Welcome to IBUS 20002 :

Sem 2 2019

Business in the Global

Economy

Dr. Ruby Ranjan

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Nuts and BoLts
Some information about ME ...
Dr. Ruby Ranjan
Thesis on: Country of origin and Competitive Advantage: The case of MNCs transferring reward management practices to subsidiaries in
Australia.
Lecturer and Unit coordinator
 Business in the Global Economy
 Issues in Managing the Multinational
 International Management (Monash)

Email: Ruby.Ranjan@unimelb.edu.au

Area of interest: IB and IM issues; also teaching Ethics and Corporate

Governance, HRM and Managing people and Organisation.

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 We want to know about your interest in
Business in the Global economy....
Why did you choose this unit?
What do you hope to learn from this
unit?
How do you think these news/events relate to
Issues in Business in Global Economy:
 The US and China are locked in a bitter trade battle.
BBC News, 29th June, 2019
https://www.bbc.com/news/business-45899310
 U.S. and China Extend Talks as the Two Sides Race to
Reach a Trade Truce, New York Times, Feb 19, 2019.
 http://www.abc.net.au/news/2018-07-13/why-a-us-
trade-war-could-make-political-sense-for-donald-
trump/9987946
 Boris Johnson vows Brexit in 99 days as he becomes Prime
Minister- Published on Jul 24, 2019 Channel 4 News
https://www.youtube.com/watch?v=AaIF_17RaS0
 Rana Plaza factory collapse: Australian clothing retailers
yet to sign Bangladesh safety accord
http://www.abc.net.au/news/2014-04-24/australian-clothing-retailers-
yet-to-sign-factory-safety-accord/54080
http://www.abc.net.au/pm/content/2014/s4048469.htm
 BRICS building July18,2014
http://indianexpress.com/article/opinion/columns/brics-building/12:59
am 3
 Today

Introductions and Administrative Details

Introduction to Globalisation: definitions and drivers

 Members of IBUS 20002
Students of IBUS 2002
Course Co-ordinator
Dr. Ruby Ranjan
Lecturer
 Dr. Ruby Ranjan
Tutors
 Dr Dau Youngsamart
 Roslyn Zervos
 Katherine Buzza
 Tutorial times and dates available on LMS
 Please email consultation request at least two days
prior

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 What is Business in the Global
Economy?
Two broad focal areas:
1. Macro business environment
2. Micro or firm-level analysis
 Some of the questions tackled in
IBUS20002…

How are What does it

firms look like?
affected?

Business The Global

Economy

How and
How can why do they How do
they take participate in countries
advantage? it? How does it differ?
all work?
 Subject Objectives
At the end of the semester you should be able to…

 Describe the global business environment (main features, nature and role
of its main organisations and institutions);

 Characterise the phenomenon of globalisation;

 Have an understanding of the multinational firm;

 Analyse key international business decisions.

 Subject Structure
Week Date Topic

1 31st July Introduction to Globalisation

2 7th August Globalisation continued; Dark side of Globalisation
and Black IB

3 14th August Globalisation as a political project: governance

issues From macro-
4 21st August What makes nations different?: Cultural Context
The environment to micro-
of International
level of
Business
5 28h August What makes nations different?: Political, Economic analysis
and Legal Context (1)
i.e. from
6 4th Sept  Political, Economic and Legal Context (2)
world-
 Emerging Markets
to country- to
firm-
7 11th Sept Theories of trade and investment perspective.
8 18th Sept Market selection and market entry

9 25th Sept Guest Lecture

2nd October Mid-semester break Firm perspective
10 9th Oct MNE strategy

11 16th Oct Ethics and MNE

12 23rd Oct Revision and Exam Preparation
 Teaching and learning contract:

What we provide
Resources Support
• Readings surplus to text book • Feedforward
– Cases, short videos, articles • Q&A forum on LMS
• Assignment specifications • One-on-one consultations

Evaluation
Activities
• Feedback on assignment
• In-class case discussions
submissions and presentations
• Questions for outside-class group
discussions
 Teaching and learning contract:
What we would like you to do
Regular attendance and
punctuality
• For lectures and tutorials
Guided self-learning
• Engage with readings, topics and
real-life examples
• Prepare for, attend and participate
in lectures and tutorials  ask
questions!
• Individual assignment
Shared-learning
• In-class and outside-class
– Questions, quizzes, debates
• Group assignments
• Constructive critiquing
– Of theories/concepts, readings,
even text book
• Remain in contact (through LMS,
email, conversations)
Peer assessment and
feedback
• Conflict resolution
 Subject Readings

Textbook:
• Cavusgil, Knight, Riesenberger, Rammal and Rose,
International Business: The New Realities, 2nd edition,
Pearson Education Australia, 2015.

