International Business PDF

International Process Reasons for International Business Motivation for going international: Saturated or limited domestic market Seeking growth opportunities and market diversity Increase revenues and profit Take advantage of larger customer base and gain economics of scale in...

International Process Reasons for International Business Motivation for going international: Saturated or limited domestic market Seeking growth opportunities and market diversity Increase revenues and profit Take advantage of larger customer base and gain economics of scale in production, sourcing, marketing, and R&D Gain new product or service ideas from international feedback Retaining key customers who go global (B2B) Operate closer to lower cost or better-value factors of production Combating or anticipating foreign competition Main participants in International Business Multinational Enterprise (MNE) A large company o with substantial resources o and performing various business activities o through a network of subsidiaries located in multiple countries Small and Medium sized Enterprises (SME) definition vary by region and continent o number of employees between 250 to 500 employees They are very active in IB activities and are the seeds of MNEs Might be less bureaucratic and more adaptable to changes o but often suffer from limited resources (human, financial) Born Global a contemporary SME that initiate international business activities from the very beginning or at a very early stage of its establishment (within 3 years) o approx. 25% of sales revenues are international based o usually established, and run by young open-minded entrepreneurs o Airbnb, Uber, Spotify, TikTok Comparing the World’s Largest Companies with Selected Countries Globalization Globalization refers to the shift toward a more integrated and interdependent world economy o (Hill, 2010) increasing global interconnectedness, so that events in one part of the world are affected by other parts of the world o (Tiplady, R. 2003) reflects a business orientation based on the belief that the world is becoming more homogenous and that distinctions between national markets are not only fading but, for some products, will eventually disappear o (Czinkota, M., Ronkainen, I., Moffat, M. 1999, p.454) Difference between global and international? Global = around the world - don’t need to be somewhere specific, can use it everywhere o e.g. in China, iPhone or Spotify International = between specific nationalizations across the border – made just for a specific customer o e.g. Sweden – Finland What Is Driving Globalization? The decline in barriers to the free flow of goods, services, and capital that has occurred since the end of World War II o (constant decrease in tariffs and the increase of FDIs) Technological change: o Microprocessors and telecommunications o The Internet and World Wide Web o Transportation technology o Increasing digitalization ➔ Digitalization refers to the use of digital data and technology to develop new business operations, strategies, or business models Globalization of Markets Historically distinct and separate national markets are merging Now it doesn´t make much sense to talk about the “German market” or “American Market” ➔ Instead: there is the “global market” o Falling trade barriers make it easier to sell globally o Consumers tastes and preferences are converging on some global norm o firms promote the trend by offering the same basic products worldwide Globalization of Production Firms source goods and services from locations around the globe o to capitalize on national differences in the cost and quality of factors of production like land, labor, and capital Companies can: o Lower their overall cost structure o have access to better technical expertise/key resources o improve the quality or functionality of their product offering Globalization means emergence of New Markets Growing global markets in services o banking, insurance, transport New financial markets o deregulated, globally linked, working around the clock, with action at a distance in real time, with new instruments such as derivatives Growth of mergers and acquisitions Global consumer market with global brands Growth In World Trade Reasons for increased internationalization “Globalization” More ´open´ global markets More globally dispersed value chains Move from one economic power to more powers Growth of Regional Trading Arrangements (RTAs) Growth of bilateral treaties o Bilateral Investment Treaties (BITs) o Double Taxation Treaties (DTTs) Internationalization of the Firm´s Value Chain What does Globalization mean for Firms? Lower barriers to trade and investment mean that firms can: o view the world as a single country, as their market o locate production in the optimal location for that activity Technological change means: o lower transportation costs ▪ firms can disperse production to economical, geographically separate locations o lower information processing and communication costs ▪ firms can create and manage globally dispersed production systems o low cost for global communications networks ▪ help create an electronic global marketplace o global communication networks and global media ▪ create a worldwide culture, and a global market for consumer products ▪ e.g. social media market How does the global Marketplace affect managers? Managing an international business differs from managing a domestic business because countries are still different in many aspects o money, communication, organization, mindset the range of problems confronted in an international business is wider and the problems are more complex than in a domestic business firms have to find ways to work within the limits imposed by government intervention in the international trade and investment system international transactions involve converting money into different currencies o euro, dollar, …