BAC 303 - Module 1 PDF

BAC 303:
International
Business & Trade
1|BAC303: Inte rnati onal Bu s i ness & Trade

Course Contents at a Glance
COURSE NAME BAC 303: International Business & Trade
This course focuses on the strategies and structures of

international enterprises and to the implications of country
Course differences to the conduct and operations of international
Description business. This also integrates discussions of the complexities
of the many theories and phenomena unique to international
trade.
Number of Units 3
Prerequisite None
This also focuses on key principles and strategies for reaching the world market. Focus is
placed on the impact in the foreign trade environment of sociocultural, demographic, economic,
technological and political factors. We will also consider a variety of topics to show the unique
nature of international business, including world trade patterns, currency exchange and
international finance, company globalization, international marketing, and multi-national
business operations.
The course also seeks to demonstrate the complexities of international business; some
of its benefits and challenges as business is conducted on the international stage.
Course Outcomes:
 Compare business practices among organizations in the global arena.

 Develop and institute strategies to maximize profit across international market
through case scenarios and assessments through reflection papers.
 Appreciate the advantages and benefits businesses can get by participating in free
trade.

Guide on browsing this module:
Opening Case: To familiarize you with

how real companies conduct business.
Closing case: To illustrate to you the

relevance of the discussions for the
practice of international business and
provide continued insight into how real
companies handle different issues.
Let’s Learn! : Discussions
Management Focus: To highlight the

importance of the discussions in the
practice of international business.
Implications for Managers:

Managerial implications of the topics
discussed are clearly explained in this
part.
Let’s do this!
Let’s try this! To enable you to go a step

further in expanding your
understanding of international
business.
Let’s look back!

Module I:
Introduction and
Overview
 Lesson 1:
Globalization
 Lesson 2:
National
Differences in
Political
Economy

Opening Case
The Globalization
of Health Care
Health care has long been considered one of the industries least vulnerable to
dislocation from globalization. After all, like many service businesses, health care is
normally delivered where it is purchased. However, for some activities and procedures,
this assumption is now changing. The trend began with certain diagnostic procedures,
such as MRI scans. The United States has a shortage of radiologists, the doctors who
specialize in reading and interpreting diagnostic medical images, including X-rays, CT
scans, MRI scans, and ultrasounds. Demand for radiologists has been growing twice as
fast as the rate at which medical schools are graduating radiologists with the skills and
qualifications required to read medical images. This imbalance between supply and
demand means that radiologists are expensive; an American radiologist can earn as much
as $400,000 a year. In the early 2000s, an Indian radiologist working at Massachusetts
General Hospital, Dr. Sanjay Saini, found a way to deal with the shortage and expense—
send images over the Internet to India where radiologists could interpret them. This
would reduce the workload on America’s radiologists and also cut costs. A radiologist in
India might earn one tenth of his or her U.S. counterpart. Plus, because India is on the
opposite side of the globe, the images could be interpreted while it was nighttime in the
United States and be ready for the attending physician when he or she arrived for work
the following morning.
The globalization trend has now spilled over into surgery. In the fall of 2008, for
example, Adrienne de Forrest of Colorado had hip surgery in Chennai, India, while Texan
David Jones had triple bypass surgery in New Delhi. Both patients were uninsured. De
Forrest’s surgery cost $8,000, and Jones’s cost $16,000 including travel expenses. Had
those operations been done in the United States, they would have cost $45,000 and
$250,000 respectively. Forrest and Jones are not alone; in 2007 some 750,000 Americans
traveled abroad for medical treatment. The consulting company Deloitte forecasts that
those numbers will reach 10 million by 2012, which would be worth about $21 billion to
those nations where the procedures are performed.