Plus supplementary lecture and tutorial readings on LMS

Lecture slides
 Independent Reading

Plus News media (The Guardian, Age, Australian, AFR..etc)

… be careful that you cite only reputable sources!

 LMS for accessing all key information

http://www.lms.unimelb.edu.au/
Provides all Subject Resources
 Subject Guide and tips on succeeding on the course
 Lecture slides and Lecture capture
 PDF slide” format – print before coming into lecture
 Surplus reading materials under ‘Readings online’
 Assessment tasks, guidelines and marking criteria under ‘‘Assignment
submission’ tab
 Submit via ‘Assignment Submission’ tab on this site
 Tutorial readings and exercises
 Guest Speaker
(25th Sept)
Muan Lim graduated with a Bachelor of Commerce with Honours (1stClass) from The
University of Melbourne in 1977. Working with KPMG and PWC in audit, Muan was
accepted as an Associate of the Australian Institute of Chartered Accountants.

A 22 year veteran of HP, Muan has served many roles in Finance & Admin.,
Manufacturing, Supply Chain and Leasing. Muan was instrumental in setting up the
first joint venture leasing company in China, HP China Leasing Ltd and the first wholly
owned manufacturing arm for China’s domestic PC and Server business, HP Shanghai
Ltd. Amongst his many appointments were Finance Director Asia Pacific, VP Supply
Chain Asia Pacific Personal Systems Group, Global VP Finance and Remarketing.

Currently Muan is an Advisory Board member of the Department of Management &

Marketing, Faculty of Business and Economics (FBE), and a lifetime member of the
Chancellor’s Circle. Muan is happily retired, married with two children who are
graduates from FBE and the Arts Faculty.

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 Assessment tasks
Assessment Task Individual and Due Weighting
Group

Assignment 1, 1200 Individual 11.00 am 28th 15%

words August (Week 5)
NB: Assignment 1 +
marking criteria
already on LMS
Assignment 2, 2500 Group 11th October, 25%
words @ 11.00 am (Week
10)
Participation in Individual Weekly 10%
tutorials
End-of-semester Individual Assessment period 50%
exam
 Tutorials
Tutorials start next week (Week 2) and lag lectures by a week
Required reading/s to be uploaded prior to class (no readings
for Week 2)
Tute attendance, participation and contribution are assessed

Not in attendance 0 marks

Physically there, participation in group work, no participation in 10% of the
the class discussions total
Strong participation in group work and good participation in class 60% of the
discussions (making interesting contributions that are on topic) total
Strong participation in group work, excellent contributions to 100% of the
class discussions (that propel our discussions forward and add a total
new, relevant dimension to our discussions)
 Exam: It is a hurdle!!!
2-hour exam at end of semester
Exam advice: throughout semester and dedicated Week 12 lecture
 Student Referral Information

Enrolment Go to:
(enrolling in STOP 1
subjects, changing
subjects)
Class registration Go to:
(registering into a Class Registration Enquiry Management (CREM) system available from
particular lecture the student portal.
stream or tutorial
group within a
subject)
Questions?
Introduction to Globalisation
 Introduction to Globalisation
Over the next three weeks:
What is globalisation?

What are the drivers of globalisation?

What are some of the upsides and downsides of globalisation?

Why do governments intervene and what are the forces limiting such
intervention?
 What is globalisation?(1)
Numerous definitions of the phenomenon of globalisation.
• At a very general level, globalisation refers to the fact that people in one country are
affected by events in other countries

• The shift towards a more integrated and interdependent world economy

• “Ongoing economic integration and growing interdependency of countries worldwide

namely through trade and investment” – Cavusgil et al. 2015 (text book pg. 31)

Q: Can you think of any examples of the globalisation phenomenon?

 Six blind men and the elephant!

Touching each part of the elephant and creating a perception about the animal…
Source: http://www.globalenvision.org/forteachers/18/861/

Similarly, globalisation has created many different perceptions among the global population.

Depending on the exposure to globalisation and the extent of understanding, such perceptions
vary wildly from person to person and from country to country…
 Globalisation debate

World is flat:Thomas Friedman 2006

https://www.youtube.com/watch?v=4kTXwxwO8hY

Globalisation myth- Pankaj Ghemawat 2012

https://www.youtube.com/watch?v=KPNn880KWfU
 Globalisation: not a recent phenomenon
Phases
Pre-Industrial: Silk road
Phase 1: 1830 to 1880s
• Industrial revolution in GB (steam
engine; railroads; ocean transport)
Phase 2: 1900 to 1930
• Electricity and steel production
Phase 3: 1948 to 1970s
• GATT (General Agreement on Tariffs and
Trade; now WTO)
Phase 4: 1980 to present
• Radical advances in technology
• Privatisation of state-owned enterprises
• Economic growth in emerging markets
Examples / consequences
Pre-Industrial: International trade
Phase 1:Rise of manufacturing, cross-
border trade of commodities
Phase 2: First MNEs (Nestle, Siemens,
Shell…) in extraction, agriculture
Phase 3: Reduction of trade barriers,
cross-border money flow
Phase 4: Influx of new participants (SMEs,
new global players, etc); unprecedented
cross-border trade but also rising
protectionism…
 What has driven economic/business interdependencies
across nations?

