International Business Week II

Last weeks reading What is international Business? Why is it important for you to study international business? What are the basic forms of international business activity? How do merchandise exports and imports and service imports differ? What is portfolio investment? What are the main reasons for growth in international business activity? Why do some businesses become global while others remain local or regional? What is the impact of Internet on international business?

Aim

Objectives Explain different forms of international business. Discuss the meaning of different terms used in international business language. Discuss globalization and its causes. Discuss how the era of globalization is central to international business and the main players. Discuss the legal, technological, accounting and political environments in the world market place.

Core Areas Importing Exporting

Feedback

International Investments After Importing and exporting this is the second major form of IB activity. It consists of capital supplied by residents of one country to residents of another these are of two types. Foreign direct investments FID Their purpose is to control assets, or companies located in host countries by parent companies headquartered in the home country Foreign portfolio investments FIP These involve the purchase of foreign financial assets (stocks, bonds etc) for propose other than controlling returning rate of return on portfolio assets.

International Licensing Is a contractual arrangement where a firm in one country licences use of intellectual property to firm in another country in return for a royalty. International Franchising Is a specialized form of international licensing where the franchisee in another country is authorised to utilize the franchisors operating system e.g. name, trademarks etc International management contract When an agreement is made for a firm in one country agrees to operate facilities or provide other management services to a firm in another.

Multinational Corporation (MNC) Identifies firms that engage in foreign direct investments, and own or control value adding activities in more than one country.

Globalization http://www.youtube.com/watch?v=k7bivuNlbi0&featur e=related http://www.youtube.com/watch?v=Pdrr3ZxZUOc

The Era of Globalization International has boomed in the last decade as such experts believe we are living in an era of globalization. Thomas Friedman suggested that globalization can be defined as “the inexorable integration of markets, nation states and technologies in a way that is enabling individual’s corporations and nation states to reach around the world further, faster, deeper and cheaper than ever before.”

Contemporary Cause of Globalization The growth in IB has been very clear and dramatic in recent years mainly for 2 reasons. Strategic imperatives These motivate globalization and environmental changes such as opportunity to leverage core competencies (advantage distinct to company) that a firm has developed in home market so as to increase revenue and profits. Other reasons may be to acquire resources e.g. raw materials labour capital or even technology.

Strategic imperatives Seeking new markets When a firms domestic market matures sales decline so new market allow sales growth Competition Businesses sometimes enter new markets to compete with rivals to prevent them gaining competitive advantage. Environmental Causes Improved communication technology Improved transport methods Improved information processing

Globalization and Emerging Markets Globalization has intensified IB promoting business to expand into new markets examples of emerging markets are. BRIC Countries Big Ten Countries Non high income Countries

The European Union consists of 27 countries that are seeking to promote European peace and prosperity by reducing mutual barriers to trade and investment this has come a long way in the past 2 decades.

Influential Members Germany With a 2009 GDP of $3.3 trillion it has the world’s fourth largest economy and they play a major role in formulating EU policies France Have been pivotal in promoting common European defence and foreign policies as well as strengthening human and worker rights. The United Kingdom Are a major international finance centre and major importer and exporter of goods?

Task Imagine you are directors of a big company who intend to invest in a new country. Discuss the legal, technological, accounting and political environments in the world market place that you need to be aware of before you engage in this venture.