complexity and variety of problems encountered. Signup and view all the answers

How do global communication networks impact the market?

They foster a worldwide culture and a global market for consumer products. Signup and view all the answers

What has significantly influenced the decline in barriers to international trade since World War II?

Decline in tariff barriers Signup and view all the answers

Which technological advancement is NOT a factor driving globalization?

Traditional manufacturing methods Signup and view all the answers

What is a benefit of globalization of production for firms?

Access to better technical expertise Signup and view all the answers

How has the concept of national markets changed due to globalization?

They are merging into a global market. Signup and view all the answers

Which of the following is NOT a characteristic of the new financial markets arising from globalization?

Operating only during local business hours Signup and view all the answers

What convergence is seen in consumer behavior due to globalization?

Convergence on a global norm Signup and view all the answers

What does increased internationalization lead to in terms of value chains?

Globally dispersed value chains Signup and view all the answers

What is one main reason for companies to enter international markets?

To take advantage of larger customer bases Signup and view all the answers

Which of the following is a reason for the growth of new markets in services?

Increased global trade and open markets Signup and view all the answers

Which of the following best defines a Multinational Enterprise (MNE)?

A large company with subsidiaries across multiple countries Signup and view all the answers

What distinguishes a 'Born Global' firm from other businesses?

It initiates international activities soon after establishment Signup and view all the answers

How does globalization impact national markets?

It results in increasing interdependence among economies Signup and view all the answers

Which statement accurately describes Small and Medium sized Enterprises (SMEs)?

They can adapt quicker to changes due to less bureaucracy Signup and view all the answers

What is a key aspect of globalization?

The movement towards a more integrated world economy Signup and view all the answers

Which of the following characteristics is typically associated with Born Global companies?

They are usually established by young, innovative entrepreneurs Signup and view all the answers

What does 'global' refer to in the context of international business?

A worldwide approach not limited to a single market Signup and view all the answers

Study Notes

Reasons for International Business

Businesses go international due to factors like saturated domestic markets, seeking growth and diversification, increasing revenue and profits, using larger markets to gain economies of scale, keeping key customers who operate globally, locating closer to lower-cost production, or to anticipate competition.

Main Participants in International Business

Multinational Enterprises (MNEs)

Large companies with substantial resources
Conduct various business activities globally through subsidiaries in numerous countries

Small and Medium-Sized Enterprises (SMEs)

Vary in employee size (250-500 employees, depending on location)
Active in international business, often acting as foundations for future MNEs
More adaptable to change than larger companies but may face resource limitations (financial, human resources)

Born Globals

Contemporary SMEs
Initiate international business early (within three years of establishment)
Approximately 25% of revenue is earned internationally
Often established and run by young, forward-thinking entrepreneurs. Examples include Airbnb, Uber, Spotify, and TikTok.

Globalization

Shift towards an integrated and interdependent world economy
Increasing interconnectedness, where events in one part of the world affect other parts
The world is becoming more homogenous, reducing distinctions between national markets, particularly for certain products.

Difference Between Global and International

Global operations are worldwide, not tied to a specific location. Examples include iPhone and Spotify globally.
International operations occur between specific countries. Examples include interactions between Sweden and Finland.

What Drives Globalization

Reduced trade barriers (tariffs, foreign direct investment) since WWII
Technological advancements (microprocessors, telecommunications, internet, worldwide transportation)
Increased digitalization, or the use of data and technology in business processes

Globalization of Markets

Historically distinct markets are merging into a global marketplace
Consumers' tastes and preferences are becoming more similar
Firms offer similar products across the globe

Globalization of Production

Companies use global resources to access lower production costs and higher-quality labor.
Lowering overall production costs through efficient use of resources, leading to improved product quality or functionality.

Globalization Means Emergence of New Markets

Growing global markets in services such as banking and insurance, transport.
Deregulated, globally linked financial markets that use instruments like derivatives.
Growth in mergers and acquisitions as well as global consumer markets with recognizable brands.

Growth in World Trade

Positive, sustained growth of international trade since the 1980s.

Internationalization of the Firm's Value Chain

Firms use international networks that include research and development activities, procurement of resources, manufacturing, marketing, distribution, sales and service. Global operations, in effect, become part of a value chain in terms of resource acquisition, production and distribution.

What Globalization Means for Firms

Lower barriers lead to a worldwide marketplace
Technology lowers transportation and communication costs, allowing companies to distribute products globally
Companies can manage globally dispersed production systems
Companies create and operate an electronic global market

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Description

Explore the key reasons businesses expand internationally and understand the different types of participants in global trade. This quiz covers multinational enterprises, small and medium-sized enterprises, and born globals, providing insights into their roles and challenges in the global market.