Transcript International Business GSBS6480 Trimester 3

International Business
Contact Details
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Lecturer: Mr. Shane Kartabil
Email: [email protected]
Overview of Course
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Text:
• Mahoney, D., Trigg, M., Griffin, R. & Pustay, M. 2001,
International Business: A Managerial Perspective, 2nd
edn, Pearson Education, Australia.
• Materials will be:
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predominantly from your text
examples from my own experience
other materials when cited
Each week:
• we will discuss a hot topic in international business
(discussion board)
• you will given a case to have a look at (mostly from the
text) and this will also be used for discussion
Brief Outline of Course
(First few weeks requires solid reading)
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2.
3.
4.
Introduction to International Business
International Cooperation
Legal & Political Forces
The Role of Culture
Brief Outline of Course (cont)
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12.
International Strategic Management
Analyzing & Entering Foreign Markets
International Strategic Alliances
Organizational Design for International
Business
Managing Behavior and Interpersonal
Relations
Controlling the International Business &
Course Review
Course Aim & Objectives
 Aim: To put you in the “shoes” of the International
Manager
• A manager facing the changes and vagaries of the
rapidly e-Globalizing international marketplace
 Objectives:
1. introduce a conceptual framework to critically analyse
issues re international business and globalisation.
2. investigate differences in political, technological,
economic, social, and cultural environment
3. develop skills for critically appraising and analysing online data sources.
4. look at strategies and structures of contemporary
international businesses
5. develop your ability on a theoretical and practical level
for international business
Introduction to International Business
(Ch1 & Ch2)
After studying chapters 1 & 2 students should be able to:
 Discuss the meaning and importance of international
business.
 Identify and describe the basic forms of international
business.
 Discuss the evolution of international business.
 Describe the value of economic geography to
international business people.
 Appreciate the uses of national income data in making
business decisions.
 Have a more sophisticated understanding of the
following potential business destinations:
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North America, Western Europe, Eastern and Central Europe,
Asia, Australia, New Zealand and the Pacific, North and South
Africa, The Middle East and South America.
A few questions for you to
ponder before beginning
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1. What is the relative impact of
international business on your daily
lives?
2. If you had to combine a list of the
ten most common products you use,
how many would relate to IB?
• Best to think also in Brand names
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Your decisions will most likely change
as we progress through this subject
What is International Business?
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International business involves any business
transaction between parties from more than one country.
• It includes such activities as:
 buying and selling raw materials,
 taking finished products across borders,
 operating plants in other countries to take
advantage of local resources,
 and borrowing money in one country to finance
operations in a second country.
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International business is different from domestic
business in that it necessarily involves transactions that
cross national borders while domestic business does
not.
Why study international business?
This question is posed to you…
Answer:
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For you to stay competitive in this marketplace you
need to be aware of the IB game
1. A student of business is naturally (in this global
village) a student of IB
2. Most students will almost certainly work for a
company that is:
• either foreign owned;
• domestically owned, but has some foreign
operations,
• or domestically owned, but is affected by the
global economy.
3. It is important for you as future managers to have
a cultural business literacy
International Business Activity
Five key forms of IB activity
Most common form of IB activity is:
1. Exporting & Importing
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Exporting involves the selling of goods or services
made in one's own country for use in other
countries.
Importing is the buying of goods or services made
in other countries for use in one's own country.
• Goods refers to trade in goods (visible trade)
while services refers to trade in intangible
products (invisible trade).
Why export or import?
• the risk involved is minimal
• opportunity often “knocks” particularly in the third
industrial revolution (knowledge economy)
Figure 1.3 The growth of export of goods since 1969
Source: International Monetary Fund, International Financial
Statistics Yearbook 1999, p. 7.
Refer to page 23
Figure 1.2 Export of goods as a percentage of GDP for
selected countries
Source: Economist Intelligence Unit, Fact Sheet—Global Economy, EIU Country.
Refer to page 14
IB Activity (cont)
2. International investments -residents of one
country supply capital to those of a second country
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Foreign direct investments (FDI)
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investments in property, assets, or companies
located in foreign host countries
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Portfolio investments
purchases of foreign financial assets such as
shares & bonds (not for a takeover)
3. Licensing agreements - allows a firm in one country
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to use all or some of the intellectual property of a firm in a
second country
4. Franchising - use the brand names, logos, and
operating techniques of a firm in a second country
5. Management contracts - an agreement in which a
firm in one country agrees to operate a business for a fee
in another
Words of caution
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Texts are notorious for favoring the “Big
End of Town” (this one is an exception)
• Big is not always beautiful
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Most Australian business is based around SMEs
• SMEs are the largest employers in Australia
• SMEs or TVEs are growing rapidly in China
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Text also often ignores the role of services
(eg consulting, communications, transportation,
and tourism)
• Services largest portion of our GDP
• 23.0 per cent of all Australian exports
The extent of internationalization
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There are several ways to describe the
extent of a firm's international orientation
• The international business is the broadest
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an organization involved in commercial transactions
with individuals, private firms, or public sector
organisations across borders.
