International Business Environments & Operations 15e, Global Edition Daniels ● Radebaugh ● Sullivan International Business Environments and Operations 15e, Global Edition by Daniels, Radebaugh, and Sullivan

Overview of International Business and Globalization Chapter 1 Overview of International Business and Globalization Chapter 1: Overview of International Business and Globalization

International Business International Business consists of all commercial transactions—including sales, investments, and transportation—that take place between two or more countries. Why should we study international business? It comprises a large and growing portion of the world’s total business. Today, almost all companies – large or small – are affected by global events and competition.

Factors of International Business

Why companies engage in international business? To expand their sales To acquire resources : Capital Technology Information To diversify their sources of sales and supplies To minimize competitive risk

Reasons for Recent International Business Growth Rapid increase in and expansion of technology Liberalization of Cross-border Movements Development of Supporting Institutional Arrangements Increase in Global Competition

Factors Influencing International Business The cultural environments The political and legal environments The economic environment The geographical advantages

Modes of International Business Export – import trade Direct Foreign Investment - Wholly owned subsidiaries - Joint venture - Mixed venture - Portfolio Investment Licensing / Franchising Strategic Alliance Turnkey Operations Management contracts

Types of International Organizations Multinational Transnational Global

Multinational / Multidomestic An organization with multi-country affiliates, each of which formulates its own business strategy based on perceived market differences. EX. Coca-Cola Global An organization attempts to standardize and integrate operations worldwide in all functional areas. Ex. Nestlé

International Company Either a global or multidomestic company Transnational It comprises parent enterprises and their foreign affiliates: a parent enterprise is defined as one that controls assets of another entity or entities in a country or countries other than its home country, usually by owning a capital stake

Example of Transnational Companies A company formed by a merger of two firms of approximately the same size that are from two different countries. + Unilever (Dutch & English – Food) + Shell (Dutch & English – Oil) + Pharmacia & Upjohn (Swedish & American – Pharmaceuticals) + Dunlop-Pirelli (English & Italian – Tires) + VFW-Fokker (Germany & Netherlands – Aircraft)

Characteristics of Global & Multinationals Trying to achieve economies of scale through global integration of its functional areas while at the same time Being highly responsive to different local environments (Multicultural Multinational) OR Combination of both 1 & 2

International business facilitates the globalization process. Globalization Defined Globalization: the ongoing social, economic, and political process that deepens and broadens the relationships and inter-dependencies amongst nations—their people, their firms, their organizations, and their governments 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 International business facilitates the globalization process.

The Forces Behind Globalization Increased expansion and technological improvements in transportation and communications networks Liberalization of cross-border trade and resource movements Development of services that support international business activities Growing consumer demand for foreign products Increased global competition Changing political and economic situations Expanded cross-national treaties and agreements

Globalization

Act Locally Think Globally Globalization

Major Globalization Forces Political Technological Market Cost Competitive

The International Environment 1. Worldwide Bodies : World Bank 2. Regional Economic Groupings of Nations : North American Free Trade Agreement 3. Organizations Bound by Industry Agreements : Organization of Petroleum Exporting Countries