Group Summary GSLC Session 17-18

“An Overview of International Business”

LB66

Created by :
Algapius Tegar - 2502044094
Arvel Rafi Ashaffandra - 2502045544
Audry Leticia Almira Sugandi - 2502051540
Azka Indira Pashya - 2502045903
Faris Azzaky - 2502000262
Farrah Khansa Tazkia - 2502050090
Jadenia Annabella Chandra - 2440036604
Muhammad Daffa Aldian Naufal - 2502004121
Nabila Alifia Nuranisa - 2502045304
Shintya Farenola Permata - 2502044610
Zahra Salsabilla Ridzka - 2502048653
 Mata Kuliah International Political Economy (IPE)
Jurusan Hubungan International
Fakultas Humaniora
Universitas Bina Nusantara
Jakarta, December 2022
Introduction

Ricky W. Griffin and Michael W. Pustay in their book entitled 'International Business: A
Managerial Perspective', especially in Chapter 1: An Overview of International Business, explain
the importance of studying international business. According to Griffin and Pustay’s view,
fluctuations in global economic conditions can affect daily life at the individual, state and global
levels. For example, starting from the product that will be purchased and the price paid, then
there is an interest rate that is charged on each item or service to affect the type of individual
work as well. Therefore, to be able to adapt to the dynamics of the global economy, individuals
need to understand the basic ideas and concepts of international business. Furthermore, studying
international business is also important for several reasons. First, the organizations we work for
are likely to be affected by the global economy. Second, in a professional context that allows us
to work in foreign-owned companies, so we need to understand arrangements in the international
world. Last, there is an urgency to have a knowledge of culture in the world at this time. Not to
mention that the rapid development of the internet and information technology has brought back
global competition, especially in the field of international business.

There are several things that need to be learned to understand international business
according to Griffin and Pustay. For example, in order to understand international business,
individuals need to understand the basic mechanisms of the global economy, the elements that
consist of and how it can affect individuals, businesses and industries. It also requires an
understanding of the complex political and economic relations in Asia, Europe, North America,
and around the world because international business involves parties from more than one country
which includes individuals, corporate groups, or government agencies. International business
also requires more understanding because of its different characteristics from domestic business
(currency, legal system, culture, and availability of resources). Moreover, international business’
rapid growth in recent years has finally forced individuals or countries to have strategic changes
in their operations by increasing competence, acquiring resources, finding new markets and
adapting to competitors' actions.

Body

What is International Business?

International business is defined as business transactions involving parties from more
than one country. The parties involved in international business are private individuals,
individual corporations, groupings of companies, or governmental bodies. There are plenty of
examples of international business transactions, such as buying materials in one country and
shipping them to another, shipping finished products from one country to another for retail sale,
building a plant in a foreign country to capitalize on lower labor costs, and borrowing money in
one country to finance operations in another.
From the explanation, what is the difference between domestic and international
business? The key gap between international and domestic business is that domestic business
transactions take place within the borders of a single country, whereas international business
transactions take place across national boundaries. A number of other reason to differ
international business from domestic business are :
● The countries involved may use different currencies, requiring at least one of them to
convert theirs into another.
● Countries' legal systems may differ, requiring one or more parties to modify their
operations to conform with local law. The missions of the legal systems may occasionally
be irreconcilable, causing severe issues for multinational management.
● Countries' cultures may differ, requiring one party to adjust its behavior to fit the
expectations of the other.
● The availability of resources varies from country to country. One country may be wealthy
in natural resources but low in skilled workers, whereas another may have a productive,
well-trained worker but lack natural resources. As a result, the methods of production and
the types of products produced vary by country.

However, although the concept of international and domestic business may be seen as the
same, the complexity of skills and knowledge needed for success is significantly larger for
international business than for domestic business. International businesses must understand
cultural, legal, political, and social variations between countries. Also, international enterprises
must coordinate the activities of their international subsidiaries, while dealing with the taxes and
regulatory authorities of their home country and all the other nations in which they do business.

Why Study International Business?

There are several reasons why understanding international business is a knowledge that
many individuals need to study. First off, practically every significant company where people
work will have activities abroad or be impacted by the world economy. To more accurately
evaluate job chances and communicate with other managers, people need to comprehend this
subject, which is becoming more and more crucial. In the modern day, small enterprises are also
becoming increasingly active in international trade. If someone were to one day open their own
business, they may find themselves competing with international companies, employing products
created elsewhere, or even selling in other countries. A well-designed website can draw
customers from all over the world without the need to establish a physical presence in each
country, making it easier for small businesses to compete in the global market. Previously,
companies that wanted to enter foreign markets frequently had to painstakingly build distribution
networks and brand recognition country by country.

