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Summary International Business (6012B0427Y)
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Week 1 lecture:Chapter 1:
Globalization definition the shift toward a more integrated and interdependent world
economy
Globalization of markets the merging of historically distinct and separate national markets
into one huge global marketplace
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
(such as labor, energy, land, and capital). By doing this, companies hope to lower their overall
cost structure or improve the quality or functionality of their product offering, thereby
allowing them to compete more effectively.
The price of being global differs for each industry, for some industries local firms perform
better than multinationals
Technology is a partner that learns from us but also could teach us something a human could
not come up with
Why has globalization occurred?
- Technology (internet, transportation)
- Declining trade and investment barriers
Why business facets are globalizing:
- New markets, many markets are exhibiting greater uniformity
- Access to lower cost workers, technical expertise, production outputs
Pros of globalization:
- Wealth
- Jobs (increases in average consumer income)
- Technology
- Lower prices for goods and services
- Economic growth stimulation
- Countries specialize in goods and services that are produced most efficiently closer to
economic ideal
- Greater competition
Cons of globalization:
- Off-shoring of business service jobs to lower-wage countries
- Environmental and social impacts
- Reduces blue-collar jobs and wages in developed countries
- Greater income disparity
- Businesses more powerful than governments?
- Loss of traditional culture
One of the most dramatic developments of the past 30 years has been the collapse of
communism in eastern Europe, which has created enormous opportunities for international
,businesses. In addition, the move toward free market economies in China and Latin America
is creating opportunities (and threats) for Western international businesses.
Managing an international business is different from managing a domestic business for at
least four reasons:
1. Countries are different.
2. The range of problems confronted by a manager in an international business is wider
and the problems themselves 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.
Week 2
Political Economy The political, economic, and legal systems of a country
There are 2 dimensions to which you can assess political systems:
- The degree to which they emphasize collectivism as opposed to individualism
- The degree to which they emphasize they are democratic or totalitarian
These dimensions are interrelated; systems that emphasize collectivism tend to lean toward
totalitarianism, whereas those that place a high value on individualism tend to be democratic.
Political system:
Collectivism refers to a political system that stresses the primacy of collective goals over
individual goals. More important than individual freedoms. In such circumstances, an
individual’s right to do something may be restricted on the grounds that it runs counter to
“the good of society” or to “the common good.” The collectivist mantle has been picked up
by socialists
Socialism: beliefs that public ownership of the means of production is for the common
good of society
In the earlier 20th century socialism split up into 2 camps:
- Communists socialism can only be achieved through violent revolution and totalitarian
dictatorship.
, - Social democrats committed themselves to achieving socialism by democratic means.
Individualism refers to a philosophy that an individual should have freedom in his or her
economic and political pursuits
Democracy government by the people, exercised directly or through elected
representatives.
Totalitarianism one person or party exercises control over all spheres of human life.
Opposing political parties are prohibited and political repression and censorship are common.
Main types:
- Theocratic power is monopolized by a political party, group or individual that governs
according to religious principles (Saudi Arabia)
- Tribal power is monopolized by a political party, group or individual that represents a
particular tribe (Zimbabwe)
- Right wing totalitarianism individual economic freedom is allowed but individual
political freedom is restricted in the belief that it could lead to communism (Singapore)
Economic System:
Market economy an economic system in which the interaction of supply and demand
determines the quantity in which goods and services are produced. Consumers determine what
is produced through their purchases. The role of the government is to encourage free and fair
competition between private producers
Command economy an economic system where the allocation of resources, including
determinants of what goods and services should be produced, and in what quantity, is planned
by the government. In a pure command economy, all businesses are state owned, and the goal
of the economy is to serve the interest of a nation as a whole rather than as private individuals.
(Less efficient than a market economy)
Legal System:
Refers to the rules, or laws, that regulate behavior along with the processes by which the laws
are enforced and through which redress for grievances is obtained.
Like the economic system, the legal system is influenced by the prevailing political system.
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