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International Business Trends Summary

Essay by   •  March 11, 2019  •  Course Note  •  3,155 Words (13 Pages)  •  38 Views

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IB Trends:

Week 1, Globalization

Globalization of Markets: formally separate markets merge into one huge global market place.

  • Easier to sell good internationally because of falling barriers to cross border trade & investment
  • Global taste
  • Benefits for big & small companies
  • Competitors may not change among nations
  • Still difference between national markets

Globalization of Products: acquire goods internationally to benefit from different cost & quality factors of production in dif. countries.

  • Not only matter of cost
  • Impediments remain
  • Reshoring can happen

Offshoring: relocation of a business process from one country to another

Outsourcing: hiring a party outside the company to perform services & create goods

FDI: firm invests resources in business activities outside it’s own country

Drivers of Globalization:

  • Declining trade & investment barriers
  • Tariff: Tax on import (high tariffs result in retaliatory trade policies)
  • GATT: General Agreement on Tariffs & Trade
  • Established WTO: World trade organization, responsible for policing the world trade system, 98% of the world are WTO members
  • Knowledge society & trade agreements
  • Role of technological change: communications, internet (equalizer)

 

Global Institutions: GATT, WTO, UN, International monetary fund, World Bank

Changing face of the global economy

  • Changing world output & world trade picture
  • West has experienced a relative decline
  • China & other emerging countries are growing more rapidly
  • By 2025 developing nations may account for more than 60% of world economic activities
  • Changing FDI picture
  • Non-western firms are increasingly investing across national border
  • Disperse production activities to optimal locations
  •  Increasing amount of FDI into developing countries

  • Changing nature of the multinational enterprise
  • Relative decline of US/Western Multinationals
  • Rise of smaller MN (Internet)
  • Changing world order
  • Former communists’ country present export & investment opportunities
  • China & India are becoming more powerful (ecumenically & politically)
  • Latin America, Asia, Africa -> expanding economies
  • Global economy of the 21st century
  • Barriers going down
  • Adoption of liberal economic policies

The Globalization Debate

  • Globalization, Jobs & Income
  • Critics:
  • Destroy manufacturing-jobs in wealthy advanced countries
  • Outsourcing of services is contributing to higher unemployment and lower living standards
  • Supporters:
  • Benefits outweigh costs
  • Countries will produce only goods and services they can produce most efficiently and import the rest -> whole economy better off + companies reduce cost structure & consumers benefit  
  • Globalization, Labor Policies & the Environment
  • Critics
  • Lack of regulations can result in abuse of low-cost countries
  • Adhering to regulations increases costs
  •  Supporters
  • Economic policies need tougher regulations
  • Globalization & National sovereignty
  • Critics
  • Shift from power from government to supranational organizations (WTO, EU, UN)
  • Supporters
  • Power of SN-organizations is limited to what states collectively agreed on
  • SN-organizations exist to serve the collective interest of member states
  • Globalization & the World’s poor
  • Critics
  • Gap between rich & poor nations has gotten wider
  • Supporters
  • Not related to free trade

Week 2: The Multinational Firm

Impact of Globalization on Business

  • Expansion of international trade
  • FDI plays increasing role in economy
  • Exports/Imports are penetrating deeper into the world’s largest economies
  • Companies home market under attack from foreign competitors
  • Greater opportunities
  • More complex & competitive environment

Environmental factors to consider

  • Economic environment: foreign investment, growth of developing nations, rising wages in developing nations
  • Technological environment: internet & wireless tech.
  • Legal/Regulatory environment: free trade agreements, anti-corruption laws
  • Demographics: Aging society in developed nations, growing population ww., especially in developing countries
  • Social Issues: Cultural differences, bribery concerns
  • Natural environment: Intensifying demand for resources (oil, water, food), growing desire for sustainable products & operations, increasingly endangered species, climate

change

Factors to consider when thinking about shifting production abroad

  • Competitive Advantage (importance of price & quality)
  • What stage is the business in?
  • Can production savings be achieved locally?
  • Can the whole supply chain be improved?

Global strategies

  • International: overseas subsidiaries, greater control by parent company (luxury, high tech)[pic 1]
  • Multinational: subsidiaries can respond locally (Heineken)
  • Global: high control by parent company, standardized production
  • Transnational: centralizing certain functions others in subsidiaries for responsiveness, communication among subsidiaries

Entry Modes

  • Exporting:
  • Advantages: economies of scale, pure global strategy
  • Disadvantages: high transportations costs & tariff barriers
  • Licensing:
  • Advantages: lower development costs, lower political risks
  • Disadvantages: loss of control over technology
  •  Franchising:
  • Advantages: lower development costs, lower political risks
  • Disadvantages: loss of control over quality
  • Joint-Venture:
  • Advantages: local knowledge, shared cost & risk
  • Disadvantages: loss of control over technology, conflict
  • Wholly owned subsidiary:
  • Advantages: control over technology & operations
  • Disadvantages: high risk & costs

Managing across borders

  • Expatriates: Parent company nationals who are sent to work in a foreign subsidiary
  • Host-Country nationals: natives in the overseas subsidiary
  • Third-Country nationals: from a third country not host/home
  • Inpatriates: foreign nationals working at parent company

How to prevent failed global assignments

  • Clear structure
  • Clear job objective
  • Performance measurements based on objectives
  • Use effective, validated selection & screening criteria
  • Prepare expatriates & family for assignment
  • Ongoing communication
  • Anticipate repatriation to facilitate reentry
  • Developing mentor program

Week 3: Political & Economic Systems

Political Economy

  • Political, economic and legal systems are independent
  • Influence each other

Political Systems

  • Collectivism: needs of society are more important than individual freedom
  • Socialism: The few benefit on the expenses of the many in capitalism
  • Individualism: 
  • Individual has freedom in economic and political pursuit
  • Interest of the individual paramount to interest of the state
  • Two tenets:
  • Guarantee of individual freedom and self-expression
  • Welfare of society best served by letting people pursuit their own economic self-interest

Democracy & Totalitarianism

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