International Business Globalisation

Definitions Globalisation: The broadening set of interdependent relationships among people from different parts of the world that happens to be divided into nations The integration of world economies through the reduction of barriers to the movement of trade, capital, technology and people Daniels J D et al (2009)

Examples Kia Sorrento - Korean Car Japanese firm furnishes CD player in the car Optical pick-up units made in China Thailand adds electrical components Assembly in Mexico Transported from US port to Korea Installed in vehicle and transported around the world

International business Definition All commercial transactions - including sales, investment and transportation that takes place – between two or more countries private companies undertake such transactions for profit; governments undertake them for either profit or political reasons

Forces Driving Globalisation Economic – international trade and investment Technological - internet connectivity, email and broadband Personal contact – international travel and tourism, international telephone traffic and personal transfers of funds internationally Political – participation in international organisations and government monetary transfers Question :Which countries are the most globalised? Singapore and Hong Kong most India and Iran least Economic US 1st on technological scale but 71st on the economic scale

Factors in increased Globalisation Increase in expansion of technology Liberalisation of cross-border trade and resource movements Development of services that support international business Growing consumer pressures Increased global competition Changing political situations Expanded cross-national cooperation

Why companies engage in international business Expanding sales - higher sales create value, as long as costs of sales doesn’t increase disproportionately Acquiring resources - lower costs, new or better products, additional operating knowledge Minimising risk - smoothing sales and profits, preventing competitors from gaining advantage

Is Offshoring good Strategy? offshoring is the process of shifting production to a foreign country If offshoring succeeds in reducing costs it’s good Example: branded clothing companies offshore to have work done by cheaper sewing machine operators

Modes of operation in international business Merchandise exports and imports - are usually a country’s most common international transaction (Visible and tangible) Service exports and imports – non product sales and purchases, travel, transportation, banking, insurance and the use of assets such as trademarks, patents and copyright Investments – Foreign Direct Investment – takes a controlling interest in a foreign company, or if shared ownership it becomes a Joint Venture Portfolio investment – non-controlling interest of a foreign operation – stock in a company or loans to a company (or country)