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
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
Why Companies Engage in IB These three reasons sales expansion resource acquisition risk minimization guide all decisions about whether, where, and how to engage in international business
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
Modes of Operations in IB 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
Modes of Operations in IB 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
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 Learning Objective: Recognize the need to apply social science disciplines to understand how international and domestic business differ
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
The Competitive Environment So, a company’s competitive strategy influences how and where it can best operate Its competitive situation may differ from country to country in terms of its relative strength and which competitors it faces
Looking to the Future 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
Summary Globalization is the widening set of interdependent relationships among people from different parts of a world divided into nations International business consists of all commercial transactions—including sales, investments, and transportation—that take place between two or more countries
