Lecture 1 Spring 2009

AC218 International Business Environment

Whos Who on AC218

Samuel Mansell E-mail smanse@essex.ac.uk Room 5S.7.12 Office hours: Wednesday 9-11, Friday 3-4 Michal Izak - class tutor Room: 5S.7.9, office hour: Tuesday 12-1 Email mizak@essex.ac.uk Anke Strauss - class tutor Email astrau@essex.ac.uk

AC218: Delivery

1 hour weekly lectures

Concepts,

issues and theories related to international business environment Provide context and background

1 hour weekly classes

Readings,

structured case-studies and group-

work Student centred and student led Active participation essential

8 hours of additional reading and study

AC218: Assessment
100%

coursework Two 2000 word individual essays Submission deadline for essay 1: Mon 16 Feb Submission deadline for essay 2: Mon 20 Apr The mark obtained for each essay constitutes 45% of the final mark for the course One group presentation Presentation delivery time: during classes in week commencing Mon 2 March The mark for the presentation constitutes 10% of the final mark for the course

Learning points of this lecture

To discuss the way in which the subject of international business environment is approached in this course To define international business To define international business environment To understand the importance of viewing an organization as operating within an environment which influences it, and upon which the organization has an influence To discuss some approaches to analysing organization within the international environment, with an emphasis on the stakeholder approach

Outline of this module

Lecture 2 Historical evolution of theories underpinning the international business environment. Lecture 3 The functional dimensions of business in the international environment. Lecture 4 The impact of different economic systems on international business. Lecture 5 The role of Multinational Corporations (MNCs) and Foreign Direct Investment (FDI). Lectures 6-9 explore a range of factors that affect and are affected by the activities of international business: culture, society, transnational institutions (IMF, WTO, World Bank, etc), politics and international law. Lecture 10 Given all of the above factors, what are the central issues and challenges facing international business today?

Defining key terms (1)

International business (IB) this term refers to any form of commercial exchange of materials, goods, services or any other resources that involves transfer across national boundaries. Internationalization in referring to the internationalization of business and organizations, we point to their expansion beyond their home nation through establishing relationships, transaction linkages or operations in one or more other countries.

Defining key terms (2)

Globalization this term is subject to many interpretations. For some, it represents a natural, inevitable and largely unproblematic move towards a borderless world and the end of the independent nation state. However, others read it as the spread of western social, economic and cultural values. Intertwined with this process, we see the imperative of multinational enterprises (MNEs) to configure and develop their value chains at a global level in the aim of making the most of their own efficiency and effectiveness in order to maximize their shareholder value.

Defining key terms (3)

Neo-liberalism and the Washington Consensus the process of globalization is underpinned by the advancement of neo-liberal policies. These support the transfer of control over country economies from the public to the private sector, with privatisation of state-owned enterprises (SOEs), development of a free market, and the elimination of restrictions on firms decision making. The spread of neo-liberalism is advocated by the Washington Consensus of Washington-based institutions that include not just the US Treasury but also the World Bank and the International Monetary Fund (IMF).

Defining key terms (4)

International business environment the external context in which organizations operate across the world. It is characterised by increased complexity and by expanding and deepening ties between the different stakeholder groups within it. To gain an understanding of the contemporary international business environment, some knowledge of global political economy is necessary.

Defining key terms (5)

Corporate governance structures and processes by which control and decision-making in an organization are exercised. OECDs Principles of Corporate Governance stipulate that corporate governance frameworks should:
Promote

transparent and efficient markets; be legal; clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities Ensure equitable treatment of all shareholders Recognise the rights of stakeholders established by law or through mutual agreement Ensure timely and accurate disclosure is made Ensure the strategic guidance of the company, the effective monitoring of management, and the boards accountability

Shareholder versus stakeholder perspective on governance issues The shareholder view considers shareholder value as the primary objective of the company. This view emphasises the principle of profit maximisation. Within the international context, it is related to the imperative of commercial organizations to configure and develop their value chains at a global level in the aim of making the most of their own efficiency and effectiveness in order to maximize their shareholder value. The stakeholder view considers the impact of an organization upon a broad range of parties affected by its acitivities. Looking at a commercial organization from a stakeholder perspective involves moving beyond the paradigm of profit and shareholder value maximisation.

Stakeholders in international business (1)

Employees all types and at all levels; within the organizations country of origin and in other countries. Consideration of employees in the context of international business environment involves e.g. discussion of sweat shop labour, existence of export processing zones (EPZs), and impacts of location of value-adding activities in low labour cost countries upon levels of poverty and inequality.

Stakeholders in international business (2)

Consumers main focus of how profits for organizations are generated. Discussion of consumers requires reflection upon e.g. what it means to conceptualise individuals exclusively as consumers; whether products and services delivered to consumers globally contribute to satisfying their needs and are to their advantage; and what broader implications emphasis on consumerism has globally.

Stakeholders in international business (3)

Society social factors influence international business environment but organizations operating within this environment also have an impact upon society and groups within it. Discussion of society in the context of international business environment involves reflection upon e.g. the relationship between internationalisation and globalization of business environment and social stratification; and the emergence of winners and losers as a result of social and economic change.

Other actors in international business environment (1)

Business organizations all organizations, regardless of their size, are affected by forces within international business environment. Understanding the role of business organizations in the contemporary environment involves discussion e.g. of the current status of MNEs; the extent of economic power of business organizations at an international and global level; and the links between commercial organizations and politics nationally, internationally and globally.

Other actors in international business environment (2)

Supranational institutions the rules according to which international businesses operate are to a large extent stipulated by supranational institutions. Discussion of the impact of these institutions involves consideration of their role and objectives; the processes of decision making within them; and the consequences of their actions for a range of stakeholders within the international business environment.

Other actors in international business environment (3)

Social movements social movements are a diverse category of stakeholders who have an impact upon other actors within the international business environment. Discussion of social movements involves reflection upon which areas of activity they are mostly represented in; what similarities and differences there are between different types of social movements; and how they make a difference to the way in which the international business environment is changing.

Classification of businesses by forms of ownership

Sole trader Partnership Private limited company Public limited company State-owned enterprise (SOE)

Classification of businesses by size

Micro Small Medium Large

Analysing aspects of international business environment PEST Useful in categorising different dimensions of the environment Dangers of analysis paralysis Possible problems with seeing different types of environment in separation from one another SWOT Summary rather than an analysis in itself Links external factors with internal ones In the field of strategic management, can be used as a step in the strategy formulation process Possible problems with adopting a formulaic approach

Lecture summary

We have discussed the delivery and assessment on the AC218 course We have explained the approach taken to the international business environment throughout this course We have provided definitions of key terms related to the area of international business environment We have introduced a range of actors within the international business environment We have discussed some classifications of businesses We have commented on the potential use of PEST and SWOT for analysing issues related to the international business environment