International Business: Chapter One

CHAPTER ONE
INTERNATIO
Dr. Priya M. Kenkare - AY - 2009-10

GLOBALIZATION AND INTERNATIONAL BUSINESS

Learning Objectives
 To explain the concept of globalization

 To elucidate factors influencing globalization
 To discuss global business expansion strategy for
emerging market companies
 To explicate the concept of international business
 To delineate motives for international business
expansion
 To expound the strategy for managing business in the
globalization era
Dr. Priya M. Kenkare - AY - 2009-

Globalization of Business : A Historical Perspective
In the initial years of human history, there were

hardly any formal barriers, such as tariffs or non-
tariff restrictions, for the movement of goods or
visa requirements for the people.
The concept of globalization can be traced back

to the phenomenon of a nation-state.

Concept of Globalization
 The process of integration and convergence of
economic, financial, cultural and political systems
across the world.

Globalization: A Holistic Approach
Economic Globalization
The increasing integration of national economic systems through
growth in international trade, investment and capital flows.
Financial Globalization
The liberalization of capital movements and deregulations,
especially of financial services that led to a spurt in cross-border
capital flows.

Globalization: A Holistic Approach
 Cultural Globalization
Convergence of cultures across the world.
 Political Globalization
Convergence of political systems and processes around
the world.

Dimensions of Economic Globalization
 Globalization of production
 Globalization of markets
 Globalization of competition
 Globalization of technology
 Globalization of corporations and industries

Movers of Globalization
 Economic liberalization
 Technological breakthrough
 Multilateral institutions
 International economic integrations
 Move towards free marketing systems
 Rising research & development costs
 Global expansion of business operations
 Advents in logistics management
 Emergence of the global customer segment
Factors Restraining Globalization
 Regulatory controls
 Emerging trade barriers
 Cultural factors
 Nationalism
 War and civil disturbances
 Management myopia

Measuring Globalization
 Trade Openness
 KOF Index of Globalization
 A.T. Kearney/ Foreign Policy Globalization Index

Reasons for Support of Globalization
 Maximization of Economic Efficiencies
 Enhancing Trade
 Increased Cross-border Capital Movement
 Improves Efficiency of Local Firms
 Increases Consumer Welfare

Criticism of Globalization
 Developed versus Developing Countries: Unequal Players in

Globalization:
 Widening Gap between the Rich and the Poor
 Wipes out Domestic Industry
 Leads to Unemployment and Mass Lay-offs
 Brings in Balance of Payments Problems
 Increased Volatility of Markets
 Diminishing Power of Nation States
 Loss of Cultural Identity
 Shift of Power to Multinationals

Response Strategies to Globalization Forces
for Emerging Market Companies

 Defender
 Extender
 Dodger
 Contender

Concept of International Business
 International Trade: Exports of goods and services by a firm

to a foreign-based buyer (importer)
 International Marketing: It focuses on the firm-level

marketing practices across the border, including market
identification and targeting, entry mode selection, and
marketing mix and strategic decisions to compete in
international markets.

 International Investments: Cross-border transfer of

resources to carry out business activities.
 International Management: Application of management

concepts and techniques in a cross-country environment and
adaptation to different social-cultural, economic, legal,
political and technological environments.

 International Business: All those business activities which
involves cross border transactions of goods, services, and
resources between two or more nations
 Global Business: Conduct of business activities in several
countries using a highly co-ordinated and single strategy
across the world.

Reasons for
International Business Expansion
 Market-Seeking Motives

Marketing opportunities due to life cycles

Uniqueness of product or service
 Economic Motives

Profitability

Achieving economies of scale

Spreading R&D costs
 Strategic Motives

Growth

Risk spread

Differences between
Domestic and International Business
 Economic Environment
 Socio-Cultural Environment
 Legal Environment
 Political Environment
 Competition
 Infrastructure
 Technology

Managing Business in the Globalization Era
Global strategies adopted by business

enterprises may include:
• Global conception of markets
• Multi-regional integration strategy
• Changes in external organisation of multinational firms
• Changes in internal organisation

INTERNATIONAL BUSINESS
Chapter One concludes

International Business: Chapter One

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CHAPTER ONE

Dr. Priya M. Kenkare - AY - 2009-10

Dr. Priya M. Kenkare - AY - 2009-10

 To explain the concept of globalization

Dr. Priya M. Kenkare - AY - 2009-

In the initial years of human history, there were

The concept of globalization can be traced back

Dr. Priya M. Kenkare - AY - 2009-

 The process of integration and convergence of

economic, financial, cultural and political systems

across the world.

Dr. Priya M. Kenkare - AY - 2009-

Dr. Priya M. Kenkare - AY - 2009-

Dr. Priya M. Kenkare - AY - 2009-

Dr. Priya M. Kenkare - AY - 2009-

 Emerging trade barriers

 War and civil disturbances

Dr. Priya M. Kenkare - AY - 2009-

 KOF Index of Globalization

 A.T. Kearney/ Foreign Policy Globalization Index

Dr. Priya M. Kenkare - AY - 2009-

 Maximization of Economic Efficiencies

 Increased Cross-border Capital Movement

 Improves Efficiency of Local Firms

 Increases Consumer Welfare

Dr. Priya M. Kenkare - AY - 2009-

 Developed versus Developing Countries: Unequal Players in

Dr. Priya M. Kenkare - AY - 2009-

for Emerging Market Companies

Dr. Priya M. Kenkare - AY - 2009-

 International Trade: Exports of goods and services by a firm

 International Marketing: It focuses on the firm-level

Dr. Priya M. Kenkare - AY - 2009-

 International Investments: Cross-border transfer of

 International Management: Application of management

Dr. Priya M. Kenkare - AY - 2009-

 International Business: All those business activities which

involves cross border transactions of goods, services, and

resources between two or more nations

 Global Business: Conduct of business activities in several

countries using a highly co-ordinated and single strategy

across the world.

Dr. Priya M. Kenkare - AY - 2009-

Dr. Priya M. Kenkare - AY - 2009-

Dr. Priya M. Kenkare - AY - 2009-

Global strategies adopted by business

• Global conception of markets

• Multi-regional integration strategy

• Changes in external organisation of multinational firms

• Changes in internal organisation

Dr. Priya M. Kenkare - AY - 2009-

Chapter One concludes

Dr. Priya M. Kenkare - AY - 2009-10

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