International Business Overview

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

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.