Lesson-1-Introduction-to-International-Business.pptx

Introduction to International Business and Trade THOMAS FRIEDMAN An American journalist, author and columnist. He is perhaps best known for his book, The World Is Flat, A Brief History of the Twenty-First Century. Released in 2005, Friedman shares several insights resulting from his experien...

Introduction to International Business and Trade THOMAS FRIEDMAN An American journalist, author and columnist. He is perhaps best known for his book, The World Is Flat, A Brief History of the Twenty-First Century. Released in 2005, Friedman shares several insights resulting from his experiences during a trip to Bangalore, India where he discovers the world is indeed flat! THE WORLD IS FLAT  Job Security in a Flat World  Technology Flattened the World During his trip to India, Friedman visited several companies changing the way business is transacted around the world. He met with chief executive officers to gain their perspective on how business has changed. What he learned from them was both sobering and frightening. As computing power increased, processing speeds multiplied at an exponential rate and technology became more accessible and cheaper. Advancements in data transmission made it possible for information to travel around the world in seconds. Technology is the main reason the world flattened out, making us all global neighbors. GLOBALIZATION 3.0  Globalization 1.0  was pre-World War 1 globalization, which was launched by a historic drop in trade costs when steam and other forms of mechanical power made it economical to consume goods made faraway. This globalization came with almost no government support  There was no global governance, unless you count the British Navy as the UN, the Bank of England as the IMF, and Britain’s free trade stance as the WTO.  there was little domestic policy to help share the gains and pains of more intense international arbitrage in goods.  Globalization back then fanned the fortunes of a nation’s most competitive citizens and companies but fractured the fortunes of a nation’s least competitive citizens and companies.  It took place in the context of very bare-knuckled economic systems (laissez-faire capitalism, imperialism and various forms of autocracy)  Two world wars, the Great Depression, and the rise of communism and fascism resulted in hundreds of millions of humans being killed by other humans  Globalization 2.0  After WWII, a resolution was eventually found. Capitalism’s face was softened with the New Deal in the US, and social-market democracy in other rich economies. In another large slice of the world, communism softened into a kinder, gentler version.  trade in goods was combined with complementary domestic policies that helped share the pains and gains of globalization (and automation)  The market was in charge of efficiency; the government was in charge of justice  saw the establishment of institute-based, rule-based international governance, specifically the UN, IMF, World Bank, GATT/WTO and many specialized agencies like the Food and Agricultural Organisation and International Labour Organisation. GLOBALIZATION 3.0  allowed people to collaborate and compete in real time  Intellectual work can now be dissected, distributed, returned and re- assembled in minutes via email and this caused the global competitive playing field to be leveled or 'flattened’.  It is now software leading the change, not horsepower or hardware. GLOBALIZATION TEN FLATTENING FORCES ''The world has been flattened by the convergence of ten major political events, innovations, and companies.'' 1. Fall of the Berlin Wall - This event liberated millions of people and signaled the end of communism. It also shifted much of the world from centrally planned economies to democratic free-market oriented governments. 2. World Wide Web and the Internet - Users can now save, retrieve, send and share intellectual content electronically and instantly. The internet created a platform for connectivity and the web made information sharing possible. 3. Workflow Software - People were now able to collaborate while working remotely. Users were able to design, display, manage and collaborate on projects and share data that was once handled manually and locally. TEN FLATTENING FORCES 4. Uploading - Provided free access to community developed software. Computer applications were no longer 'bought'. They could be downloaded for free off the web. 5. Outsourcing - Specific functions or tasks performed in-house such as tax preparation, research or call-center operations are now performed by another company at a lower cost. 6. Offshoring - Different from outsourcing, offshoring moves an entire operation, factory and function to a completely different location. All things are equal expect for labor costs, lower taxes and subsidized energy. The combined savings creates a lower cost product. 7. Supply Chaining - Collaboration among suppliers, retailers and customers to create value during the production and distribution of a product. Supply chain methodologies also force the adoption of common industrial standards. TEN FLATTENING FORCES 8. Insourcing - Small and mid-sized companies are able to provide services to large supply chains without prohibitive expense, such as UPS fixing computers for Toshiba.web. 9. Informing - Provides universal access to knowledge information and research. Anyone with an internet connection can access knowledge from the world's libraries. 