BI0013

International Business
Introduction to International
Business

ACCOUNTING PROGRAM
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Defining Globalization
• Globalization is the broad set of interdependent
relationships among people from different parts
of a world divided into nations

• The term refers to the elimination of barriers to

international movement of goods, services,
capital, technology, and people that influence the
integration of world economies
Measuring Globalization
• Two problems in measuring globalization:
• Degree of two countries’ interdependence must be
measured indirectly
• When national boundaries shift, domestic business
transaction can become international or vice versa
• Some countries are more globalized than others. Some
are globalized on one dimension more than on other
dimensions
What is International
Business?
• International business consists of all
commercial transactions—including sales,
investments, and transportation—that take place
between two or more countries
• increasingly foreign countries are a source of both
production and sales for domestic companies
• The ‘Made in’ label is no more correct
• The private businesses seek profit
• The governments seek profit and/or politics
Why Study Intl Business?
• It is important to study international business because IB is
now a large proportion of world’s total business
• Most companies are either international or compete with
international companies (secure supplies, sell output, compete)
• Global events and competition affect almost all companies,
regardless of industry (need to approach operating strategies from
international standpoint)
• International companies have more complex environments
than domestic firms.
• An understanding of IB helps you make better and informed
career decisions
• An understanding helps you decide what government policies
to support
IB: Complex set of relationships
among conditions and operations
International Business
• Doing business at home may not be the same as
doing it in another country
• Differences:
• Modes of business
• Physical, social, competitive conditions
• Diverse and complex operating environments
• Effects
• Profits
• Employment security and wages
• Consumer prices
• National security
Forces Driving Globalization
1. Increase in and application of technology

2. Liberalization of cross-border trade and resource movements

3. Development of services that support international business

4. Growth of consumer pressures

5 Increased global competition

6 Changing political situations and government policies

7 Expanded cross-national cooperation

Globalization vs Anti‐
globalization
• Most of the world’s goods and services are still
sold in the countries where they are produced

• Principal source of capital in most countries is

domestic and not international
Costs of Globalization
• Threats to national sovereignty

• Economic growth and environmental stress

• Growing income inequality and personal stress

• Offshoring, a type of outsourcing, involves the

transferring of production abroad
• it can be beneficial because it reduces costs
• but, it also means that jobs move abroad

• Yet, offshoring may also create new, better jobs at home

Why Companies Engage in IB
• To expand sales (depends on consumer interests and
willingness)

• To acquire resources

• To diversify or reduce risks

Why Companies Engage in IB
• Advanced communication systems have enabled
better control and supervision of global
operations

• Three reasons (sales expansion, resource

acquisition, risk minimization)

Guide all decisions about whether, where, and

how to engage in international business
Why IB is Different
• The external environment affects a companyʼs
international operations
• Managers must understand social science
disciplines and how they affect functional
business fields
• Consider
• physical factors (geography)
• social factors (politics, law, culture, economics)
• competitive factors (number and strength of
suppliers, customers, and competitors