Another reason for people to study international business is to keep pace with their future
competitors. In many universities, business students have a tradition of taking several language
classes, traveling extensively, and working abroad. They must spend one or more semesters
abroad as part of several of their degrees. Because no one nation has a monopoly on brilliant
ideas, people should study international business to keep up to date on the most recent business
strategies and instruments. Finally, in order to develop cultural literacy, you must study
international business. Understanding and respecting the similarities and contrasts of the many
peoples of the globe will be more and more crucial as global cultures and political systems
become even more linked than they are now.
International Business Activities

Historically, international business activities have been conducted by multinationals across

international borders and sometimes even across national borders. The complexity of the issues
in international trade have increased with time, but the opportunities for companies to combine
labor, land and capital around the world are growing.Trade start between countries can be
enjoyed back as far as 2000 BC, when tribes in northern Africa brought Babylonian and Assyrian
dates and clothing to the Middle East and traded them for spices and olive oil. This trade has
continued to expand over the years, covering more territories and a growing list of resources and
products. Chinese merchants were actively exporting silk and jade to India and Europe, and
common trade routes were being built.
At the time during the Middle Ages, Italy became a focal point for international business
because of its central location to world markets. Venice's political and military might, Genoa,
and Florence reflect their role as major centers of international trade and banking connecting
trade routes between Europe and China. In 1453 the trade route was cut when the Turks
conquered Constantinople and took control of Europe's Middle East trade with China. It had
been very profitable for Christopher Columbus to sail west from the European route in search of
such. His landings on the Caribbean islands went around rather than identifying important new
resources and, eventually, led to the colonization of America by European nations.
When this colonization took place, new trade routes were opened. Settlers across the
Americas sold raw materials, precious metals, and grain to Europe with an imbalance of tea,
manufactured goods, and other commodities. Most of the Americas eventually became
independent nations and important contributors to the world economy. Another phenomenon of
great importance to international business developed during the colonial period and the ensuing
Age of Imperialism: the growth of foreign direct investment (FDI) and multinational
corporations (MNCs), both of which involved foreigners supplying and controlling investment in
the host country. During the nineteenth century, the invention and improvement of the steam
engine, coupled with the spread of railroads, dramatically lowered the cost of transporting goods
by land and thereby made larger factories more economical. These developments in the
extension of the expansion of FDI. Forerunners of contemporary multinational corporations so
large as Unilever, Ericsson, and Royal Dutch Shell took their first steps on the path to becoming
international giants by considering.
 One of the most prominent International Business activities is exporting and importing.
Selling domestically produced goods to other nations for consumption or resale is known as
exporting, meanwhile purchasing goods created in other nations to use or sell on one's own is
known as importation. Activities related to import and export are frequently split into two
categories. Trade in goods, which includes tangible things like apparel, computers, and raw
materials, is one category of activities. The British frequently refer to this sort of trade as visible
trade, whereas official U.S. government publications refer to it as merchandise exports and
imports. The trade in services, which includes activities like banking, traveling, and accountancy,
is the other category of activities. Service exports and imports are the names given to this sort of
commerce in the United States.
International investments, or capital provided by citizens of one nation to citizens of
another, are the second most important type of international business activity. Foreign direct
investments and foreign portfolio investments are the two categories under which these
investments fall. Investments made with the goal of actively controlling real estate, other assets,
or businesses based in the host country are known as foreign direct investments (FDI).
There are also other types of international business activities such as contracts for
management, franchising, and licensing which are also significant. International licensing is a
legal agreement in which a company in one nation grants a company in another nation a license
to utilize its intellectual property (patents, trademarks, brand names, copyrights, or trade secrets)
in exchange for a royalty payment.

The Contemporary Causes of Globalization

The rapid growth of international business in the last decade has led many experts to
believe this is an era of globalization, in which every individual, company, and country, even a
nation, can easily reach the rest of the world. The book International Business A Managerial
Perspective shows the ratio of the increase in the role of international trade to economic activity
in the world economy. When the 2009 global recession occurred, goods trade accounted for 9
percent and was further increased by 6 percent of total GDP as GDP declined. The feasibility of
various international trade industries is due to the fast-growing international trade in services and
is a result of the development of IPTEK. Examples include some Canadian and U.S. companies.
India provides customer subscriptions and problem-solving services to customers of many
multinational corporations. The book also contains images showing another manifestation of
globalization, where FDI, which has a significant role in the world economy, has increased
significantly. Previously only 6 percent of the world's GDP, FDI stocks increased to 39 percent
in 2017. There are two broad reasons for international business growth and increased
international business activity.

1. Strategic Imperative
The first reason is the imperative strategy that motivates globalization by forcing
companies to become more global in orientation and action. It enhances the company's core
competencies, acquires resources at low cost, expands to new markets, and competes with
industry competitors. The main motive for globalization is the opportunity to increase the core
competencies that are the strengths of companies that have developed home market companies.
Companies can increase revenue and profit by leveraging core competencies in new markets. As
has already been done by Samsung with its smartphone technology development and Singapore
Airlines with the development of standards of satisfaction and reliability to its customers.
Like North American groceries that buy coffee and bananas from South America or many
U.S. advertising agencies make commercials abroad, an organization must go to foreign sources
because of the rare or absence of products or services locally and consider more economical
expenditures to buy from other countries. The common motive for international expansion is to
seek new markets and demographic changes playing a major role in MNCs' resource acquisition
strategies. When a firm's domestic market matures, it becomes increasingly differentiated to
generate high revenue and profit growth. Expansion into new markets has benefits for companies
that may reach an economical scale, lowering average costs along with increased production, and
diversified and self-protective corporate revenue streams because they serve many countries. A
business sometimes has to enter overseas markets to better compete with industry rivals. For
example, Coca-Cola is expanding aggressively around the world.

