International Business Revision Tips PDF

Sitkin and Bowen: International Business, 2nd edition Revision tips  People have been engaging in economic activities outside of their communities’ borders for thousands of years. In this sense, international busi...

Sitkin and Bowen: International Business, 2nd edition Revision tips  People have been engaging in economic activities outside of their communities’ borders for thousands of years. In this sense, international business is nothing new. What does vary from one era to another, however, is the extent to which it affects people’s lives. The general trend has been towards closer interdependencies, if only because of technological progress. On the other hand, other social, political and cultural factors either promote or hinder cross-border transactions. There is nothing inevitable about international business.  International business refers to the exchange not only of physical goods but also services, capital, technology and human resources. It is broader and more multidisciplinary than international management, which focuses more on corporate actions whereas international business pays just as much attention to the different contexts in which companies act. The basic philosophy of this book is that business must be analysed in context.  International business differs from globalization, a term associated with the connotation that the world is unified, and that companies should therefore focus on convergence and similarity. The starting position of international business, on the other hand, is to highlight and respect differences. It would do learners a disservice to underestimate the difficulties of operating in foreign environments.  Like all disciplines, international business has its own vocabulary. People and companies usually start in a home country before moving to a foreign, ‘host’ country. Despite greater cosmopolitanism, various forms of xenophobia remain widespread and often create a protectionist atmosphere that makes it difficult for managers to succeed outside of their home country. One of the purposes of the study of international business is to identify the foundations for such obstacles and develop ‘insiderization’ strategies to overcome them.  There is a link between peoples’ identity and their paradigm (worldview), thus their behaviour. The book’s philosophical approach adopted is that there is no such thing as ‘one-best-way’ (business) behaviour but simply different kinds of conduct that will be more or less suitable in a given situation. Successful international business requires the ability to relativize one’s own outlook.  The main unit of an analysis in this discipline is the ‘multinational enterprise’ (MNE), ranging from a huge company operating globally as a matter of course to a small and medium-sized business (SME) that operates overseas sporadically at best.  MNEs are often structured into ‘configurations’ comprised of a head office and subsidiaries located in different parts of the world. In addition to cross-border trade (imports and exports), a second pillar of international business is ‘offshore’ foreign direct investment that companies undertake abroad. © Oxford University Press, 2013. All rights reserved.  Sitkin and Bowen: International Business, 2nd edition  Another central concept is the ‘value chain’, which perceives a company’s output as the culmination of a series of acts in which raw materials are transformed into semi-processed goods and finally end products. Activities during the earlier production phases are called ‘upstream’. Activities undertaken during the later marketing phases are called ‘downstream’.  A major topic in international business today is the extent to which companies ‘internalize’ (do in-house) activities. Value tends to accumulate at different speeds in various parts of different value chains. This is important for companies but also for countries, with economists often comparing the value- added contents of national imports versus exports, the so-called ‘terms of trade’. In turn, this leads to discussion of the distribution of the benefits of international business between the older OECD/Triad nations (Global North) and less developed countries (LDCs) in the ‘Global South’ on the other. This breakdown is shifting with the rise of certain LDCs, starting with the Asian one.  The rise in global trade volumes since the 1990s has been matched by an even faster rise in FDI. International business also studies the direction of these flows. Although ‘North-North’ FDI flows (between wealthy countries) continue to dominate, the past decade has witnessed a sharp rise in ‘North- South’ flows from wealthy to poor countries, South-South flows and lately South-North flows. Like ‘outsourcing’ discussions, the direction of FDI flows is one of the many levels where ‘macro’ analyses of national political interest are linked to ‘micro’ discussions of business strategy.  External drivers of international business include a company’s desire to expand sales by leveraging its existing competencies in a new, foreign market, with or without product adaptation. This is particularly easy when the company is moving somewhere that is not particularly different from its market of origin. A second external driver is the desirability for companies to grow large enough to achieve the kind of ‘critical mass’ that enables them to produce economies of scale and increase productivity. This is particularly useful when a company’s domestic economy is too small to buy all of its output, meaning that its home country factory has surplus capacities.  Companies also go abroad to diversify their risks. It is dangerous, both on the production and on the sales side, to become overly dependent on one location or market, meaning that in some respects (and despite the expense), going abroad can be described as the safe option. This kind of risk diversification emphasis can also involve products’ differential situations in various national markets (‘product lifecycles’) and to foreign exchange risk.  Companies also go abroad to acquire inputs more competitively than they can at home. Such inputs may be physical resources or cheap labour but they also include technology. This latter factor is also an external driver of international business, in the sense that technological progress worldwide is one of the factors that has helped to improve global communications and logistics. As witnessed by the major changes affecting emerging countries like © Oxford University Press, 2013. All rights reserved.  Sitkin and Bowen: International Business, 2nd edition China, international business is greatly facilitated when technology raises general awareness of (and access to) foreign markets or products.  Another external variable affecting international business is the regulatory framework. Depending on whether a government is more interested in protecting particular local constituencies or in opening the country up to foreign producers, it may or may not decide to set up different kinds of ‘barriers to trade’. The recent trend towards lower barriers is called ‘liberalization’. This lies at the heart of certain modern institutional frameworks like the World Trade Organization or the European Union. In a less protected world, however, companies are forced from the very outset to compete on a more global stage. Everyone’s playing field has become bigger.  The same globalization trend applies in the field of finance, as witnessed by huge international institutional investors’ power to shape MNE decisions. Currently there is deep debate about whether companies’ main mission should be to look after shareholder or stakeholder interests. The power of MNEs is such that they can be a force for progress in the world. At the same time, it is clear that some MNE conduct has been unsustainable. How managers choose to deal with the different financial, ethical and ecological challenges they face is an increasingly important topic within international business. © Oxford University Press, 2013. All rights reserved.