Globalization The world economic globalization process

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1 Globalization The world economic globalization process
Theodore Levitt’s (1983) view--now seen as simplistic: Tech advances altered communication, transportation, travel to create a global consumer who prefers standardized products The entire world [or major regions of it] is now a single entity; an organization can sell the same things in the same way everywhere Today’s view International integration of goods, technology, information, labor, and capital The process of making this integration happen LO2

2 Globalization Forces Globalization is a result of
Political forces that reduce barriers to trade and foreign investment by governments induce privatization of industries of former communist nations Technological forces that lead to advances in computers and communications technology allow low cost network computing and ubiquitous Internet collaboration across borders LO2

3 Globalization Forces Globalization is a result of Market forces
lead to globalizing companies’ need for their suppliers to globalize too allow easier revenue seeking activity abroad due to home market saturation Cost forces demand economies of scale -- product line and manufacturing -- to reduce unit costs lower cost production factor seeking efforts in other countries Competitive forces more intense due to explosive growth internationally of small and new businesses LO2

4 Globalization Forces LO2

5 What is International Business?
International Business (IB): any business transaction across national borders Trade in goods Cross-border services consulting, advertising, legal, financial, accounting tourism, banking, communications/media, construction management, etc. Company activity inputs may involve IB activity even if outputs do not Firm’s revenues may come entirely from the home country Key raw materials, knowledge, processes may come partially or entirely from other countries LO3

6 Ways A Company May Be Involved in International Business
A company is involved in international business by working with others who are abroad Managers of its own subsidiaries Customers, suppliers, agents Overseas service providers: bankers, advertising executives, lawyers, auditors, government officials, transportation managers Service providers from home country who work with with the company’s overseas operations traveling overseas for company business LO3

7 Rapid Growth of International Business
The rapid growth of international business is a result of dramatic increases of foreign direct investment (FDI) and exports FDI: A firm invests in equipment, structures, and organizations in another country while retaining significant management control Exports: Sale and transfer of any good or service from the firm’s home country to another country LO3

8 Globalization Debate Supporting Free Trade
enhances socioeconomic development promotes more and better jobs LO3

9 Concerns With Globalization
Produces uneven results across nations and people Has deleterious effects on labor and labor standards Contributes to the decline of environmental and health conditions LO3

10 Environment of International Business
Two sets of forces in the IB environment influence the development and operations of a firm External Forces (Uncontrollable) Those that management cannot control Internal Forces (Controllable) Those that management can develop and use to formulate and execute the firm’s strategy given particular external forces LO4

11 External Forces That Affect IB Due To Cross-Border Differences
Competitive Competitor kinds, number, locations, activities Distributive National and international agencies that distribute goods and services Economic Factors such as GNP, unit labor cost, and personal consumption expenditures that matter to business and vary among countries LO4

12 External Forces That Affect IB Due To Cross-Border Differences
Socioeconomic Characteristics and distribution of human population Financial Interest rates, inflation rates, and taxation Legal Foreign, domestic, and international laws governing a firm’s IB operations Physical Natural elements: natural resources (i.e., factors of production), topography, climate LO4

13 External Forces That Affect IB Due To Cross-Border Differences
Political Government forms, international organizations Sociocultural National culture similarities or differences that affect international managers Labor Composition, skills, attitudes of labor Technological Technical skills and equipment that affect how resources are converted to products LO5

14 Internal Forces That Managers Can Influence Across Borders
Factors of production Capital, raw materials, people Activities of the organization Personnel management, finance, production, marketing LO5

15 Why Is IB Different? In IB a firm operates in multiple environments
Domestic environment - uncontrollable forces Has forces that surround and influence the firm’s behavior in the home country These remain mostly the same regardless of where in the country the firm operates LO5

16 Why Is IB Different? In IB a firm operates in multiple environments
Foreign environment country-by-country uncontrollable forces influence the firm’s behavior and are different from those of the domestic environment based on values that differ difficult to assess for the firm’s home managers interrelated LO5

17 Why Is IB Different? The international environment is characterized by interaction between domestic and foreign country environmental forces among foreign country environmental forces Hence, decision making is more complex due to environment force differences and interactions culture differences that are difficult to learn the tendency of manager’s to rely on their own culture’s reference points LO5