IB Unit - 1: An Overview of International Business PDF

# Unit 1: An Overview of International Business ## Definition of International Business The exchange of goods and services amongst individuals and businesses across multiple countries. - Goods and services - Technology know-how - Managerial knowledge - Capital ## Drivers of International Busines...

# Unit 1: An Overview of International Business ## Definition of International Business The exchange of goods and services amongst individuals and businesses across multiple countries. - Goods and services - Technology know-how - Managerial knowledge - Capital ## Drivers of International Business 1. Developing markets have huge opportunities to increase their profits and sales. 2. Many MNC's are locating their subsidiaries in low wage countries to take advantage of low cost production. 3. Trading blocks seek to promote international business by removing trade and investment barriers. 4. Changing demographics also add to increasing globalization. ## International Business Environment: Factors of Change - **Political Factors:** power, dominance... - **Economical:** resources, capital markets, etc... - **Socio-cultural:** social habits, cultural differences - **Technological:** Communication, innovation - **Environmental:** ozone depletion, recycling, green tech ## Globalization The spread of the flow of financial products, goods, technology, information, and jobs across national borders and cultures. ## What is Globalization? - Globalization can be defined as a process of rapid economic, cultural, and institutional integration among countries. - This unification is driven by the liberalization of trade, investment and capital flow, technological advances, and pressures for assimilation towards international standards. - Globalization makes the world more accessible to everyone. ## The Nature of Globalization - **Financial Globalization:** World stock markets are constantly affecting one another. What happens on one market will definitely affect what happens on others as the day's trading goes on. - **Economic Globalization:** Companies are no longer associated with a particular country. They move production and capital and seek markets anywhere that will benefit their company. ## Seven Trends in Global Business Strategies | Corporate Strategy | Global Strategy | Competitive Strategy | |---|---|---| | 1: Renewal - Transforming business structures and brand | 3: Re-alignment - Relocating production and R&D bases | 5: Alliance - Forming new intra and inter-industry partnerships | | 2: Exploration - Exploring new businesses and business models | 4: Emerging markets - Expanding to these markets to seek long-term growth | 6: Convergence - Converging technologies and functions | | | | 7: Cheap and competitive - Providing low-cost, competitive products and services | ## Benefits of Globalization - People enjoy goods from all over the world. - Greater connectivity – Facebook, cell phones, Skype. - Advances in information technology. - Advances in medicine. - Advances in engineering. - Average standards of living are higher. - The pace of economic development has accelerated. ## United Nations Conference on Trade and Development (UNCTAD) ### Main functions of UNCTAD - To promote international trade all over the world, between developed and developing countries with different socio-economic systems. - To formulate principles and policies on international trade and related problems of economic development. - To make proposals for putting those principles and policies into effect. - To review and facilitate the coordination of activities of other institutions within the U.N. system in the field of international trade. - To be available as a center for harmonious trade and related documents in the development policies of governments. ## International Monetary Fund (IMF) An international organization that promotes global economic growth and financial stability, encourages international trade, and reduces poverty. ### Objective of The IMF - Promote international monetary cooperation. - Expansion and balanced growth of international trade. - Promote exchange rate stability. - The elimination of restrictions on the international flow of capital. ### Functions of The IMF - The fund is regarded as "the guardian of good conduct" in the area of the balance of payments. - It aims at reducing tariffs and trade restrictions. - It provides technical advice to its members regarding monetary and fiscal policies. - It is a lending institution of foreign currencies. - It is machinery for international liquidity. ### What the IMF Does The IMF promotes international monetary cooperation and exchange rate stability, facilitates the balanced growth of international trade, and provides resources to help members in balance of payments difficulties or to assist with poverty reduction. ## International Bank for Reconstruction and Development (IBRD) ### Functions of The IBRD - Assist in reconstruction and development of its member countries. - Promote private foreign investment. - Promote balanced growth of international trade. - Assist in bringing about a smooth transition from war to peaceful economies. - Aims to reduce poverty in middle-income and creditworthy poorer countries. ### Functions of The IBRD - Granting developmental loans to underdeveloped countries. - Providing loans to governments for agriculture, irrigation, power, transport, water supply, education, health, etc. - Providing technical, economic and monetary advice to member counties for specific projects. - Encouraging industrial development of underdeveloped countries by promoting economic reforms. ## World Trade Organization (WTO) ### Role of the WTO 1. Assisting settlement of disputes between conflicting countries with advisors and mediators. 2. Policing agreements through dispute settlement; judgements by specially appointed independent experts. 3. Policy review – constant assessment of existing agreements, their effectiveness, and their transparency. 4. Work with developing countries – looking for increased participation of these countries in the global trading system. 5. Technical assistance – training officials from over 100 countries in matters relating to international trade. ### Advantages of the WTO - Helps promote peace between nations. - Disputes are handled constructively. - Rules make it easier for all – WTO based on rules not on power. - Free trade cuts the cost of living, provides more choice of products and quality. - Trade stimulates economic growth. - Trade raises the income of the country and its people. - Basic principles make life more efficient. - Governments shielded from lobbying. - The system encourages good governance.