international business environments & operations 15e daniels ● radebaugh ● sullivan...

International Business

Environments & Operations

15e

Daniels ● Radebaugh ● Sullivan

Copyright © 2015 Pearson Education, Inc. 1-1

Chapter 1

Globalization and International Business


Learning Objectives Define globalization and international business

and explain how they affect each other Grasp why companies engage in international

business and why its growth has accelerated Discuss globalization’s future and the major

criticisms of it Illustrate the different ways a company can

accomplish its global objectives Recognize the need to apply social science

disciplines to understand how international and domestic business differ


Introduction Globalization is the widening set of

interdependent relationships among people from different parts of a world divided into nations

The term sometimes refers to the elimination of barriers to international movement of goods, services, capital, technology, and people that influence the integration of world economies


Introduction International business consists of all

commercial transactions—including sales, investments, and transportation—that take place between two or more countries increasingly foreign countries are a source of

both production and sales for domestic companies


Introduction It is important to study international

business because Most companies are either international or

compete with international companies Global events and competition affect almost all

companies, regardless of industry International companies have more complex

environments than domestic firms. An understanding of IB helps you make better

career decisions An understanding helps you decide what

government policies to supportCopyright © 2015 Pearson Education, Inc. 1-6

IntroductionFactors in International Business Operations


Forces Driving Globalization

1. Increase in and application of technology2. Liberalization of cross-border trade and

resource movements3. Development of services that support

international business4. Growth of consumer pressures5. Increased global competition6. Changing political situations and

government policies7. Expanded cross-national cooperation


Costs of Globalization Threats to national sovereignty

lose freedom to “act locally” Economic growth and environmental

stress growth consumes nonrenewable natural

resources and increases environmental damage

Growing income inequality and personal stress promotes global superstars at the expense of

others


Costs of Globalization Offshoring, a type of outsourcing,

involves the transferring of production abroad it can be beneficial because it reduces costs but, it also means that jobs move abroad

Yet, offshoring may also create new, better jobs at home


Why Companies Engage in IB

To expand sales pursuing international sales increases the

potential market and potential profits To acquire resources

may give companies lower costs, new and better products, and additional operating knowledge

To diversify or reduce risks international operations may reduce operating

risk by smoothing sales and profits, preventing competitors from gaining advantage


Modes of Operations in IB

Merchandise exports goods that are sent out of a country

Merchandise imports goods that are brought into a country

Sometimes referred to as visible exports and imports



Service exports provider and receiver of payment

Service imports recipient and payer of payment

Examples Tourism and transportation Service performance

turnkey operations and management contracts

Asset use licensing and franchising



Investments Foreign Direct Investment (FDI)

investor takes a controlling interest in a foreign company

joint venture

Portfolio Investment a non-controlling financial interest in

another entity Mutual funds often include international

companies


Modes of Operation in IB Collaborative arrangements

Joint ventures Licensing arrangements Management contracts Minority ownership Long-term contractual arrangements

Strategic alliance companies that work together, but the

agreement is critical to at least one partner an agreement that does not involve joint

ownership


Types of International Organizations

Multinational enterprises (MNEs) take a global approach to markets and

production or have operations in more than one country

Sometimes they are referred to as multinational corporations (MNCs) multinational companies (MNCs) transnational companies (TNCs)


Types of International Organizations

In foreign markets, companies often have to adapt their typical methods of doing business foreign conditions may dictate a particular

method operating modes may be different from those

used domestically


Why IB is Different The external environment affects a

company’s international operations Managers must understand social science

disciplines and how they affect functional business fields

Consider physical factors social factors competitive factors


Physical and Social Factors

Geographic influences natural conditions influence business locations

Political policies countries determine where and how business occurs

within their borders Legal policies

influence how a company operates Behavioral factors

may require adaptation in to local conditions Economic forces

explain differences in costs, currency values, market size


The Competitive Environment

Competitive strategy for products Cost strategy Differentiation strategy Focus strategy

Company resources and experience market leaders have more resources for

international operations Competitors faced in each market

local or international


Future of Globalization Three major perspectives on the future of

international business and globalization Further globalization is inevitable International business will grow primarily along

regional rather than global lines Forces working against further globalization

and international business will slow down both trends


22

Global GovernanceGlobal Governance Politics/Peace- United Nations Trade- World Trade Organization (WTO) Money/Finance- International Monetary

Fund (IMF) Development- World Bank Overall- G8 Nations (USA, Canada, UK,

France, Germany, Italy, Japan, and Russia) Other international organizations and

bodies

23

Chapter 1: Discussion Chapter 1: Discussion QuestionsQuestions

1.1. Define globalization and explain the forces Define globalization and explain the forces driving globalization.driving globalization.

2.2. Define globalization and explain the cost and Define globalization and explain the cost and future of globalization.future of globalization.

3.3. What is global governance? Explain the role of What is global governance? Explain the role of each institution in Global Governance.each institution in Global Governance.

4.4. What is Globalization Index? Explain the What is Globalization Index? Explain the construct and methodology in evaluating the construct and methodology in evaluating the countries.countries.

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international business environments & operations 15e daniels ● radebaugh ● sullivan...

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