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Introduction to International Business Summary
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Introduction to International Business Summary
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Introduction to International BusinessGlobalization
- Trade and investment barriers are disappearing
- Perceived distances are shrinking due to advances in transportation and
telecommunications
- Material culture is beginning to look similar
- National economies merging into an interdependent global economic system
=the shift toward a more integrated and interdependent world economy
Merging of historically distinct and separate national markets into one huge global
marketplace
→largest global markets: industrial goods and materials
- The world is moving away from self-contained national economies toward an
interdependent, integrated global economic system
+increased revenue opportunity through -different nations = different problems
global sales
+reduced costs by producing in ‘low cost’ -similarities between nations may be
countries superficial
+variety of products -global planning may be easy, but global
execution is not
Individual point of view: jobs are
disappearing
Market side: we see where the product is sold
Production side: products are shipped to China, manufactured and final products are
shipped back again
- Today, taxes for imported products are less than 10%
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 (labor,energy, land and
capital
→companies hope to lower their overall cost structure + improve the quality or functionality
of their product offered – increasing their competitiveness
What is the globalization of markets?
=the merging of historically distinct and separate national markets into one huge global
marketplace.
- No national markets but global markets → falling trade barriers →global sales
- Consumers’ tastes and preferences are converging on some global norm
- Firms promote the trend by offering the same basic products worldwide
- Firms of all sizes benefit and contribute to the globalization of markets
Why do we need global institutions?
We need global institutions
- Help manage, regulate, police the global marketplace
- Promote the establishment of multinational treaties to govern the global business
system
, Examples:
- World Trade Organization: policies the world trading system, makes sure that nation-
states adhere to the rules laid down in trade treaties, promotes lower barriers to
trade and investment
- International Monetary Fund (1944): maintains order in the international monetary
system, helps in normal/regular development. But can also help in crises, lender of
last resort for countries in crisis (Argentina, Indonesia, Mexico, Russia, South Korea,
Thailand, Turkey, Ireland, Greece
- World Bank (1944): promoted economic development via low interest loans for
infrastructure projects
- United Nations (1945): founded because that World War was so brutal. Maintains
international peace and security, develops friendly relations among nations,
cooperates in solving international problems and in promoting respect for human
rights, is a center for harmonizing the actions of nations, offices all over the world,
helping various sectors (food, refugees, sanitary)
- G20: forum through which major nations tried to launch a coordinated policy
response to the 2008-2009 global financial crisis
What is driving globalization?
- Declining barriers to the free flow of goods, services and capital
Average tariffs are now at just 4%, more favorable environment for FDI, facilitates
global production
- Technological change
Microprocessors and telecommunications, the Internet and WWW, transportation
technology
What does Globalization mean for firms?
Home markets under attack by foreign markets, e.g. watches (Switzerland Swatch, US-
American watches etc)
- Lower barriers to trade and investment means firms can
-view the world rather than single countries as their market
-base production in the optimal location for that activity
- But firms may also find their home markets under attack by foreign firms
- Technological change means
-lower transportation costs help create global markets
-disperse production to economical, geographically separate locations
-low cost information processing and communication→firms can create an electronic
global marketplace
-low cost communication networks and global media →create a worldwide culture
and a global consumer product market
FDI changes over time. Fluctuations
developing countries
+work -exploitation, workers do not always work
under good conditions
+get knowledge -regional suppliers can be neglected
+connection to other -land is exploited
countries→institutions watch
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