Some might be worried about the quality of medical care in other countries, but
medical tourists typically go to new hospitals, most of which are private, where
highly skilled physicians treat them, many of whom trained in places like the United
States or Britain. The three largest recipient countries of American patients are
Mexico (due to its proximity), India (where 450,000 were treated in 2007), and
Singapore (where over 400,000 were treated in 2007, and where the local medical
schools are considered to be among the very best in the world). Costs in these
countries generally run from 20 to 35 percent of costs for the same procedure in
the United States.
A number of factors are driving the globalization trend. First is the high cost
of medical care in the United States, which is the source of the largest number of
patients. Then is the fact that over 45 million Americans are uninsured and many
more are underinsured and face high co-payments for expensive procedures. Many
of these people find it far cheaper to fly abroad to get treatment. Third, is the
emergence of high-quality private hospital chains in places like India and
Singapore. Fourth, the rising costs of ensuring their workforces are starting to
persuade some large American companies to look abroad. And finally, some
insurance companies are starting to experiment with payment for foreign
treatment at internationally accredited hospitals. In 2008, for example, Aetna, a
large insurer, launched a pilot scheme in partnership with Singaporean hospitals.
Aetna started to give Americans the option to have procedures costing $20,000 or
more in the United States performed in Singapore, where the company reckons that
the quality of care is better than at the average American hospital.
Source: Wee, Chou-Hou, Udayansankar, K. & Hill, C. 2016. International Business Asia
Global Edition. McGraw-Hill

Let’s look back!
What do you think?

“The study of international business is fine if you are going to work in a large multinational
enterprise, but it has no relevance for individuals who are going to work in small firms.” Briefly
evaluate this statement.
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Let’s learn!
Lesson 1: Globalization
Intended Learning Outcome:
 Explained how the nature of international business is changing in

response to the changing global economy.
What Is Globalization?
Globalization refers to the shift toward a more integrated and

interdependent world economy. In other words, the world is moving away from self-contained
national economies toward an interdependent, integrated global economic system.

What is now starting to happen in the health care industry exemplifies the
changes now taking place (see the Opening Case). Health care has long been thought to be
immune from the effects of globalization, but this is now no longer true. Medical tourism is
becoming a significant business, with Americans in particular traveling to places like India and
Singapore to have surgical procedures performed because the costs of surgery are lower and the
quality of care often comparable to what they would receive in the United States. Obviously, this
creates opportunities for health care providers in
India and Singapore to grow their businesses, for
U.S. insurance companies to lower their costs by
agreeing to pay for treatment in accredited
hospitals overseas, and for health brokers in the
United States, who make money by arranging for
U.S. citizens to have treatment overseas. The trend also clearly benefits some health care
consumers.
Two Facets of Globalization:

1. Globalization of Markets- refers to the merging of historically distinct and separate
national markets into one huge global marketplace.
- It no longer makes sense to talk about the “German market” or the “American market”.
Instead, there is the “global market”.
- falling trade barriers make it easier to sell globally
- consumers’ tastes and preferences are converging on some global norm
- firms promote the trend by offering the same basic products worldwide
Consumer products such as Coca-Cola soft drinks,

Sony PlayStation video games, McDonald’s hamburgers,
Starbucks coffee, and IKEA furniture are frequently held
up as prototypical examples of this trend. Firms such as
those just cited are more than just benefactors of this trend; they are also facilitators of it. By
offering the same basic product worldwide, they help to create a global market.
2. Globalization 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 like land, labor, and capital.

- Companies hope that by sourcing and producing their products in the
optimal location, wherever in the world that might be, they will be able to better compete
against their rivals.
- Boeing, for example, outsources about 65

percent of its 787 aircraft to foreign companies. About 35
percent of the jet will be made by three Japanese
companies. Boeing believes that this strategy allows it to
use the best suppliers in the world, an advantage that will help it win market share over
its rival Airbus Industries.
Why Do We Need Global Institution?
Several global institutions have emerged to manage, regulate, and police the
global marketplace, and to promote the establishment of multinational treaties to govern
the global business system.
The key institutions affecting international business are the:
 The General Agreement on Tariffs and Trade (GATT)- the predecessor of World
Trade Organization.
 The World Trade Organization- (like the GATT before, is responsible for policing the
world trading system, and making sure that members adhere to trade treaties. The 153
nations that account for about 97 percent of the world’s trade are all WTO members, so
the organization is very influential in working toward an open business system where
goods can cross national borders without barriers to trade and investment.
 The International Monetary Fund (IMF) - created in 1944. Its goal is to maintain order
in the international monetary system. It is
often seen as the lender of last resort to
nation-states whose economies are in
turmoil and currencies are losing value. IMF
loans, however, come with strings attached,
that’s why it is considered as more
controversial than World Bank.

