Khulna university International Business

Business Administration Discipline • International business consists of all commercial

EMBA Program transactions—including sales, investments, and
transportation—that take place between two or more
Subject: International Business countries
Lecture 1, Date: 13 August, 2023 • Increasingly foreign countries are a source of both
production and sales for domestic companies
Topic: Introduction and Globalization
• Import: Goods and services purchased abroad and
brought into a country
Course Teacher: • Export: Goods and services sold abroad and sent out
Dr. ATM Jahiruddin of a country
Professor
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Key Players in International Business Studying International Business is Important

• Most companies are either international or compete

Large companies from the wealthiest nations with international companies
• Modes of operations may differ from those used
Firms from emerging markets
domestically
Small and medium-sized companies • The best way of conducting business may differ by
country
Multinational corporation (MNC) • An understanding helps you make better career
decisions
Born global firm • An understanding helps you decide what
government policies to support

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International Business: Operations and Influences Factors Contributing to Rapid Growth of

International Business

1. Increase in and expansion of technology

2. Liberalization of cross-border trade and resource
movements
3. Development of services that support
international business
4. Growing consumer pressures
5. Increased global competition
6. Changing political situations
7. Expanded cross-national cooperation

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 Companies Engage in International Business Modes of Operation in International Business

• To Expand Sales: pursuing international sales • Merchandise exports and imports

increases the potential market and potential profits • Service exports and imports
• To Acquire Resources: may give companies lower – Tourism and Transportation
costs, new and better products, additional – Service Performance
operating knowledge – Asset Use

• To Diversify or Reduce Risks: international • Investments

operations may reduce operating risk by – Foreign Direct Investment (FDI)
smoothing sales and profits, preventing – Portfolio Investment
competitors from gaining advantage

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Multinational Enterprises Difference - International and Domestic Operations

• Multinational Enterprises (MNEs) take a global
approach to markets and production. Sometimes they
are referred to as multinational corporations or
companies (MNCs) or transnational companies
(TNCs).
• When operating abroad companies may have to
adjust their usual methods of carrying out
business.
• Foreign conditions often dictate a more suitable
method, and the operating modes used for
international business differ from those used on
a domestic level.

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Physical and Social Factors Affecting Competitive Factors Affecting International

International Business Operations Business

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 The Shrinking Globe

1500 -1840 1850 - 1930 1950s 1960s

Propeller Jet
Steam locomotives aircraft passenger
Best average speed of
average 65 mph. 300 - 400 aircraft,
horse-drawn coaches
Steamships average mph. 500 - 700
and sailing ships, 10
36 mph. mph.
mph.
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Businesses expanding beyond the border Illustrative world trade flows ($billions)
• World trade increased more than 20 times between Western Europe
194
’50 and ’98 and 25 time from ’70 to ’02 intratrade: 1430
227
 FDI bilateral treaties up more than 10x from ’80 to
’02 241
North America 200 Asia / Pacific Rim
 By 1998 60,000 parent companies: intratrade: 465 intratrade: 632
– operated away from home markets through 500,000 393
382
subsidiaries / affiliates
– Produced US$11 trillion in global sales, 25% of 365
279
global output
381
 US, Japanese, Western European companies the 140 Rest
of world
major investors in Europe, Asia, and North 137
intratrade:
America 175
313

Concepts of globalization - 1 Concepts of globalization - 2

• The tendency of world investment and business to
move from national and domestic markets to a
worldwide environment.
• A complex series of economic, social, technological,
cultural, and political changes seen as increasing
integration, and interaction between people and
companies in disparate locations.
• The integration of all national economies into one
global market, with one set of rules
• An ongoing process that deepens and broadens the
relationships and interdependence among countries.
International Business is a mechanism to bring about
globalization.
• The process of interaction and integration among people,
companies, and governments worldwide.
• As a complex and multifaceted phenomenon, which entails
the integration of local and national economies into a global,
unregulated market economy.
• The interweaving of markets, technology, information
systems and telecommunications systems in a way that
individual countries into one world
• A phenomenon by which the experience of everyday life, as
influenced by the diffusion of commodities and ideas, reflects
a standardization of cultural expressions around the world.

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 Concepts of globalization - 3 Measuring Globalization

• Globalization: Trend toward greater economic,

cultural, political, and technological interdependence • A.T. Kearney/Foreign Policy Globalization Index
among national institutions and economies
– Economic
• Divided into three major areas according to the
– Technological
academic literature:
– Personal Contact
– Economic globalization
– Political
– Cultural globalization
– Political globalization.

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Proponents of globalization - 1 Impact

• Development in the ICT sector
• Advancement in transportation and communication
technology.
• Increased global interactions comes the growth of
international trade, ideas, and culture.
• High rate of migration and cross border movement
• Fall of communism
• Liberalization of economy
• Change in values, norms and ideology
• International treaties and development agencies
• Economic growth (increasing material
consumption) as sole desirable end
• Privatization and commodification of public
services, national and global commons
• Corporate deregulation and unrestricted
movement of capital across borders
• Increased corporate concentration
• Cultural and economic homogenization

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Benefits Problems with globalization

• Wider consumers choice • Economic growth and environmental stress
• Reduced cost and cheaper price
• Growing income inequality and personal stress
• High quality of living
• Eliminates jobs in developed nations
• Collective productivity
• Labor mobility
• Lowers wages in developed nations
• Improved learning • Exploits workers in developing nations
• Creates new market opportunities
• Increases wealth and efficiency in all nations
• Generates labor market flexibility in developed
• Levels uneven income streams
nations
• Local buyers’ needs • Advances the economies of developing nations.
• Global sustainability
Global business Benefits of Globalization of Market
• Selling product throughout the global market with
little or no modification • Reduces marketing costs
• Creates new market opportunities
Globalization Globalization • Levels uneven income streams
of markets of production • Local buyers’ needs
• Global sustainability
Dispersal of
Convergence in
production activities
buyer preferences in
worldwide to
markets around the
minimize costs or
world
maximize quality

Benefits of Globalization of Production Forces expediting global business

• Access lower-cost workers • General Agreement on Tariffs and Trade
• Access technical expertise (GATT)
• Access production inputs • World Trade Organization (WTO)
• Other international organizations
– The World Bank
– The International Monetary Fund (IMF)
• Regional trade agreements
• Trade and national output

The Global Business

Environment

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