Globalization and

International Business
Agenda
Globalization and international business
(IB)
Forces driving globalization and IB
Criticisms of globalization
Different operating modes
Impact of external environments on IB
Three key reasons for companies to
expand globally:
1. Sales expansion
2. Resource acquisition (financial, human
or physical resources) i.e supply
chains become global
3. Risk reduction
Globalization and IB
What is Globalization?
Why Globalization?
The connection between Globalization
and IB.
Why study IB?
What is Globalization?
Globalization is the widening and deepening
of interdependent relationships among people
from different nations.
The term sometimes refers to the elimination
of barriers to international movements of
goods, services, capital, technology, and
people that influence the integration of world
economies.
How do consumers benefit from
globalization?
The connection between Globalization and
International Business (IB)
The global connections between suppliers
and markets result from the activities of IB,
Why study IB?

• There is a good chance each and every one of you will

be involved in IB in some way or another, depending
on the type of companies you work for.
Studying IB is important because:
Most companies are either international or compete with
international companies
Modes of operations may differ from those used
domestically
It helps managers to decide where to find resources and
to sell
The best way of conducting business may differ by
country
An understanding helps you make better career decisions
An understanding helps you decide what governmental
policies to support
The Forces Driving Globalization
and IB
Globalization
Has been growing
Is less pervasive than generally thought
Only 15% of US consumption comes from
other countries.
The Forces Driving Globalization
and IB – three key factors
Size of countries—Smaller countries
tend to be more globalized than larger
ones, mainly because their smaller land
masses and populations permit a lower
variety of production.
Ex: Qatar
The Forces Driving Globalization
and IB – three key factors
Per capita incomes—Countries with
higher per capita incomes tend to be
more globalized than those with lower
ones because their citizens can better
afford foreign products, travel, and
communications.
Mint countries: Turkey, Malaysia, Mexico,
indonesia
The Forces Driving Globalization
and IB – three key factors
Variance among globalization aspects—
Although a country may rank as highly
globalized on one dimension, it may be
low on another
• China: high on production, low on market access
(global in prod, restrictive in access)
Increased globalization has lead to:
Rise in applications of technology
Liberalization of cross-border trade and resource
movements
Development of services that support IB
Growth of consumer pressures
Increase in global competition
Changes in political situations and government
policies
Expansion of cross-national cooperation (ex:G20)
Criticisms of Globalization and IB
Sovereignity: dependant on other
countries and IMF dictating terms
Environment
Some people may lose
Increase to personal stress
IB Operating Modes
Merchandise Exports and Imports
Service Exports and Imports
Investments – FDI and portfolio
investments
Types of International Organizations
MNE(Multinational Enterprises)
International Company
any company operating in more than one
country
Collaborative Arrangements
Joint Ventures
Licensing agreements
Management contracts, minority ownership
Long-term contractual arrangements
Environmental Factors Affecting
Ability to Operate Abroad
Physical factors
• Geographic barriers—mountains, deserts, jungles, and land-locked
areas—often affect communications and distribution channels. Ex:
ibm failed in Indonesia due to heat and humidity in non insulated
buildings.
• Natural disasters and adverse climatic conditions can make business
riskier in some areas than in others while affecting supplies, prices,
and operating conditions in far-off countries. (hurricanes in Florida)
Demographic
• Countries’ populations differ in many ways, such as density,
education, age distribution, and life expectancy. These differences
impact IB operations, such as market demand and workforce
availability.
Environmental Factors Affecting
Ability to Operate Abroad
Institutional factors
Institutions refer to “systems of established
and prevalent social rules that structure
social interactions.
Examples include:
• Culture and etiquette
• Politics
• Law
• Economy
Environmental Factors Affecting
Ability to Operate Abroad
Competitive factors
Products compete by means of cost or
differentiation strategies, the latter usually
by developing a favorable brand image,
usually through advertising or from long-
term consumer experience with the brand;
or developing unique characteristics, such
as through R&D efforts or different means
of distribution
Factors in IB Operations
Objective 1-1
Figure 1.1 Factors in IB Operations