International Business Management

INTERNATIONAL BUSINESS MANAGEMENT

Framework

1 Definition:

International business may be defined simply as business transactions that take place across national borders. Nearly all business enterprises, large and small, are inspired to carry on business across the globe. This may include, purchase of raw materials, from foreign suppliers, assembling products from components made in several countries or selling products or services to customers in other nations.

International Business

Other definitions:

IB field is concerned with the issues facing international companies and governments in dealing with all types of cross border transactions.

IB involves all business transactions that involve two or more countries.

IB consists of transactions that are devised and carried out across borders to satisfy the objectives of individuals and organizations.

IB consists of those activities private and public enterprises that involve the movement across national boundaries of goods and services, resources, knowledge or skills.

2 Multinational Enterprise:

A MNE has a worldwide approach to foreign markets and production and an integrated global philosophy encompassing both domestic and international markets.

3 International Management

It is defined as a process of accomplishing the global objectives of a firm by

Effectively coordinating the procurement, allocation, and utilization of the human, financial, intellectual, and physical resources of the firm within and across national boundaries.

Effectively charting the path toward the desired organizational goals by navigating the firm through a global environment that is not only dynamic but often very hostile to the firm’s very survival International Trade: When a firm exports goods or services to consumers in another country. Foreign Direct Investment: When a firm invests resources in business.

4 The Globalization of the World:

Globalization of Economy Globalization of markets

Globalization of production

Decline of barriers to trade (WTO) Increased technological capabilities

60,000 international firms with 500,000 foreign affiliates that generate $11 trillion in sales in 1998

Globalization

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.

Globalization: Pros & Cons

Pros

   Increased revenue opportunity through global sales.

   Reduced costs by

Cons

   Different nations = different problems.

   Similarities between nations may be superficial.

   Global planning may be easy, but global execution is not.

5 Definition of Globalization:

The worldwide movement toward economic, financial, trade, and communications integration. Globalization implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers. However, it does not include unhindered movement of labor and, as suggested by some economists, may hurt smaller or fragile economies if applied indiscriminately.

6 What is “Globalization”?

“The shift toward a more integrated and interdependent world economy.” Markets Production

Globalization of Markets:

“Merging of historically distinct and separate national markets into one huge global marketplace.”

Facilitated by offering standardized products:

Citicorp

Coca-Cola

Sony PlayStation

McDonalds

Does not have to be a big company to participate:

Over 200,00 U.S. companies with less than 100 employees had foreign sales in 2000.

The Largest Global Markets:

Consumer Goods

Industrial Goods and Materials

Commodities such as aluminum, oil and wheat.

Industrial products such as microprocessors, aircraft. Financial assets such as U.S. Treasury bills and

Eurobonds.

Industrial Goods and Materials

Commodities such as aluminum, oil and wheat.

Industrial products such as microprocessors, aircraft. Financial assets such as U.S. Treasury bills and Eur

Globalization of production

Refers to sourcing of goods and services from locations around the world to take advantage of

    Differences in cost or quality of the factors of production

Labor Land Capital

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 and/or improve the quality or functionality of their product offering - increasing their competitiveness.