bbm v tri ib unit i

8/12/2019 Bbm v Tri Ib Unit i

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Unit I

International Business An Overview Globalization introduction to the

field of International Business,Significance, and Modes ofInternational Business


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International Business An overview A business decision making is based on the

internal and external environmental factors. The internal environmental factors are :

Value system, mission and objectives, management structure and nature, internal power relationship, human resources, company image and brand equity and

other factors such as physical assets and facilities, R&D and Technological capabilities,marketing resources and financial factors.


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International Business An overview

External environmental factors are broadly

classified as two. 1) Micro Environmentalfactors 2) Macro Environmental factors Micro Environmental factors are : suppliers,

customers, competitors, marketingintermediaries and public

Macro Environmental factors are : economicenvironment, political and regulatory

environment, social/cultural environment,demographic environment, technologicalenvironment and natural environment.


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What is Globalization?

The shift toward a more integrated andinterdependent worldeconomy.

Markets

Production


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Multinational Enterprises (MNE)

A MNE has a worldwide approach to foreign markets and production

an integrated global philosophy encompassing both domestic and international markets.


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Characteristics of the GlobalEnterprise

1. DRAWS RESOURCES FROM A GLOBAL POOL capital, labor, materials

2. VIEWS THE WORLD AS ITS HOME

3. ESTABLISHES A WORLDWIDE PRESENCE IN ONE OR MOREBUSINESSES

but may go global by chance or design

4. PURSUES A GLOBAL BUSINESS STRATEGY

5. TRANSCENDS EXTERNAL AND INTERNAL BOUNDARIES


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Globalization

Trade and investment barriers aredisappearing.

Perceived distances are shrinking due toadvances in transportation andtelecommunications.

Material culture is beginning to look similar. National economies merging into an

interdependent global economic system.


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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.


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The Largest Global Markets

NOTCONSUMER

GOODS

Industrial Goods andMaterials

Commodities such asaluminum, oil and wheat.Industrial products such asmicroprocessors, aircraft.

Financial assets such as U.S.

Treasury bills and Eurobonds.


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Globalization of production

Refers to sourcing of goods and services fromlocations around the world to take advantageof

Differences in cost or quality of the factors of production Labor Land Capital


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Globalization of Production

GLOBAL PRODUCT- The sourcing of goodsand services from locations around the globeto 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 orfunctionality of their product offering -increasing their competitiveness.


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Globalization: Pros& Cons

Pros Increased revenue opportunity through

global sales. Reduced costs by producing in low cost

countries.Cons Different nations = different problems. Similarities between nations may be superficial. Global planning may be easy, but global execution

is not.


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International Business (IB) -Definitions

1) IB field is concerned with the issues facing internationalcompanies and governments in dealing with all types ofcrossborder transactions.

2) IB involves all business transactions that involve two or more

countries.3) IB consists of transactions that are devised and carried out

across borders to satisfy the objectives of individuals andorganizations.

4) IB consists of those activities private and public enterprisesthat involve the movement across national boundaries ofgoods and services, resources, knowledge or skills.


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International Trade : When a firm exportsgoods or services to consumers in anothercountry.

Foreign Direct Investment : When a firminvests resources in business activities.


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International Management (IM)

IM defined as a process of accomplishing the globalobjectives of a firm by:(1) effectively coordinating the procurement,

allocation, and utilization of the human,

financial, intellectual, and physicalresources of the firm within and acrossnational boundaries and

(2) effectively charting the path toward the desiredorganizational goals by navigating the firmthrough a global environment that is not onlydynamic but often very hostile to the firms verysurvival.


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Modes of International Business

The six major modes of international business are :1. Imports and exports,2. Tourism and transportation,3. Licensing and franchising,4. Turnkey operations,5. Management contracts, and6. Direct and portfolio investment.


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1) IMPORTS AND EXPORTS Imports and exports are the most common mode

of international business, particularly in smallercompanies even though they are less likely toexport. Large companies are more likely toengage in other modes of

international business in conjunction withimporting and exporting. Companies may importand export merchandise, defined as tangiblegoods brought into or out of (respectively) a

country. While exports and imports apply mainlyto goods, they can also apply to services, ornonproducts.


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TOURISM AND TRANSPORTATIONMost service imports and exports revolve aroundtourism and transportation. The revenue gainedfrom international tourism and transportation isbest seen in hotels, airlines, travel agencies, and

shipping companies. For many countries,especially in the Caribbean and Southeast Asia,their income on foreign tourism is moreimportant than their income from exports. The

same holds true in countries such as Norway andGreece, who earn a considerable amount fromforeign shipping


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LICENSING AND FRANCHISINGMany companies enter into international licensingagreements, allowing other countries around the world touse their assets (ie: trademarks, patents, copyrights, orexpertise) under contract, receiving royalty payments inreturn.Similarly, many companies engage in franchising, as a modeof business where the franchisor allows the franchisee touse a trademark that is an essential part of the franchisee'sbusiness. For example, Gloria Vanderbilt has franchised hername out to several clothing companies, forming the GloriaVanderbilt line. The franchisor also assists on a continuing

basis in the operation of the business-for example, byproviding components, management services, andtechnology.


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TURNKEY OPERATIONS Companies also pay fees that may be incurred

on an international level for engineeringservices handled through turnkey operations

and management contracts. A turnkey operation involves construction of

facilities, performed under contract, which is

then transferred to the owner when thecompany is ready to begin operating.


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MANAGEMENT CONTRACTSManagement contracts are initiated when onecompany supplies personnel to performgeneral or specialized management functionsfor another company. This is most evident inDisney's theme parks in France, Japan, andChina.


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DIRECT AND PORTFOLIO INVESTMENT.Finally, international business occurs withindirect and portfolio investments. a portfolioinvestment is a noncontrolling interest in acompany that usually involves either takingstock in a company or making loans to a

company in the form of bonds, bills, or notesthat the investor purchases.


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The End

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