Vsfs session 1
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This document provides an overview and introduction to international business. It defines international business as transactions between parties from different countries, including sourcing, manufacturing, selling, and developing. It notes that conducting international business presents unique risks, challenges and opportunities. The key objectives of studying international business are to understand the global business environment, select international business modes, analyze different cultures, research global markets, understand how policy shapes business, and comprehend the EU's role in markets.
Vsfs session 1
- 2. What is InternationalWhat is International Business?Business? Business transactions between parties from more than one country Sourcing, Manufacturing, Selling, Developing Parties may include ◦ Private individuals ◦ Individual companies ◦ Groups of companies ◦ Governmental agencies
- 3. Why Study InternationalWhy Study International Business?Business? Today’s business environment is global. Conducting international business presents unique risks, challenges and opportunities. ASK YOURSELF: is your company maximizing the opportunities of global business across the value chain?
- 4. Key ObjectivesKey Objectives Learn to: 1. Understand the global business environment and how it is different from the national environment. 2. Select between the different modes of international business 3. Analyze and react to different cultural contexts 4. Research and evaluate global markets. 5. Assess how countries can shape global business through policy and integration 6. Understand the EU’s role in the global marketplace
- 7. International vs. DomesticInternational vs. Domestic OPPORTUNITIESOPPORTUNITIES 1.Seek opportunities for growth through market diversification 2.Gain new ideas about products, services, and business methods 3.Better serve key customers that have relocated abroad 4.Be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products
- 8. International vs. Domestic OPPORTUNITIES 5. Gain access to lower-cost or better- value factors of production 6. Develop economies of scale in sourcing, production, marketing, and R&D 7. Confront international competitors more effectively or thwart the growth of competition in the home market
- 9. International vs. DomesticInternational vs. Domestic RISKSRISKS 1. Cross-cultural risk: a situation or event where a cultural miscommunication puts some human value at stake 2. Country risk: potentially adverse effects on company operations and profitability holes by developments in the political, legal, and economic environment in a foreign country 3. Currency risk: risk of adverse unexpected fluctuations in exchange rates 4. Commercial risk: firms potential loss or failure from poorly developed or executed business strategies, tactics, or procedures
- 10. Basic Indicators of InternationalBasic Indicators of International BusinessBusiness Balance of Payments ◦ http://www.cnb.cz/en/statistics/bop_stat/b op_q/bop_usd_en.htm Indices ◦ Demographic ◦ Economic ◦ Business ◦ Social and Technological
- 11. Balance of Payments (BOP)Balance of Payments (BOP) Accounting SystemAccounting System Measures and records all economic transactions between residents of one country and residents of all other countries during specified time period Provides understanding of performance of each country’s economy in international markets Signals fundamental changes in country competitiveness Assists policy makers in designing appropriate public policies 7-11 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
- 12. Major Components of the BOPMajor Components of the BOP Accounting SystemAccounting System 7-12 Current Account Capital Account Official Reserves Errors and Omissions Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
- 13. Table 7.6. U.S. Balance of Payments in 2007Table 7.6. U.S. Balance of Payments in 2007 7-13 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
- 14. Population vs. GDPPopulation vs. GDP as percentage of world totalas percentage of world total
- 15. World Population 2010World Population 2010
- 18. Purchasing Power ParityPurchasing Power Parity (PPP)(PPP)
- 19. World GDP 2008World GDP 2008
- 20. Per Capita GDPPer Capita GDP
- 21. Doing BusinessDoing Business Produced by World Bank Evaluates business regulations and enforcement 180+ countries 10 categories of data www.doingbusiness.org
- 22. National BusinessNational Business EnvironmentEnvironment 1. Starting a Business Tracks the procedures, time, and costs for a limited liability company to legally start operation. 2. Dealing with Licenses Tracks the procedures, time and costs to build a warehouse, including obtaining necessary licenses and permits, completing required notifications and inspections and obtaining utility connections. 3. Hiring & Firing Workers Measures the flexibility of regulations for hiring and firing workers and the costs of hiring and firing.
- 23. National BusinessNational Business EnvironmentEnvironment 4. Registering Property Tracks the steps, time, and cost involved in registering property. 5. Getting Credit Explores the role of creditor rights and credit information registries in expanding access to credit. 6. Protecting Investors Measures the strength of minority shareholder protections against directors’ misuse of corporate assets for personal gain. 7. Paying Taxes Records the tax that a medium-size company must pay or withhold in a given year, as well as measures of the administrative burden in paying taxes.