• The multinational corporation (MNC)
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engages in foreign direct investment and owns or
controls value-adding activities in more than one
country
buys resources, create goods and/or services, and then
sell those goods and services in a variety of countries
most often coordinates from headquarters with
subsidiaries making adjustments as necessary
Figure 2.1 Headquarters of the largest 500 corporations
Source: Fortune, ‘Fortune Global 500’, 24 July 2000, pp. F1-F10.
Refer to page 52
The extent of internationalization
Three main types of MNC:
Multidomestic corporation
• A corporation with a collection of relatively
independent operating subsidiaries, each of which is
focused on a specific domestic market.
2. Global corporation
• A corporation that views the world as a single
marketplace and striving to create standardised goods
and services
3. Transnational corporation
• A corporation that seeks to combine the benefits of
global-scale efficiencies with the benefits of local
responsiveness.
4. A new corporation? The World company – transcends
national boundaries and Nationless (Ohmae – eg Nestle)
Be careful as some texts vary in their interpretation of the
above
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The evolution of International Business
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Early origins in a snapshot
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International business has origins as far back as 2000 B C
500 BC – Greek purple patch & Chinese silk road
Romans at the turn of AD
Italy had its moments in the Middle Ages
1400s saw the Spanish in good traveling spirit
British and the Dutch strong in the 1600-1900s
US has dominated the latter stages with 1945-60 a golden
age
• Marshall plan instituted post WW2 to aid Europe
• Since the Second World War, international business has
seen continued growth.
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World exports have grown from about US$53 billion in 1950 to
US$5.5 trillion by 1998.
Similarly, FDI has grown from US$105 billion in 1967 to over
US$1.2 trillion in 1988.
The evolution of International Business
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1960s – Strengthening of Europe and Japan
1970s – OPEC oil crisis & small car invasion from
Japan
• End of the 1970s, manufacturers began to copy the
Japanese - Theory Z (the participative organisational
practices), TQM , JIT
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1980’s, Australian and New Zealand introduced
• economic and labour market reforms, and enhanced
deregulation and privatisation (positive ecomomic
benefits)
• 1987 – stock market crash & property boom/bust
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80-90s Emergence of the four Asian “tigers”
Modern IB & Globalisation
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Today’s market has increasingly gone global through
transport, communication and the Net
• Three important geographic marketplaces dominate the world
economy (possibly four with China):
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The United States, the European Union, and Japan.
A key concept you must understand is Globalisation
• Has been called many things by many people but for our
purposes:
• Globalisation refers to the production and distribution of
products and services of a homogeneous type and quality on a
world wide basis to customers whose tastes and preferences
are similar and converging.
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The most stunning changes to international business
during the 1990s were developments in electronic
commerce.
• Electronic commerce is the buying and selling of
information, products and services via computer
networks.
Remember the Game for us is now Global
Refer to page 47
Reasons for IB growth
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Several reasons international business growth has
occurred and will continue.
• The desire to increase returns for shareholders
 Leads to market expansion as firms seek new markets
 Firms seeking materials, unavailable in their own countries
must go to foreign sources.
• The presence of competitive forces also prompts
foreign investment as firms struggle to keep pace with
their rivals.
• Changes in technology as discussed have also spurred
the growth of international business
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Firms have capitalised on computer technology and better
transportation
• Shift in tastes
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Today's consumers are “globe-savvy” and aware of the
products and services offered in other countries
• Freer trade has been a major advantage for IB
How well do you know the IB
territory
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Do you know the World IB setting?
•How far apart are Tokyo & Singapore
5300km
•What is the capital of the Ukraine?
Kiev
•What is Brazil’s official language
Portuguese
•What countries border France?
Andorra, Belgium, Luxembourg, Monaco,
Germany, Switzerland, Italy & Spain
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Plenty of mistakes have been made in IB
• The text on page 44-45 shows numerous blunders
 Mercedes tried to roll off its “trash”
 Energiser Bunny – you better make sure the wedding
ring finger is right
Structure & characteristics of
the world economy
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Various factors of economic geography affect
international trade
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shared borders
common heritage
similar income levels
and ownership of natural resources
 see Jared Diamond (Guns, Germs & Steel)
Your assignment requires you to ponder the regions and
make specific choices as to what region and what
countries to select
• Keep this in mind in this early chapter
• For example a good article on classifying countries according to
GDP, GNP, Purchase Power Parity (pp. 48-49)
Important Reading
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We cannot cover chapter 2 in detail in the lecture
• NAFTA and The EU and other blocs will become
increasingly important
You need an understanding of the circumstances
of the following:
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The US
Canada
Mexico, Central America & The Caribbean
Western Europe
Central & Eastern Europe
Russia and the new States
Japan,Four Tigers, China
Malaysia, Indonesia, Thailand & Vietnam
India, Pakistan & Sri Lanka
Australia, NZ & The Pacific
Africa, The Middle East & South America
Traps for young IB players
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The closing case on page 85-86 is
interesting
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Focuses on the opportunities in China
Also the down side
Many have failed
Do you think you understand China
Need to snap your myth of a simple
homogeneous population
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See also India
Next week we will move on to chapter 3 & 4