Course Code: MGT-413

International Business
(By Charles W.L.Hill)
 Introduction
• Over the past three decades a fundamental
shift has been occurring in the world economy.
• We are moving away from a world in which
national economies were isolated by the
following ways:
– By barriers to cross-border trade and investment
– By distance, time zones, languages and
– By national differences in government systems,
economic systems and culture.
 Introduction
Introduction
• But now we are moving toward a world in
which national economies are merging into an
– Interdependent and
– Integrated global economic systems
• The process by which this transformation is
occurring is commonly known as
globalization.
By producing same basic product worldwide, they help create a global market.
 What Is Globalization??
• It refers to the fundamental shift toward a
more integrated and interdependent world
economy.
• It has several dimensions including the
following:
– Globalization of Markets and
– Globalization of Production
 Globalization of Markets
• It refers to the merging of national markets
which were historically distinct and separated.
• It only occurs when there is
– Declining barriers to cross-border trade and
investment and
– Advanced technology in communication,
transportation and information process.
• But it is not that the national markets are
giving way to the global market.
 Globalization of Markets
Globalization of Markets
• Because of it the taste and preferences of
consumers in different nations are beginning to
converge.
• But the most global markets are not typically
markets for consumer products but for industrial
products.
• In global markets, the same firms frequently
confront each other as competitors.
• As a result, greater uniformity replaces diversity.
 Globalization of Production
• Globalization of production refers to the sourcing of
goods and services from locations around the globe.
• The main purpose of it is to take advantage of national
differences in the cost and quality of factors of
production. Such as labor, energy, land and capital.
• It helps the companies to lower their total cost of
production and improve the functionality of their
product.
• Early outsourcing efforts wee primarily confined to
manufacturing activities such as-
Ford car

Designed in Germany
Assembled in Mexico
Components are made in the USA and Japan
Fabricated from Korean steel and Malaysian rubber.
Now scenario is, the internet allowed hospitals to
outsource some radiology work to India, where
images from MRI scans and the like are read at night
while U.S physicians sleep and the results are ready
for them in the morning.
 The Emergence of Global Institution
 General agreement on Tariffs and Trade (GATT) :
 World Trade Organization (WTO): Lowering barrier to
cross-border trade and investment.
 International Monetary Fund (IMF) : last resort to nation-
stares whose economics are in turmoil and whose
currencies are losing value against those of other nations.
 World Bank: promote economic development
 United Nations: committed to preserving peace through
international cooperation and collective security.
 G20 : response to financial crises in developing
nations.
 Drivers of Globalization
Two macro factors underlie the trend toward
greater globalization. The first is the decline in
barriers to the free flow of goods, services and
capital that has occurred since the end of world
war II.
The second factor is technological change,
particularly the dramatic developments in recent
decades in communication, information
processing and transportation technologies.
• Declining Trade and Investment Barriers
International trade and FDI
• Microprocessors and Telecommunications
Moore’s Law: Moore's law is the observation that the
number of transistors in a dense integrated circuit integrated
circuit(IC) doubles about every two years.
• The Internet and World Wide Web
Remove the constraints of location, scale and time zone
• Transportation Technology
Lowering the cost of shipping goods over long distances.
• Implications for the globalization of production
• Implications for the globalization of markets
 The changing demographics of the global
economy
The changing world output and world trade
picture: China-EU-US-Japan
The changing foreign direct investment
picture
 The Globalization Debate
• Anti-globalization Protests
– Globalization, Jobs, and Income
– Globalization, Labor Policies, and The
Environment
– Globalization And National Sovereignty
– Globalization and World Poor
Managing the global market place
 What is International Business?
• International business is described as any
business activity that crosses national
boundaries.
• International business is all commercial
transactions between two or more countries.
• The entities involved in business can be
private, governmental, or a mixture of the
two.
 How To Engage In International
Business??
• Furthermore, an international business is any
firm that engages in international trade or
investment.
• To engage in international business, a firm
does not have to
– become a multinational enterprise or
– invest directly in operations in other countries
 Facets of International Business
• International business can be broken down
into four types:
– Foreign Trade
– Trade in Services
– Portfolio Investments, and
– Direct Investments.
 Facets of International Business
• In Foreign Trade, visible physical goods or
commodities move between countries as exports or
imports.
• In addition to tangible goods, the international firm is
paid for services it renders in another country as
Trade in Services.
• In Portfolio Investments, the investor purchases debt
or equity in the expectation of nothing more than a
financial return on the investment.
• Direct investments are differentiated by much
greater levels of control over the project or
enterprise by the investor