 The World Bank- also created in 1944. It promotes economic development by making
loans to cash-strapped nations wishing to make significant infrastructure improvements
like building dams or roads.
 The United Nations (UN) - was established in 1945. It has four purposes:
 To maintain international peace and security
 To develop friendly relations among nations
 To cooperate in solving international problems and in promoting respect for human

rights
 To be a center for harmonizing the actions of nations
Drivers of Globalization:
1. Declining Trade and Investment Barriers- at the end of World War II, many advanced
nations committed to removing barriers that prevented the free flow of goods, services,
and capital between countries.
- They formalized the process through the General Agreement on Tariffs and Trade, or
GATT.
- Since1950, average tariffs have fallen significantly.
- Foreign direct investment, or FDI, is also rising as countries open their market to
firms.
As you can see in the graph above, tariff rates has been declining over the years thus promoting
more free flow of goods and services from country to country.
International trade- occurs when a firm exports goods or services to consumers in another
country.
10 | B A C 3 0 3 : I n t e r n a t i o n a l B u s i n e s s & T r a d e
Foreign direct investment (FDI) - occurs when a firm invests resources in business activities
outside its home country.
2. Technological Change
 Lower transportation costs - firms can disperse production to economical,

geographically separate locations.
 Lower information processing and communication costs - firms can create and
manage globally dispersed production systems.
 low cost global communications networks - help create an electronic global

marketplace
 global communication networks and global media - create a worldwide culture,

and a global market for consumer products
How do critics and supporters view globalization and jobs and income?
Critics:
 Argue that falling barriers to trade are destroying manufacturing jobs in advanced
countries.
 Worry that jobs are being lost to low-wage nations.
 They argue that falling trade barriers are allowing companies to move manufacturing jobs
to countries where wage rates are low. For example, clothing manufacturing has
increasingly shifted away from the U.S. where workers might earn $9 per hour to
countries like Honduras where wages are less than 50 cents per hour. Critics believe that
this leads to falling wages and living standards in the U.S.
Supporters:
 Supporters contend that the benefits of this trend outweigh the costs.
 They claim that free trade will prompt countries to specialize in what they can produce
most efficiently, and to import everything else.
 They argue that the whole economy will be better off as a result.
How Does Globalization Affect National Sovereignty?
Critics:
 Economic power is shifting away from national governments and towards supranational
organizations like the WTO and the European Union, or EU.
 Critics argue that unelected bureaucrats have the power to impose policies
on the democratically elected governments of nation-states.
Supporters:
 Globalization’s supporters argue that the power of

Implications for these organizations is limited to what they are granted
Managers by their members. They also point out that the
organizations are designed to promote the collective
How Does the Global Marketplace interests of members, and they won’t gain support for
Affect Managers? policies that don’t achieve this goal.
Managing an international How Is Globalization Affecting the World’s Poor?

business, or any firm that engages in
Critics:
international trade or investment, will
be different from managing a  Critics of globalization worry that the gap between
domestic business for several key rich and poor is growing and that the benefits of
reasons: globalization haven’t been shared equally.
 Countries are different.  Critics believe that if globalization was beneficial

there should not be a divergence between rich and
 The range of problems
poor nations.
confronted in an international
business is wider and the Supporters:
problems more complex than

 While supporters of globalization concede the gap
those in a domestic business.
between rich and poor has gotten wider, they also
 Firms have to find ways to contend that it has more to do with the policies
work within the limits countries have followed than with globalization. For
imposed by government example, many countries have chosen to pursue
intervention in the totalitarian regimes, or have failed to contain
international trade and population growth, and many countries have huge
investment system. debt loads that are stagnating economic growth.
 International transactions  Supporters claim that the best way for the poor
involve converting money into nations to improve their situation is to:
different currencies.  reduce barriers to trade and investment
 Implement economic policies based on free

market economy.
Let’s try this!
You are working for a company that is considering investing in a foreign
country. Investing in countries with different traditions is an important
element of your company’s long-term strategic goals. As such, management
has requested a report regarding the attractiveness of alternative countries
based on the potential return of FDI. Assess them and choose the top 3
countries which are the most feasible for your company.
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Let’s do this!
Describe the shifts in the world economy over the past 10 years. What are
the implications of these shifts for international business based in Asia?
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Let’s learn!
Lesson 2: NATIONAL DIFFERENCES IN POLITICAL ECONOMY

Intended Learning Outcome: Explain the implications for management practice of national
differences in political economy.
What Is A Political Economy?

