1. The Rapid Change of International Business
Introduction to IB
The Rapid Change of International Business
McGraw-Hill/Irwin
International Business, 11/e
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives
Appreciate the dramatic internationalization of markets
Understand the various names given to firms that have operations in more than one country
Understand the five kinds of drivers, all based on change, that are leading international firms to globalize
Comprehend why international business differs from domestic business
Describe the three environments—domestic, foreign, and international--in which an international firm operates

3. International Business Terminology
Foreign business
Multidomestic company (MDC)
Global company (GC)
International company (IC)

4. International Business Terminology, cont’d.
A business whose activities are carried out across national boarders
Foreign Business
The operations of a company outside its home or domestic market
Multidomestic Company
An organization with multicountry affiliates
Each formulates its own business strategy on perceived market differences

5. International Business Terminology, cont’d.
Global Company
an organization that attempts to standardize and integrate operations worldwide in most of all functional areas
International Company
A global or multidomestic company

6. History of International Business
Early traders
Well before the time of Christ, Phoenician and Greek merchants
China stimulated the emergence of an internationally integrated trading system
“all roads lead to China”
17th Century mercantilism/colonialism
British East India Company
Dutch East India Company
Portugal and France

7. Globalization Globalization (សាលកភាវូនីយកម្ម)
Coined by Theodore Levitt
“as if the entire world (or major regions of it) were a single entity; [such an organization] sells the same things in the same way everywhere”
Economic Globalization(សេដ្ឋកិច្ចសាលកភាវូនីយកម្ម)
International integration of goods, technology, information, labor, and capital
Process of making this integration happen

8. Table 1.1 Globalization Rankings: The KOF Index of Globalization and the A.T Kearney/Foreign Policy Globalization Index

9. Globalization Forces Political forces (កត្តាជំរុញផ្នែកនយោបាយ)
Reduction of barriers to trade and foreign investment by governments
Privatization of former communist nations
Technological forces​ (កត្តាជំរុញផ្នែកបច្ចេកវិទ្យា)
Advances in computers and communications technology
Internet and network computing

10. Globalization Forces, cont’d.
Market forces (កត្តាជំរុញផ្នែកទីផ្សារ)
Globalizing companies become global customers
Cost forces (កត្តាជំរុញផ្នែកថ្លៃដើម)
Goal for economies of scale to reduce unit costs
Competitive forces (កត្តាជំរុញផ្នែកប្រកួតប្រជែង)
Increase in intensity due to explosive growth in international business

11. Explosive Growth (សន្ទុះនៃកំណើន)
Foreign Direct Investment and Exporting
​​​ (ការវិនិយោគផ្ទាល់និងការនាំចេញ)
FDI - Direct investment in equipment, structures, and organizations in a foreign country
level sufficient to obtain significant management control (Table 1.2)
Exporting – transportation of any domestic good/service to a destination outside a country or region

12. Table 1.2 FDI Indicators and Multinational Company Statistics (billions of dollars and percentages)

13. Explosive Growth Number of International Companies
UNCTAD - United Nations agency in charge of all matters relating to FDI and international corporations.
1995 – 45,000 parent companies with 280,000 foreign affiliates ($7 trillion in sales)
2004 – 70,000 parent companies with 690,000 foreign affiliates ($19 trillion in sales)

14. Table 1.3 Ranking of International Companies and nations according to GNI (Atlas Method) or Total Sales
Note: Belgium (B), China (PRC), France (F), Germany (G), Italy (It), Netherlands (N), Switzerland (S), United Kingdom (U.K.), and United States (U.S.). Source: World Development Indicators database, (July 4, 2006); and Fortune 2005 Global 500, (July 4, 2006).

15. Globalization Debate And You
World Trade Organization (1999, Seattle)
Extensive public protests about globalization and the liberalization of international trade
Debate –
Waged by diametrically opposed groups with extremely different views on consequences of globalization
Dramatic reductions in worldwide poverty are contrasted with anecdotal stories of people losing their livelihoods under the growing power of multinationals

16. Environments of IB Environment ​(បរិយាកាស) Forces (កត្តាជំរុញ)
All the forces influencing the life and development of the firm
Forces (កត្តាជំរុញ)
External Forces (កត្តាជំរុញខាងក្រៅ) (Uncontrollable: មិនអាចត្រួតពិនិត្យបាន) – Forces over which management has no direct control
Internal Forces (កត្តាជំរុញខាងក្នុង) (Controllable: អាចត្រួតពិនិត្យបាន) – Forces that management can use to adapt to external forces

17. External Forces Competitive (ការប្រកួតប្រកួត) Kind, number, location
Distributive (ការចែកចាយ)
For distributing goods and services
Economic (កត្តាសេដ្ឋកិច្ច)
GNP, unit labor cost, personal consumption expenditure
Socioeconomic (សេដ្ឋកិច្ចសង្គម)
Characteristics of human population
Financial (កត្តាហិរញ្ញវត្ថុ)
Interest rates, inflation rates, taxation

18. External Forces, cont’d.
Legal (កត្តាច្បាប់)
Laws governing how international firms must operate
Physical (កត្តារូបវិទ្យា)
Topography, climate, and natural resources
Political​ (កត្តានយោបាយ)
Forms of government, and international organizations
Sociocultural (កត្តាវប្បធម៌សង្គម)
Attitudes, beliefs, and opinions
Labor (កត្តាពលកម្ម)
Skills, attitudes of labor
Technological (កត្តាបច្ចេកវិទ្យា)
Equipment and skills that affect how resources are converted to products

19. Internal Environmental Forces
Factors of Production (កត្តាផលិតកម្ម)
Capital, raw materials, and people
Activities of the organization (សកម្មភាពរបស់អង្គភាព)
Personnel, finance, production, and marketing

20. Why Is International Business Different?
Domestic Environment (បរិដ្ឋានក្នុងតំបន់)
All the uncontrollable forces in the home country that surround and influence the firm’s life and development
Foreign Environment (បរិដ្ឋានបរទេស)
All the uncontrollable forces originating outside the home country that surround and influence the firm
different values
difficult to assess

21. Why Is International Business Different? cont’d.
International Environment (បរិដ្ឋានអត្តជាតិ)
Interaction between domestic and foreign environmental forces or between sets of foreign environmental forces
Increased complexity for decision-making
Decision making more complex (ការសំរេចចិត្តមានលក្ខណៈស្មុគ្រស្មាញ)