1. WEEK 1 Background for International Business
Globalization and International Business

2. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
Chapter Objectives
To define globalization and international business and show how they affect each other
To understand why companies engage in international business and why international business growth has accelerated
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3. Why we should study international business?
Most companies today compete with each other to be more competitive
Understand Mode of business operation differ than before
Understand different ways of conducting business in various countries
Helps us to make better career decisions
Helps us to understand what government policies involve in international business
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4. Definition of Globalization
The broadening set of interdependent relationships among people from different parts of a world that happens to be divided into nations
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5. Definition of Globalization
Also refers to integration of world economies through reduction of barries to the movement of trade, capital, technology and people
Enables us to get more variety, better quality or lower price of product or services.
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6. The forces Driving Globalization
Economic – international trade and investment (25% of world production is sold outside its country origin)
Technology – internet connectivity
Personal contact – international travel
Political – participation in international organization and government monitory transfer
Globalization Index 2009
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7. Factors in Increased Globalization
Increase in and expansion of technology – advances in transportation and communication (product can be develop at any part of the world)
Liberalization of cross-border trade and resource movements
Development of services that support international business
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8. Factors in Increased Globalization
Growing consumer pressures
Increased global competition – many companies merged or acquired
Changing political situations – end of communist world
Expanded cross-national cooperation – trading block
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9. The Criticisms of Globalization
Threats to national sovereignty – diminish local freedom and control, objective and policies, culture changes
Economic growth and environmental stress
Growing income inequality and personal stress
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10. Definition of International Business
All commercial transactions—including sales, investments, and transportation—that take place between two or more countries
Business (firm) that engages in international (cross-border) economic activities or the action of doing business abroad
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11. International Business: Operations and Influences
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12. LEADING TRADING NATION 2008
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13. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
Best Global brand 2009
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14. Examples of Global Brand – Top Global Brand 2008
Asian Brands
Toyota
Honda
Samsung
Sony
Canon
Value USD billion
24.8
15.8
15.0
10.7
9.0
Country Origin
Japan
South Korea
Main Product services
Automobile
Consumer electronic
Copier, camera
European Brands
Nokia
Mercedes-Benz
BMW
Louis Vuitton
Nescafe
26.5
20.0
17.1
16.1
12.2
Finland
Germany
France
Switzerland
Cell Phone devices
Fashion accessories
Coffee
US Brands
Coca-cola
Microsoft
IBM GE
Intel
67.5
59.9
53.4
47.0
35.6 US
Soft drink
Software
IT services
Appliances/ Jet engine
Computer chip
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15. Reasons That Firms Engage in International Business
Expanding sales
Acquiring resources
Minimizing risk
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16. Reasons That Firms Engage in International Business
To expand sales
Volkswagen [Germany]
Ericsson [Sweden]
Michelin [France]
Nestlé [Switzerland]
IBM [USA]
Seagram [Canada]
Sony [Japan]
[continued]
Malaysian Companies
Petronas (SEA, Africa, middle East)
Telekom ( SEA, Africa, India, Bangladesh)
Sime Darby ( SEA)
YTL ( Africa, UK)
UEM ( India )
KFC Holdings
Ranhill Construction
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17. Why firm engage IB ? (cont..)
To acquire resources
Products, components, services
Foreign capital
Technologies
Information
To minimize risk
Take advantage of business cycle
differences amongst countries
Diversify suppliers across countries
Counter competitors’ advantages
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18. Modes of Operation in International Business
Merchandise exports and imports
Service exports and service imports
Tourism and Transportation
Service Performance
Asset Use (trademarks, patterns, copyrights) – franchising, licensing, royalties
Investments
Direct investment (FDI) - controlling financial interest JV
Portfolio investment – no controlling financial interest
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19. Types of International Organizations
Collaborative arrangements
Strategic Alliance
Multinational Enterprise (MNE)
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20. Why international business differ from domestic business
Because of two reasons
Physical and social factors
Competitive factors
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21. Why international business differ from domestic business
Physical and social factors
Geography influence
Political policies
Legal policies
Behavioral factors
Economic forces
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22. Why international business differ from domestic business
Competitive factors
Competitive strategy for product/services - branding, image, unique characteristics
Company resources and experience – large companies more resource and experience than small companies
Competitors faced in each market – competition
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