International Business IB refers to the performance of trade and investment a ctivities by firms across national borders. Globalization of markets is the ongoing economic integration and growing interdependency of countries worldwide. International Trade => (1) exporting (2) importing products and services across national borders International investment => refers to international transfe r or acquisitions of ownership in assets => (1)Foreign direct investment: physical presence abroad through acquisitions of capital, tech. labor, land, etc (2) International portfolio investment: ownership of foreig n securities such as stocks and bonds

Four risks in International Business Differences between international busi ness and domestic business (1)country risk: adverse effects on company operations an d profitability caused by developments in political, legal, and economic environments in the foreign country (2)currency risk: risk of adverse fluctuations in exchange r ates. (3)commercial risk: possibility of a firm’s loss or failure (4)cross-cultural risk: situation/event at cultural miscommu nications

Why do firms pursue internationalization strategies 1.Increase sales and profits 2.Access lower-cost or superior production factors 3.Optimize sourcing activites 4.Develop economies of scale 5.Confront competitors more effectively 6.Develop rewarding relationships with foreign partners.

Why should you study IB It enhances a firm’s competitive positioning in the global markeyt Facilitates development of the global economy and of the interconnectedness among nations Contributes to national economic well-being Provide you with a competitive edge Enhance your ability to thrive in the job

Market Globalization The gradual integration and growing interdependence of national economies. Many firms become more aggressive at identifying foreign market opportunities, seeking partnerships with foreign firms, and building organizational capabilities in order to enhance their competitive advantage.

Dimensions of market globalization It represents a growing global interconnectedness of buyers, producers, suppliers, and governments. Globalization of production Growth of global investment and financial flows -Convergence of buyer lifestyles and needs -reconfiguration of company value chains

Drivers of market globalization 1.Falling Trade and Investment barriers 2.Market liberlization and adoption of free market economics in formerly closed economies, especially among emerging markets, integration of world financial markets and technological advances. 3.Technological advances: IT, communications, the Internet, manufacturing and transportation

Drivers of market globalization Technological advances create an interconnected network of customers, suppliers, and intermediaries worldwide Technological advances have made the cost of international business affordable for all types of firms

Globalization’s benefits and harms Globalization interferes with national sovereignty. Less costly due to foreign locations Decrease poverty, but may widen the gap between the rich and the poor Unrestricted industrialization may harm the natural environmen Loss of cultural values unique to each nation.

Firm-level results of market globalization organize their sourcing, manufacturing, marketing, and other value-adding activities on a global scale. Each value-adding activity can be performed in the home country or abroad. Firms choose where in the world they locate or configure key-value-adding activities. Firms internationalize valu-chain activites to reduce the cost of R&D and production, or to gain closer access to customers

Value Chain and Globalization of markets Value Chain: The sequence of value- adding activities performed by the firm in the process of developing, producing, marketing, and servicing a product. Globalization of markets: the gradual integration and growing interdependence of national economies.