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Summary International Business International Business
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International BusinessChapter 1 “Globalization”
Globalization, the shift toward a more integrated and interdependent world economy.
Globalization of markets, the merging of historically distinct and separate national markets unto one
huge global market place.
Globalization of production, the sourcing of goods and services from locations around the globe to
take advantage of national differences in the cost and quality of factors of production. (labour, energy,
land and capital.)
General Agreement on Tariffs and Trade (GATT)
World Trade Organization (WTO), responsible for policing the world trading system and making
sure nation-states adhere to the rules laid down in trade treaties signed by WTO member states.
International Monetary Fund (IMF), maintains order in the international monetary system.
World Bank, promotes economic development.
Group of Twenty (G20), compromises the finance ministers and central bank governors of the 19
largest economies in de world, plus representatives from the EU and the European Central Bank.
International trade, when a firm imports/exports goods or services to consumer in another country.
Foreign Direct Investment (FDI), when a firm invests in resources in business activities outside its
home country.
Moore’s law, the cost of microprocessors continues to fall, while their power increases.
Stock of foreign direct investment, the total cumulative value of foreign investments as a percentage
of the country’s GDP.
Multinational enterprise, any business that has productive activities in two or more countries.
International business, any firm that engages in international trade of investment.
,This chapter has shown how the world economy is becoming more global and reviewed the main
drivers of globalization, arguing that they seem to be thrusting nation-states toward a more tightly
integrated global economy. It looked at how the nature of international business is changing in
respond to the changing global economy, discussed concerns raised by rapid globalization, and
reviewed implications of rapid globalization for individual managers.
➢ Over the past three decades, we have witnessed the globalization of markets and production.
➢ The globalization of markets implies that national markets are merging into one huge
market- place. However, it is important not to push this view too far.
➢ The globalization of production implies that firms are basing individual productive activities
at the optimal world locations for the particular activities. As a consequence, it is increasingly
irrelevant to talk about American products, Japanese products, or German products because
these are being replaced by ‘global’ products.
➢ Two factors seem to underlie the trend toward globalization;
o Declining trade barriers.
o Changes in communication, information, and transportation technologies.
➢ Since the end of World War II, barriers to the free flow of goods, services, and capital have
been lowered significantly. More than anything else, this has facilitated the trend toward
the globalization of production and has enabled firms to view the world as a single market.
➢ As a consequence of the globalization of production and markets, in the last decade, world
trade has grown faster than world output, foreign direct investment has surged, imports
have penetrated more deeply into the world’s industrial nations, and competitive pressures
have increased in industry after industry.
➢ The development of the microprocessor and related developments in communication and
information processing technology have helped firms link their worldwide operations into
sophisticated information networks. Jet air travel, by shrinking travel time, has helped link the
worldwide operations of international businesses. These changes have enabled firms to
achieve tight coordination of their worldwide operations and to view the world as a single
market.
➢ In the 1960’s, the US economy was dominant in the world, US firms accounted for most of
the direct foreign investment in the world economy, US firms dominated the list of large
multinationals, and roughly half the world (the communist economies) was closed to
Western business.
➢ By the 2000’s, the US share of world output had been cut in half, with major shares nog being
accounted for by western European and Southeast Asian economies. The US share of
worldwide foreign investments had also fallen by about two-thirds. US multinationals were
now facing competition from a large number of Japanese and European multinationals. In
addition, the emergence of mini-multinationals was noted.
➢ One of the most dramatic developments of the past 30 years has been the collapse of
communism in eastern EU, which has created enormous opportunities for international
business. In addition, the move toward free market economies in China and Latin America
is creating opportunities (and threats) for Western international business.
,➢ The benefits and costs of the emerging global economy are being hotly debated among
businesspeople, economists, and politicians. The debate focusses on the impact of
globalization on jobs, wages, the environment, working conditions, national sovereignty,
and extreme poverty in the world’s poorest nations.
➢ Managing an international business Is different from managing a domestic business.
1. Countries are different.
2. The range of problems confronted by a manager in an international
business is wider and the problems themselves are more complex than
those confronted by a manager in a domestic business.
3. Managers in an international business must find ways to work within the
limits imposed by governments’ intervention in the international trade
and investment system.
4. International transactions involve converting money into different currencies.
, Chapter 2 “National Differences in Political, Economic,
and Legal Systems”
Political economy, political, economic, and legal systems of a country are interdependent. They
interact with and influence each other, by doing so they affect the level of economic well-being.
Political system, the system of government in a nation.
Collectivism, a political system that stresses the primacy of collective goals over individual goals.
Socialists (Karl Marx), few benefit at the expense of many in a capitalist society where individual
freedoms are not restricted.
▪ Communists, socialism would be achieved only through violent revolution
and totalitarian dictatorship.
▪ Social democrats, achieving socialism by democratic means, not through
violence and dictatorships.
Privatisation, selling state-owned enterprises to private investors.
Individualism, An individual should have freedom is his or her economic and political pursuits.
Democracy, political system where the government is elected by the people.
Totalitarianism, form of government where one person or political party exercises absolute control
over all spheres of human life and prohibits opposing political parties.
Representative democracy, citizens periodically elect individuals to represent them.
Communist totalitarianism.
Theocratic totalitarianism, political power is monopolized by a party, group or individual that governs
according to religious principles.
Tribal totalitarianism, a political party that represents the interests of a particular tribe monopolizes
the power.
Right-wing totalitarianism, permits some individual economic freedom but restricts individual
political freedom. Hostility to socialism or communism.
Market economy, all productive activities are privately owned.
Command economy, the government plans the goods and services that a country produces, the
quantity in which they are produced, and the prices at which they are sold.
Legal system, refers to the rules, or laws, that regulate behaviour along with the processes by
which the laws are enforced and trough which redress for grievances is obtained.
Common law, based on tradition, precedent and custom.
Civil law system, based on a detailed set of laws organized into codes.
Theocratic law system, law is based on religious teachings.
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