We use the term “political economy” to stress that the political, economic, and legal systems of a
country are interdependent; they interact and influence each other, and in doing so they affect
the level of economic well-being.
Political System- refers to the system of government in a

nation. It can be assessed according to two dimensions:
 the degree to which the country emphasizes
collectivism as opposed to individualism
 the degree to which the country is democratic or
totalitarian
 These dimensions interrelated; systems that emphasize collectivism tend toward
totalitarianism, whereas those that place a high value on individualism tend to be
democratic.
COLLECTIVISM AND INDIVIDUALISM
Collectivism- refers to a political system that stresses the primacy of collective goals over
individual goals.
- can be traced to the Greek philosopher, Plato (427-347 BC)
- Today, collectivism is equated with socialists (Karl Marx 1818-1883)
- advocate state ownership of the basic means of production, distribution, and exchange.
- manage to benefit society as a whole, rather than individual capitalists.
- In the early 20th century, socialism split into:
 Communism – socialism can only be achieved through violent revolution and
totalitarian dictatorship.
 Social democrats – socialism is achieved through democratic means.
Individualism- refers to philosophy that an individual should have freedom in his own economic
and political pursuits.
- can be traced to Greek philosopher, Aristotle (384-322 BC), who argued that individual
diversity and private ownership are desirable.
- individual economic and political freedoms are the ground rules on which a society
should be based.
- implies democratic political systems and free market economies.
DEMOCRACY AND TOTALITARIANISM
Democracy- refers to a political system in which government is by the people, exercised either
directly or through elected representatives.
- usually associated with individualism.
- pure democracy is based on the belief that citizens should be directly involved in decision
making.
- most modern democratic states practice representative democracy where citizens
periodically elect individuals to represent them.
Totalitarianism- is a form of government in which
one person or political party exercises absolute
control over all spheres of human life and prohibits
opposing political parties.
 Communist totalitarianism – found in states
where the communist party monopolizes
power.
 Theocratic totalitarianism - found in states where political power is monopolized by a
party, group, or individual that governs according to religious principles.
 Tribal totalitarianism - found in states where a political party that represents the
interests of a particular tribe monopolizes power.
 Right-wing totalitarianism - permits some individual economic freedom, but restricts
individual political freedom.
Economic Systems- are the means by which countries and governments distribute resources
and trade goods and services. They are used to control the five factors of production, including:
labor, capital, entrepreneurs, physical resources and information resources.
1. Market economies - all productive activities are privately owned and production is
determined by the interaction of supply and demand. Government encourages free and
fair competition between private producers.
2. Command economies - government plans the goods and services that a country
produces, the quantity that is produced, and the prices as which they are sold. All
businesses are state-owned, and governments allocate resources for “the good of society”.
3. Mixed economies - certain sectors of the economy are left to private ownership and free
market mechanisms while other sectors have significant state ownership and
government planning. Governments tend to own firms that are considered important to
national security.
Legal System- refers to the rules that regulate behavior along with the processes by which the
laws are enforced and through which redress for grievances is obtained.
1. Common law - based on tradition, precedent, and custom.
2. Civic law - based on detailed set of laws organized into codes.
3. Theocratic law - law is based on religious teachings.
How Are Contracts Enforced In Different Legal Systems?
- A contract is a document that specifies the conditions under which an exchange is to
occur and details the rights and obligations of the parties involved.
- Contract law is the body of law that governs contract enforcement.
- Under a common law system, contracts tend to be very detailed with all contingencies
spelled out
- Under a civil law system, contracts tend to be much shorter and less specific because many
issues are already covered in the civil code
- Many countries have ratified the United Nations Convention on Contracts for the
International Sale of Goods (CIGS) which establishes a uniform set of rules governing
certain aspects of the making and performance of everyday commercial contracts
between buyers and sellers who have their places of business in different nations.
PROPERTY RIGHTS AND CORRUPTION
Property rights- refer to the legal rights over the use to which a resource is put and over the use
made of any income that may be derived from that resource. It can be violated through:
 Private Action – refers to theft, piracy, blackmail, and the like by private individuals and
groups.
 Public Action- occurs when public officials, such as politicians and government
bureaucrats, extort income, resources, or the property itself from property holders. This
can be done through legal or illegal mechanisms.
High levels of corruption reduce foreign direct investment, the level of international trade,
and the economic growth rate in a country.
How Can Intellectual Property Be Protected?
Intellectual property – refers to a property that is the product of intellectual activity. It can be
protected using:
 Patent– grants the inventor of a new product or process exclusive rights for a defined
period to the manufacture, use, or sale of that invention.
 Copyrights – the exclusive legal rights of authors, composers, playwrights, artists, and
publishers to publish and disperse their work as they see fit.
 Trademarks – design and names, often officially registered by which merchants or
manufacturers designate and differentiate their products.
To avoid piracy, firms can:
 stay away from countries where intellectual property laws are lax
 file lawsuits
 lobby governments for international property rights agreements and enforcement
PRODUCT SAFETY AND PRODUCT LIABILITY
Product safety laws- set certain standards to which a product must adhere.
Product liability- involves holding a firm and its officers responsible when a product causes
injury, death, or damage. Both civil and criminal liability laws exist.
THE DETERMINANTS OF ECONOMIC DEVELOPMENT