- 24. National BusinessNational Business EnvironmentEnvironment 8. Trading Across Borders Details the costs and procedures involved in importing and exporting a standardized shipment of goods. 9. Enforcing Contracts Evaluates the efficiency of contract enforcement by following the evolution of a payment dispute and tracking the time, cost, and number of procedures involved from the moment the plaintiff files the lawsuit until actual payment. 10. Closing a Business Measures the time and cost of bankruptcy procedures, and develops indices of procedural bottlenecks in bankruptcy law
- 25. Web ResourcesWeb Resources Country Financial and Demographic info ◦ http://www.worldbank.org ◦ https://www.cia.gov/library/publications/the-world- factbook/index.html ◦ http://globaledge.msu.edu/ ◦ http://www.oecd.org Economic and Political Freedom ◦ http://www.freedomhouse.org/template.cfm?page=1 ◦ http://www.heritage.org/index/ National Business Environment ◦ http://www.doingbusiness.org Human Development ◦ http://www.undp.org
- 26. Why do nations trade?Why do nations trade? Protectionism Free Trade ◦ Mercantilism ◦ Jobs ◦ Defense ◦ Infant Industry ◦ Comparative Advantage ◦ Competitive Advantage
- 27. Perspectives of the Nation and the FirmPerspectives of the Nation and the Firm Comparative advantage Is the concept that helps answer the question of all nations can gain and sustain national economic superiority Competitive advantage Is the concept that helps explain how individual firms can gain and sustain distinctive competence vis-à-vis competitors
- 28. Examples of National Comparative AdvantageExamples of National Comparative Advantage China is a low labor cost production base India’s Bangalore region offers a critical mass of IT workers Ireland’s repositioning enabled a sophisticated service economy Dubai, a previously obscure Emirate, has been transformed into a knowledge-based economy National advantage can be created
- 29. Examples of Firm Competitive AdvantageExamples of Firm Competitive Advantage Dell’s prowess in global supply chain management Nokia’s design and technology leadership in telecommunications Samsung’s leadership in flat-panel TV Herman Miller’s design leadership in office furniture (e.g., Aeron chairs)
- 32. Limitations of Early Trade TheoriesLimitations of Early Trade Theories Do not take into account the cost of international transportation Tariffs and import restrictions can distort trade flows Scale economies can bring about additional efficiencies When governments selectively target certain industries for strategic investment, this may cause trade patterns contrary to theoretical explanations Today, countries can access needed low-cost capital on global markets Some services do not lend themselves to cross- border trade
- 33. Michael Porter’s Diamond Model:Michael Porter’s Diamond Model: Sources of National Competitive AdvantageSources of National Competitive Advantage 1. Firm strategy, structure, and rivalry – the presence of strong competitors at home serves as a national competitive advantage 2. Factor conditions – labor, natural resources, capital, technology, entrepreneurship, and know how 3. Demand conditions at home – the strengths and sophistication of customer demand 4. Related and supporting industries – availability of clusters of suppliers and complementary firms with distinctive
- 34. Porter’s Diamond ofPorter’s Diamond of National Competitive AdvantageNational Competitive Advantage Firm Strategy, Structure, and Rivalry Related and Supporting Industries Factor Conditions Demand Conditions
- 35. National Industrial PolicyNational Industrial Policy Proactive economic development plan implemented by the public sector to nurture or support promising industry sectors with potential for regional or global dominance. Public sector initiatives can include: Tax incentives Monetary and fiscal policies Rigorous educational systems Investment in national infrastructure Strong legal and regulatory systems
- 37. “the growing interdependence of“the growing interdependence of countries worldcountries world--wide through thewide through the increasing volume and variety ofincreasing volume and variety of crosscross--border transactions in goodsborder transactions in goods and services and of internationaland services and of international capital flows, and also through thecapital flows, and also through the more rapid and widespread diffusionmore rapid and widespread diffusion of technology.”of technology.” –– IMFIMF 37 Globalization
- 38. Growth of relations between nationsGrowth of relations between nations and cultures or between institutionsand cultures or between institutions situated in different nations orsituated in different nations or cultures.cultures. 38 Internationalization
- 39. What’s the difference?What’s the difference? Globalization Internationalization Growing world systems Transnational, Subnational and Supranational actors Driven by free markets and technology Relations between nations Nation state is central actor Driven by national interests 39
- 40. Comparing the Growth Rates of World GDPComparing the Growth Rates of World GDP and World Exportsand World Exports
- 42. “The World is Flat”“The World is Flat” Thomas FriedmanThomas Friedman Triple Convergence: 1. 10 Flattening Forces Internet and IT integration Outsourcing, Offshoring, Insourcing, Supply Chain Uploading, Informing at individual level Technological speed and cost 2. Productivity Lag / Learning Curve 3. Opening of Countries (3 billion people) USSR, Central Europe, China, India, South America Market economies and integrated financial system
- 43. Top Global Brands (selectTop Global Brands (select industries)industries) Cars 1 Toyota 2 BMW 3 Porsche 4 Mercedes 5 Honda 6 Nissan 7 Ford 8 Chevrolet 9 VW 10 Lexus Mobile Operators 1 China Mobile 2 Vodafone 3 Verizon Wireless 4 NTT DoCoMo 5 Orange 6 AT&T 7 T-Mobile 8 Movistar 9 MTS 10 TIM Beer 1 Budweiser 2 Bud Light 3 Heineken 4 Corona 5 Stella Artois 6 Guinness 7 Miller Light 8 Skol 9 Amstel 10 Beck’s
- 44. Major Companies in NonMajor Companies in Non--TriadTriad MarketsMarkets Mahindra & Mahindra Orascom Lenovo Infosys Wipro SABMiller Embraer Ranbaxy Haier Tata
- 45. Major Companies in NonMajor Companies in Non--TriadTriad MarketsMarkets Mahindra & Mahindra Orascom Lenovo Infosys Wipro SABMiller Embraer Ranbaxy Haier Tata India Automotive Egypt Cellular China Computers India Software India Tech Services South Africa Brewing Brazil Aircraft India Pharmaceuticals China Appliances India Automotive
- 46. Negative ConsequencesNegative Consequences of Market Globalizationof Market Globalization Loss of national sovereignty Offshoring and the flight of jobs Effect on the poor Effect on health and safety Effect on the natural environment Effect on national culture
- 47. How Globalized is the World?How Globalized is the World?