1. Chapter 1 Trade and investment in a global economy
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2. Lecture plan Scope of international business
exports of goods and services
international contracting
foreign direct investment
What is globalisation? Main indicators
The drivers of globalisation
Arguments pro and against globalisation
International business versus domestic business
Why study international business?
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3. Scope of international business
Exports (goods and services)
Contracting
Joint ventures
Wholly owned direct investment
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4. Exports of goods Primary products
agricultural products (food, raw materials)
mining products (ores, fuels, non-ferrous metals)
Manufactures
iron and steel
chemicals
other semi-manufactures
machinery and transport equipment
textiles and clothing
other consumer goods
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5. Exports of services Transportation (shipment and other) Travel
Other services
telecommunications
non-merchandise insurance
banking
other professional services (engineering, legal, accounting, education, market research)
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6. Contracting Licensing rights for production and sales of a product
licensing fee
territorial restrictions
Franchising
Pepsi Cola, Shangri-La, Burger King
Turnkey project
planning, construction, commissioning, training
Large plant projects
Subcontracting (e.g. the car sector)
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7. Foreign investment Foreign Direct Investment (FDI)
joint venture and wholly-owned investment
effective control; managerial participation
Portfolio investment
investment income; capital gains
Dividing line: 10% of the company shares
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8. FDI concepts
FDI (flow): measures movement of FDI in a given period, usually a year
FDI outflows
FDI inflows
FDI (stock): book value of accumulated investment flows over the years
outward FDI (stock)
inward FDI (stock)
Foreign production: value of goods and services produced abroad by multinationals.
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9. Global–multinational–transnational
Global company: company operating globally, e.g.
exporting to many countries, or
investing in many countries.
Multinational (MNE): engages in foreign production in three or more countries.
Transnational (TNC): a corporation with owners in more than one nation.
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10. Organization for Economic Co-operation and Development (OECD)
Global integration
‘The process by which markets and production in different countries are becoming increasingly interdependent due to the dynamics of trade in goods and services and the flows of capital and technology.’
Organization for Economic Co-operation and Development (OECD)
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11. Drivers of globalisation
Two key factors seem to underlie the trend towards the increasing globalisation of markets and production:
1. decline of barriers to trade and investment
2. technological change
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12. Indicators of globalisation
Increasing trade/GDP ratio
FDI as % of GDP
Growth of intra-industry trade
Declining concentration of international business flows
Aggregate international business as % of GDP
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13. Why FDI is growing more rapidly than world trade or world output
Can circumvent future trade barriers
World political and economic change
Democratisation of markets
Globalisation of world markets
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14. Answers to critics of globalisation
Decisions in WTO and other international organisations are made by consensus of governments
Globalisation is more effective with strong governments and sound institutions
Globalisation benefits both large and small/medium companies
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15. Anti-globalisation arguments
Destroys manufacturing jobs in wealthy, advanced countries
Wage rates of unskilled workers in advanced countries decline
Companies move to countries with fewer labour and environment regulations (‘export of jobs’)
Loss of sovereignty
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16. Globalisation - arguments pro
Lower prices for goods and services
Economic growth stimulation
Increase in consumer income
Job creation
countries specialise in production of goods and services that are produced most efficiently
Unprecedented advances in living standards
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17. International business vs domestic business
International risk
financial (exchange, interest, inflation)
political (nationalisation, expropriation)
regulatory (legal systems, policies)
marketing (income levels, marketing practices)
Multinational conflicts
Multinational strategies vs national interest
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18. International business training
Reasons
- ‘multinationalisation’
- internationalisation (small and medium companies)
- international business policies (government)
- globalisation of financial markets
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19. The Future Challenges Domination of the food trade by a few MNCs
The vast technology gaps that exist between rich and poor countries
Agriculture’s role as the sector employing most of the labor force in the poorer countries
Manufacturing workforce is made redundant by foreign investment is being absorbed by new fast growing industries
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21. Act Locally
Think Globally

22. Why Study the Area of International Business???
ANSWER PLEASE!!!
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