The most common measure of economic development is a country’s gross national
income (GNI) per capita.
Gross National Income (GNI)- is regarded as a yardstick for the economic activity of a country;
it measures the total annual income received by residents of a nation.
Nobel-prize winner Amartya Sen argues economic development should be seen as a process of
expanding the real freedoms that people experience:
 the removal of major impediments to freedom like poverty, tyranny, and neglect of public
facilities
 the presence of basic health care and basic education
The United Nations used Sen’s ideas to develop the Human Development Index (HDI to
measure the quality of human life in different nations which is based on:
 life expectancy at birth
 educational attainment
 whether average incomes are sufficient to meet the basic needs of life in a country
THE NATURE OF ECONOMIC TRANSFORMATION

The shift toward a market-based system involves:
 Deregulation – removing legal restrictions to the free play of markets, the establishment
of private enterprises, and the manner in which private enterprises operate.
 Privatization - transfers the ownership of state property into the hands of private
investors.
 the creation of a legal system to safeguard property rights.
Let’s try this!
Assess a country of your choice based on its political economy and determine
the attractiveness of this country as an investment site for a fast food business.
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Let’s do this!
You are the CEO of a company that has to choose between making a
$100 million investment in Russia or Poland. Bothe investments promise
the same long-run return, so your choice is driven by risk
considerations. Assess the various risks of doing business in each of
these nations. Which investment would you favor and why?
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IMPLICATIONS FOR MANAGERS
The political, economic, and legal environments of a country clearly influence the
attractiveness of that country as an investment site. Its attractiveness depends on
balancing the likely long-term benefits of doing business in that country against the
likely costs and risks.
Managers must consider:
 Political risk - the likelihood that political forces will cause drastic changes
in a country's business environment that adversely affects the profit and
other goals of a business enterprise.
 Economic risk - the likelihood that economic mismanagement will cause

drastic changes in a country's business environment that adversely affects
the profit and other goals of a business enterprise.
 Legal risk - the likelihood that a trading partner will opportunistically

break a contract or expropriate property rights.
How Can Managers Determine A Market’s Overall Attractiveness?
 The overall attractiveness of a country as a potential market and/or

investment site for an international business depends on balancing the
benefits, costs, and risks associated with doing business in that country.
 Other things being equal, the benefit-cost-risk trade-off is likely to be most