2. Environmental Change
● The Environmental Causes of Globalization
 Firms are generally driven to expand internationally by several core strategies.
Nevertheless, firms might not have been able to grow their global operations to the extent of
their business. But firms usually cannot extend their international business without the help of
the political and technological environment .

● Political; Changes
Policies that are enforced will sometimes hinder international trade. An example is that
after the first world war, many countries imposed quota tariffs on imported goods. With the
initial intention to be able to encourage economic activity and local products, the opposite
happened as a result, investment decreased. After the second world war this policy was reversed,
in short the result of this policy change was a loosening of trade and investment barriers.

● Technological Changes
Not only government policies that can affect international trade activities. Technological
developments also affect the course of international trade activities. Especially in the field of
communication, transportation, and information processing. In short, the development of
transportation such as airplanes and ships can cut the travel time of goods that should take
months to become in just a few weeks.
Then developments in the field of communication help a business owner to contact his
colleagues abroad without having the business owner fly to his colleague's country or vice versa.
In addition, messages or letters can be sent via email which does not require a long time to reach
their destination.
Developments in the field of information processing alone can cut time in administration
and reduce the risk of human error. Not only that, thanks to the help of a computer, a company
can manage all of its branches in every world.

3. Globalization and Emerging Markets

Globalization in a nutshell causes an increase in activity in international trading activities.
.Many scholars have predicted that globalization will result in a borderless world with less
importance for nation-states. Today, many are more focused on emerging markets in
international business. In a nutshell, emerging markets are countries that have their recent growth
exceeding traditional markets. But the terms emerging markets do not have a universally
accepted definition. Some will say it’s Brazil, Russia, India, and China.Or maybe Argentina,
Brazil, China, India, Indonesia, Mexico, Poland, South Africa, South Korea, and Turkey. But the
point is these countries have enjoyed rapid growth in their business and economy.
Although globalization brought us many benefits, it does come with a cost. For example
many environmental and human activists argue that many firms from developed countries can
move their factory to a developing country just because it’s cheaper. And in developing countries
labor forces, and environmental law is weakly enforced or even worse they didn;t have it at all.

Conclusion
This part of the book is focusing its content to help readers find knowledge from general
to specific topics in the world marketplaces that use managers as the main actors. One of the
intentions of this book is to also help managers find solutions in handling operational concerns
and challenges. Chapter 1 is more focused on introducing the definition and motivating managers
to understand the basic concept of contemporary global business conditions. We agree with the
statement about how the writer believes international business is affected by the global economy.
The process within international business that involved private individuals, individual and group
of companies, or even governmental agencies. The author emphasizes on the main outline of
international business and aims for the basic understanding of the system itself. As the author
stated, international businesses usually ‘exploit’ the lower labor costs in a foreign country or they
even took bank sponsors from other countries. The crossing boundaries lead us to FDI or most
known as Foreign Direct Investment. FDI has made it possible for investors and stakeholders to
operate their assets across nations, minding the political and technological aspects as a hurdle for
international business to expand. With the growth of international business interest since the end
of World War 2 until now, the collaboration and international urgency use national boundaries to
create Multinational Corporations (MNC). Globalization in International Business are
interrelated and have parallel relationships, world economic activity has risen due to
globalization. This action leads to the changing flow of political and technological environments
in some countries, specifically with globalization that leads to competition on maintaining
international business.
References

Griffin, R. W., & Pustay, M. W. (2020). The World's Marketplace: An Overview of International
Business. In International Business: A Managerial Perspective (pp. 26–48). essay,
Pearson Education.

Job Description

- Algapius Tegar (2502044094): Paper bagian body & Menyusun dan Presentasi PPT
- Arvel Rafi Ashaffandra (2502045544): Paper bagian conclusion & Presentasi PPT
- Audry Leticia Almira Sugandi (2502051540): Paper bagian body & Menyusun presentasi
(What is International Business)
- Azka Indira Pashya (2502045903): Paper bagian conclusion & Menyusun presentasi
(PPT) bagian conclusion
- Faris Azzaky (2502000262): Paper bagian body & Presentasi PPT
- Farrah Khansa Tazkia (2502050090): Paper bagian body & menyusun PPT (International
Business Activities)
- Jadenia Annabella Chandra (2440036604): Menyusun PPT introduction & Presentasi
PPT bagian introduction
- Shintya Farenola Permata (2502044610): Paper bagian introduction & Moderator
- Muhammad Daffa Aldian Naufal (2502004121): Paper bagian body & Menyusun PPT
- Nabila Alifia Nuranisa (2502045304): Paper bagian body & Presentasi PPT
- Zahra Salsabilla Ridzka (2502048653): Paper bagian conclusion & Presentasi PPT