10. Wireless Connectivity - Wireless access created a mobile society so work was no longer tethered to a hard-wired connection. All content could now be digitized, shared remotely and reshaped. INTERNATIONAL BUSINESS  any situation where the production or distribution of goods or services goes beyond the country borders.  described as the transition toward a more collective and blended global economy which creates greater opportunities for international business  all commercial negotiations, may it be private or within the government of two or more countries wherein exchanges are not only goods and services as well as transfers of other resources such as people, intellectual properties, and/or contractual assets or liabilities  There are also nonfinancial gains such as corporate social responsibility, triple bottom line and political favor IMPORTANCE OF STUDYING INTERNATIONAL BUSINESS it comprises a large growing portion of the world’s total business; and all companies are affected by global events and competition DIFFERENCES OF MULTINATIONAL, GLOBAL AND TRANSNATIONAL COMPANIES multinational companies  are businesses with branches, offices or production facilities  in more than one country and are more focused on adapting their products and service to each individual local market Examples: McDonalds, Procter and Gamble, and Toyota.  global companies have a niche in multiple countries, but the product or service offerings and processes are the same in each country. Examples: Adobe, Hillton and Hyatt Hotels, and Google DIFFERENCES OF MULTINATIONAL, GLOBAL AND TRANSNATIONAL COMPANIES transnational companies  have invested in foreign operations, have a central corporate  facility but they give the decision-making, R&D and marketing powers to each individual foreign market Examples: Nestle who employs senior executives from many countries and try to make decisions from a global perspective rather than from one centralized headquarters. NATURE OF INTERNATIONAL BUSINESS  International Restrictions  restrictions which are imposed by the government of different countries may arise in international business. Such restrictions are relating to foreign exchange, trade blocs, trade barriers and so on.  These things may greatly affect the international businesses yet were implemented to either protect their own country or due to other reasons.  Benefits to Participating Countries  countries which grow their business to the international level get richer and more developed.  Those developing countries usually get the foreign capital, latest technology, rapid industrial development and employment opportunities which help them in developing their economy more.  developing countries willingly open their economy for foreign investments. NATURE OF INTERNATIONAL BUSINESS  Large Scale Operations  When it comes to the production of goods and marketing of their products, international business contains many operations to fulfill the demand at a large scale globally.  This is a good nature for the countries because while earning while providing for domestic demands, they can also earn through their surplus to be exported in the foreign markets.  Integration of Economies  companies utilize the labor, resources, finance and establishments of other countries which is a win-win situation for both  provide employment and other opportunities to where the company is working on while earning at the same time.  Another great example of economy integration is when the parts of a product are made in different countries, being assembled in another and sell those products in different countries. NATURE OF INTERNATIONAL BUSINESS  Dominated by Developed Countries  Developed countries like the USA, Japan and Europe have large financial capacity, best technologies, large research and development centers which help them dominate the international business.  these countries are producing high-quality products and services at low costs which help them capture the world market.  Market Segmentation  produces goods according to the demand of consumers of different market segmentations.  Sensitive Nature  it is highly affected by political environment, changes in economic policies, upgrade in technologies, etc., in a positive or negative way  different policies implemented by the government is what businesses totally depend on, which can help in business expansion and maximize their profits and vice-versa. GOALS OF INTERNATIONAL BUSINESS  Expand Sales  Compared to one country, the number of people and the level of their purchasing powers are higher for the international level. Consequently, companies build their business globally to cater their potential markets and increase their sales.  Acquire Resources  businesses look for foreign resources such as capital, technologies and information because those are either not available in their country or those can reduce the costs of the company.  Minimize Risk  Companies who seek out foreign markets minimize swings in sales and profits arising out of business cycle recessions and expansions which occur differently in different countries  Example: Sales decrease or grow more slowly in a country that is in recession and increase or grow more rapidly in one that is expanding rapidly in one that is expanding economically PROBLEMS OF INTERNATIONAL BUSINESS  Political and Legal Differences  Cultural Differences  Economic Differences  Differences in the Currency Unit  Differences in the Language  Differences in the Marketing Infrastructure  Trade Restrictions  High Costs of Distance  Differences in Trade Practices