favorable in politically stable developed and developing nations that have
free market systems and no dramatic upsurge in either inflation rates or
private sector debt.
Closing Case
India’s Transformation
After gaining independence from Britain in 1947, India adopted a democratic system of
government. The economic system that developed in India after 1947 was a mixed economy
characterized by a large number of state-owned enterprises, centralized planning, and subsidies.
This system constrained the growth of the private sector. Private companies could expand only
with government permission. It could take years to get permission to diversify into a new product.
Much of heavy industry, such as auto, chemical, and steel production, was reserved for state-
owned enterprises. Production quotas and high tariffs on imports also stunted the development
of a healthy private sector, as did labor laws that made it difficult to fire employees. By the early
1990s, it was clear that this system was incapable of delivering the kind of economic progress
that many Southeastern Asian nations had started to enjoy. In 1994, India’s economy was still
smaller than Belgium’s, despite having a population of 950 million. Its GDP per capita was a paltry
$310; less than half the population could read; only 6 million had access to telephones; only 14
percent had access to clean sanitation; the World Bank estimated that some 40 percent of the
world’s desperately poor lived in India; and only 2.3 percent of the population had a household
income in excess of $2,484. The lack of progress led the government to embark on an ambitious
economic reform program. Starting in 1991, much of the industrial licensing system was
dismantled, and several areas once closed to the private sector were opened, including electricity
generation, parts of the oil industry, steelmaking, air transport, and some areas of the
telecommunications industry. Investment by foreign enterprises— formerly allowed only
grudgingly and subject to arbitrary ceilings, was suddenly welcomed. Approval was made
automatic for foreign equity stakes of up to 51 percent in an Indian enterprise, and 100 percent
foreign ownership was allowed under certain circumstances. Raw materials and many industrial
goods could be freely imported and the maximum tariff that could be levied on imports was
reduced from 400 percent to 65 percent. The top income tax rate was also reduced, and corporate
tax fell from 57.5 percent to 46 percent in 1994, and then to 35 percent in 1997. The government
also announced plans to start privatizing India’s state-owned businesses, some 40 percent of
which were losing money in the early 1990s. Judged by some measures, the response to these
economic reforms has been impressive. The economy expanded at an annual rate of about 6.3
percent from 1994 to 2004, and then accelerated to 9 percent per annum during 2005–2008.
Foreign investment, a key indicator of how attractive foreign companies thought the Indian
economy was, jumped from $150 million in 1991 to $36.7 billion in 2008. Some economic sectors
have done particularly well, such as the information technology sector where India has emerged
as a vibrant global center for software development with sales of $50 billion in 2007 (about 5.4
percent of GDP) up from just $150 million in 1990. In pharmaceuticals too, Indian companies are
emerging as credible players on the global marketplace, primarily by selling low-cost, generic
versions of drugs that have come off patent in the developed world. However, the country still
has a long way to go. Attempts to further reduce import tariffs have been stalled by political
opposition from employers, employees, and politicians, who fear that if barriers come down, a
flood of inexpensive Chinese products will enter India. The privatization program continues to
hit speed bumps—the latest in September 2003 when the Indian Supreme Court ruled that the
government could not privatize two state-owned oil companies without explicit approval from
the parliament. State owned firms still account for 38 percent of national output in the nonfarm
sector, yet India’s private firms are 30–40 percent more productive than their state-owned
enterprises. There has also been strong resistance to reforming many of India’s laws that make it
difficult for private business to operate efficiently. For example, labor laws make it almost
impossible for firms with more than 100 employees to fire workers, creating a disincentive for
entrepreneurs to grow their enterprises beyond 100 employees. Other laws mandate that certain
products can be manufactured only by small companies, effectively making it impossible for
companies in these industries to attain the scale required to compete internationally.
Case Discussion Questions
1. What kind of economic system did India operate under during 1947 to 1990? What kind
of system is it moving toward today? What are the impediments to completing this
transformation?
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2. How might widespread public ownership of businesses and extensive government
regulations have impacted (1) the efficiency of state and private businesses, and (2) the
rate of new business formation in India during the 1947–1990 time frame? How do you
think these factors affected the rate of economic growth in India during this time frame?
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3. How would privatization, deregulation, and the removal of barriers to foreign direct
investment affect the efficiency of business, new business formation, and the rate of
economic growth in India during the post-1990 time period?
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4. India now has pockets of strengths in key high technology industries such as software and
pharmaceuticals. Why do you think India is developing strength in these areas? How
might success in these industries help to generate growth in the other sectors of the
Indian economy?
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_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
5. Given what is now occurring in the Indian economy, do you think the country represents
an attractive target for inward investment by foreign multinationals selling consumer
products? Why?
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
Source: Wee, Chou-Hou, Udayansankar, K. & Hill, C. 2016. International Business Asia Global Edition.
McGraw-Hill
REFERRENCES;
1. Hill, Charles & Hult, Tomas. 2016. Global Business Today 9th Edition. McGraw-Hill
2. Wee, Chou-Hou, Udayansankar, K. & Hill, C. 2016. International Business Asia Global
Edition. McGraw-Hill
3. Hill, Charles W.L.2008. International Business: Competing I the Business Asia Global
Edition. McGraw Hill
4. [Online.] Global Institutions. Available at http://www.global-strategy.net/global-
institutions
5. [Online] National Cultural Differences and Multinational Business available at
http://www.aacsb.edu/-
/media//AACSB/Publications/CDs%20and%20DVDs/Globe/readings narional-
cutural-differences-and-multinational-business.ashx
6. [Online] The Political Economy of Foreign Direct Investment. Available at