The confluence of numerous factors:

1) Emergence (and charter extension) of supranational institutions (at a regional or global

level):

 International administrative/regulatory bodies (e.g. GATT/WTO, EU, IMF, UNCTAD, ILO…),

standards and judicial bodies (e.g. ISO, international courts of arbitration), professional bodies
(e.g. FIDIC) and NGOs (e.g. Greenpeace, Fairtrade).
 Some of the key players
World Trade Organisation (WTO) “Washington
Consensus” Policies
International Monetary Fund
World Bank

Nation states: USA, UK, Japan, France,

G8(-1=G7), G20 Germany, Italy, Canada, + Brazil, Russia,
India, China, South Africa, Mexico,
Argentina, Australia, Indonesia, South
Korea, Saudi Arabia, Turkey and the
European Union

World Economic Forum - Davos, Switzerland

 What drives economic/business interdependencies across nations?

2) Liberalisation of trade and foreign investment (eg. Opening of

economies; bilateral and multilateral Free trade agreements)

3) Technological changes: the world “has become smaller”

• Improvements in transportation technology (freight and passengers),
Internet, IT and communication technologies.

4) Mass media (e.g. satellite TV) and Internet

• Exposure to other nations’ lifestyles, products, brands, …

=> The above factors collectively drive economic and business links across
nations.

NB: Trade and FDI are driven by the above; but they are also drivers of the
above.
Actors
Supra-national United Nations, World Bank, WTO, IMF,
government bodies EU

National Nearly 195 countries

governments
MNEs Coca-Cola, IBM, BMW…

Greenpeace, Oxfam, Red Cross…

NGOs
Thousands of SMEs and born globals
SMEs
Expatriates, global teams
Individuals
 Globalisation: 2 components

‘Globalisation of markets’

‘Globalisation of production’

• And the various impacts of these

– A political economy approach

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 Globalisation of Markets

The merging of distinctly separate national markets

into a global marketplace. Tastes and preferences
converge onto a global norm.

Global financial markets (e.g. traded freely across borders:

bonds, currencies, derivatives…)
Explosive growth of investment and financial flows, capital markets and financial
instruments of varying complexity, buoyed by increased global market integration

Enabled by regulatory access and

technological changes
 Globalisation of markets

Global Product/Service Markets (in some industries)

Commercial Aircraft

Construction equipment

Accounting services
 Globalisation of markets
Global Product/Service Markets (in some industries)
Consumers buying similar products/services for similar prices, at
similar times, from the same companies
 Globalisation of Production

“Refers to the sourcing of goods and services from locations around the globe to
take advantage of national differences in the cost and quality of factors of
production (such as labour, energy, land and capital” (Hill, 2005).

Dispersal of the production process of good/service

to many locations to minimise costs and/or maximise
quality
 Why Companies Globalise?

 Increase size: capture market opportunities

 Increase size benefit from economies of scale

 Get access to resources

 Get access to low cost labor and infrastructure

 Get access to knowledge

 Serve global customers

 Reduce risks through geographic diversification

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 Fortune Global 500
Top 10 Largest Global Companies

Rank Company Country Revenues ($ Mil.) Profit ($ Mil.)

1 Walmart USA $ 500,343 $ 9,862

2 State Grid China $ 348,903 $ 9,533

3 Sinopec Group China $ 326,953 $ 1,538

4 China National China $ 326,008 -$ 691
Petroleum
5 Royal Dutch Shell Netherlands $ 311,870 $ 12,977

6 Toyota Motor Japan $ 265,172 $ 22,510

7 Volkswagen Germany $ 260,028 $ 13,107

8 BP Britain $ 244,582 $ 3,389

9 Exxon Mobil USA $ 244,363 $ 19,710

10 Berkshire USA $ 242,137 $ 44,940

Hathaway
11 Apple USA $ 229,234 $ 48,351
12 Samsung South Korea $ 211,940 $ 36,575
Electronics

Source: Fortune, 2018

 Looking ahead
Globalisation will occupy us for the next two weeks.

Extent of globalisation, the role of developed and developing economies in

globalisation; the “dark side” of globalisation…

Remember to enrol for, attend your tutorial and meet your tutor.
Questions?
Thank you

See you next week!