Professional Documents
Culture Documents
International Business:
An Overview
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Chapter Objectives
Define international business and how it differs
from domestic business
Examine the forces that are driving globalization
Explain why companies engage in international
business
Introduce different international business modes
companies use
Provide an overview of patterns for international
expansion
Describe the differences between international
business and domestic business
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What is Globalization?
What is International Business?
Globalization:
The deepening relationship and broadening interdependence
among people from different parts of the world, and
especially among different countries.
International Business:
All commercial transactions between two or more countries, whether
they involve private or public parties.
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KEY TAKEAWAYS
Key Points
The modern economy is globally connected, and growing more so
every day. Weighing the pros and cons of international expansion
is a key strategic consideration.
The multinational enterprise ( MNE ) is the primary player in
international business. MNEs are present in virtually every
industry nowadays.
Entry modes for international businesses include global
concentration, global synergies, and other strategic global
motivations.
With the complexity of international operating environments,
organizations should consider economic, technological, legal,
socio-cultural and environmental factors.
Weighing the risks and potential returns and determining a
required rate of return for an international expansion is a key
aspect of global financial management.
Why Expand Globally?
Global expansion is costly and complex. To offset these costs
and risks, organizations must have strong reasons for
developing a global strategy. These reasons generally fit
one (or more) of the following three strategic areas:
Global Concentration – Depending upon the competitive
concentration of a given industry in a given region, it may
make sense to enter a market where competition is
relatively scarce (and demand is high).
Global Synergies – Some organizations have highly
developed competencies that are easily scaled. In these
situations, global expansion means natural synergy.
Global Strategic Motivations – Other reasons for expansion
to a given country may exist strategically, such as
developing new sourcing sites for production or acquiring
strategic assets in a given region.
Management in International
Business
In additional to domestic
business management skills,
international business
management requires
• Social science understanding
• Political science appreciation
• Legal awareness
• And an innate ability in:
Anthropology
Sociology
Psychology
Economics
Geography
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Reasons for Growth in International
Business
Rapid increase in and expansion of
technology
Transportation is quicker while costs are
lower
Communication enables control from afar
Liberal government policies on trade and
resources
Development of institutions that support
international trade
Consumer pressures
Increased global competition
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Criticisms of Globalization
Economic Growth:
Negative Consequences:
- Using more nonrenewable natural resources.
- Environmental pollution through toxic and pesticide waste, factory
and vehicle emissions, and deforestation.
Positive Consequences:
- Global cooperation to develop uniform standards to solve
environmental problems.
- Efficiency in the use of resources because of openness.
- Access to technological developments, which reduce pollution and
inefficient use of resources.
Modes of International Business
Importing and exporting
Tourism and transportation
Licensing and franchising
Turnkey operations
Management contracts
Direct and portfolio investment
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Levels/Terms of International
Companies
Multinational Enterprise (MNE): global
approach to markets and production
• Multinational Corporation (MNC)
• Transnational Company (TNC)
Globally integrated company: integrated
operations located in different countries
Multidomestic company: multinational
companies that allow local responsiveness
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National Operations for
International Companies
Multidomestic strategy: countries
operate autonomously
Global strategy: integrate various
country operations into an
international headquarters control
Transnational strategy: integrate
various country operations while
dispersing the location of control
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External Factors Impacting
Expansion
International expansion can be a costly and complex
procedure. Before considering such a significant strategic
move, management must weigh the external factors that
will impact success during a global transition. These
include:
Socio-cultural and demographics
Geographic/Environmental
Legal/Political
Economic
Technology
Operations and Influences
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Influences on International
Business
External Influences Operations
• Physical/Societal • Objectives
factors • Strategy
Political policies and
• Means
legal practices
Cultural factors
Economic factors
Geographical
influences
• Competitive
environment
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Influences on International Business
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END.