http://www.highered.mheducation.com
7. www.mhhe.com/hill

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BAC 303:

1|BAC303: Inte rnati onal Bu s i ness & Trade

COURSE NAME BAC 303: International Business & Trade

This course focuses on the strategies and structures of

 Compare business practices among organizations in the global arena.

2|BAC303: Inte rnati onal Bu s i ness & Trade

Opening Case: To familiarize you with

Closing case: To illustrate to you the

Let’s Learn! : Discussions

Management Focus: To highlight the

Implications for Managers:

Let’s try this! To enable you to go a step

Let’s look back!

3|BAC303: Inte rnati onal Bu s i ness & Trade

4|BAC303: Inte rnati onal Bu s i ness & Trade

5|BAC303: Inte rnati onal Bu s i ness & Trade

6|BAC303: Inte rnati onal Bu s i ness & Trade

What do you think?

Intended Learning Outcome:

 Explained how the nature of international business is changing in

Globalization refers to the shift toward a more integrated and

7|BAC303: Inte rnati onal Bu s i ness & Trade

Two Facets of Globalization:

Consumer products such as Coca-Cola soft drinks,

8|BAC303: Inte rnati onal Bu s i ness & Trade

- Boeing, for example, outsources about 65

Why Do We Need Global Institution?

The key institutions affecting international business are the:

9|BAC303: Inte rnati onal Bu s i ness & Trade

 To maintain international peace and security

 To develop friendly relations among nations

 To cooperate in solving international problems and in promoting respect for human

 To be a center for harmonizing the actions of nations

- Since1950, average tariffs have fallen significantly.

 Lower transportation costs - firms can disperse production to economical,

 low cost global communications networks - help create an electronic global

 global communication networks and global media - create a worldwide culture,

 Worry that jobs are being lost to low-wage nations.

How Does Globalization Affect National Sovereignty?

 Globalization’s supporters argue that the power of

Managing an international How Is Globalization Affecting the World’s Poor?

 Countries are different.  Critics believe that if globalization was beneficial

problems more complex than

imposed by government example, many countries have chosen to pursue

intervention in the totalitarian regimes, or have failed to contain

investment system. debt loads that are stagnating economic growth.

involve converting money into nations to improve their situation is to:

different currencies.  reduce barriers to trade and investment

 Implement economic policies based on free

Lesson 2: NATIONAL DIFFERENCES IN POLITICAL ECONOMY

What Is A Political Economy?

Political System- refers to the system of government in a

COLLECTIVISM AND INDIVIDUALISM

DEMOCRACY AND TOTALITARIANISM

PROPERTY RIGHTS AND CORRUPTION

How Can Intellectual Property Be Protected?

THE DETERMINANTS OF ECONOMIC DEVELOPMENT

THE NATURE OF ECONOMIC TRANSFORMATION

Managers must consider:

 Economic risk - the likelihood that economic mismanagement will cause

 Legal risk - the likelihood that a trading partner will opportunistically

How Can Managers Determine A Market’s Overall Attractiveness?

 The overall attractiveness of a country as a potential market and/or