International Business
Part 1, foundations. About the two leading perspectives: institution-based and
resource-based views.
Chapter 1. Globalizing Business
Chapter 2. Understanding Politics, Laws, and Economics
Chapter 3. Emphasizing Cultures, Ethics, and Norms
Chapter 4. Leveraging Capabilities Globally
,Chapter 1. Globalizing Business.
Key words and explanation.
Institution based-view
The success and failure of firms are enabled and constrained by the rules of the game(institutions).
These are formal rules(laws) and informal rules(values).
Resource-based view
The success and failure of firms around the globe are determined by their environments. How can
some firms be unique and be more successful than others. They must possess specific resources and
capabilities.
International business(IB)
(1) A business(or firm) that engages in international (cross border) economic activities and/or (2) the
action of doing business abroad.
Global Business
Business around the globe.
Globalization
The close integration of countries and peoples of the world.
Multinational enterprise(MNE)
A firm that engages in foreign direct investment(FDI)
Foreign direct investment(FDI)
Investment in, controlling, and managing value-added activities in other countries.
A foreign company makes an active investment in local business. The foreign country is going to
actively run and manage the business.
Emerging economies/markets
A term that has replaced the term: developing countries, since the 1990s.
Gross domestic product(GDP)
The sum of value added by resident firms, households, and governments operating in an economy. It
is a monetary measure of the market value of all final goods and services produced in a certain period.
(BBP) The money that foreign-owned firms earn in a country, will be counted by the GDP of the
country where the firm is.
Purchasing power parity(PPP)
A conversion that determines the equivalent amount of goods and services that different currencies
can purchase. It must be made on the currency exchange rate between countries.
Gross national product(GNP)/ Gross national income(GNI, used by Banks and international
organisations)
GDP plus income from non-resident sources abroad. Example: money that is sent back to Mexico
such as earnings of Mexicans who do not live and work in Mexico and dividends received by Mexicans
who own non-Mexican stocks: A Mexican person who earns money from business abroad.
BRIC
Brazil, Russia, India and China.
Triad
North America, Western Europe, and Japan.
,Base of the pyramid(BOP)
Economies where people make less than 2000$ per capita per year.
Reverse innovation
An innovation that is adopted first in emerging economies and is then diffused around the world. It
leads to products which are created locally in emerging markets, and then upgraded for use in the
developed world.
Group of 20 (G-20)
The group of 19 major countries plus the European Union(EU) whose leaders meet on a biannual
basis to solve global economic problems.
Expatriate manager
A manager who works abroad, or expat for short. This person is send from a company to another
country to work here.
International premium
A significant pay raise when working overseas.
Liability of foreignness
The inherent(vaste) disadvantage that foreign firms experience in host countries because of their non-
native status.
Risk management
The identification and assessment of risks and the preparation to minimize the impact of high-risk,
unfortunate events.
Scenario planning
A technique to prepare and plan for multiple scenarios, high and low risk.
Semiglobalization
A perspective that suggests that barriers to market integration at borders are high, but not high enough
to insulate countries from each other completely.
Isolation is treating each country as a unique market, you have to come up with multiple products.
Globalization would lead to standardization, you treat the whole world as one market. This wouldn’t
work. Semiglobalization has no single right strategy, resulting in a wide variety of experimentations.
Nongovernmental organization (NGO)
An organization that is not affiliated with governments, such as environmentalist, human rights
activists, and consumer groups.
, Chapter summary
1.1 What is global Business?
Explain the concepts of international business and global business, with a focus on emerging
economies.
- IB is typically defined as (1) a business that engages in international economic activities, and
(2) the action of doing business abroad.
- Global business is defined in this book as doing business around the globe.
- This book has gone beyond competition in developed economies, and is mostly about
competitive battles waged in emerging economies and the base of the global economic
pyramid.
- An interesting recent development out of emerging economies is reverse innovation.
1.2 Why study global Business?
Give three reasons why it’s important to study global business.
- Enhance your employability and advance your career in the global economy, by having global
business knowledge.
- Better preparation for possible expatriate assignments abroad.
- Stronger competence in interacting with foreign suppliers, partners and competitors and in
working for foreign owned employers in your own country.
1.3 A Unified framework
Articulate one fundamental question and two core perspectives in the study of global business.
- What determines the success and failure of firms around the globe?
- (1) the institution-based view and (2) the resource-based view.
- The book is as a framework around those two perspecitves.
1.4 What is globalization?
Identify three ways of understanding what globalization is.
- It is a recent phenomenon or it has been a one-directional evolution since the dawn of human
history.
- We suggest that globalization is best viewed as a process similar to the wing of a pendulum.
1.5 Global Business and globalization at a crossroad.
State the size f the global economy and its broad trends, and understand your likely bias(partijdigheid)
in the globalization debate.
- The total size of global GDP is approximately 60$ trillion
- MNE’s especially large ones from developed economies, are sizable economic entities.
- Current and would-be business leaders need to be aware of their own hidden pro-globalization
bias.
