Bài giảng International Business - Chapter one: The Rapid Change of International Business

The Rapid Change of International BusinessMcGraw-Hill/IrwinInternational Business, 11/eCopyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.chapter oneLearning ObjectivesAppreciate the dramatic internationalization of marketsUnderstand the various names given to firms that have operations in more than one countryUnderstand the five kinds of drivers, all based on change, that are leading international firms to globalizeComprehend why international business differs from domestic businessDescribe the three environments—domestic, foreign, and international--in which an international firm operates3International Business TerminologyInternational businessForeign businessMultidomestic company (MDC)Global company (GC)International company (IC)4International Business Terminology, cont’d.International Business A business whose activities are carried out across national boardersForeign Business The operations of a company outside its home or domestic marketMultidomestic CompanyAn organization with multicountry affiliatesEach formulates its own business strategy on perceived market differences5International Business Terminology, cont’d.Global Company an organization that attempts to standardize and integrate operations worldwide in most of all functional areasInternational Company A global or multidomestic company 6History of International BusinessEarly tradersWell before the time of Christ, Phoenician and Greek merchants China stimulated the emergence of an internationally integrated trading system“all roads lead to China”17th Century mercantilism/colonialism British East India Company Dutch East India Company Portugal and France7GlobalizationGlobalization Coined by Theodore Levitt“as if the entire world (or major regions of it) were a single entity; [such an organization] sells the same things in the same way everywhere”Economic GlobalizationInternational integration of goods, technology, information, labor, and capital Process of making this integration happen8Table 1.1 Globalization Rankings: The KOF Index of Globalization and the A.T Kearney/Foreign Policy Globalization Index9Globalization ForcesPolitical forcesReduction of barriers to trade and foreign investment by governmentsPrivatization of former communist nationsTechnological forcesAdvances in computers and communications technologyInternet and network computing10Globalization Forces, cont’d.Market forcesGlobalizing companies become global customersCost forcesGoal for economies of scale to reduce unit costs Competitive forcesIncrease in intensity due to explosive growth in international business11Explosive GrowthForeign Direct Investment and ExportingFDI - Direct investment in equipment, structures, and organizations in a foreign countrylevel sufficient to obtain significant management control (Table 1.2)Exporting – transportation of any domestic good/service to a destination outside a country or region12Table 1.2 FDI Indicators and Multinational Company Statistics (billions of dollars and percentages)13Explosive GrowthNumber of International Companies UNCTAD - United Nations agency in charge of all matters relating to FDI and international corporations.1995 – 45,000 parent companies with 280,000 foreign affiliates ($7 trillion in sales)2004 – 70,000 parent companies with 690,000 foreign affiliates ($19 trillion in sales) 14Table 1.3 Ranking of International Companies and nations according to GNI (Atlas Method) or Total SalesNote: Belgium (B), China (PRC), France (F), Germany (G), Italy (It), Netherlands (N), Switzerland (S), United Kingdom (U.K.), and United States (U.S.). Source: World Development Indicators database, (July 4, 2006); and Fortune 2005 Global 500, (July 4, 2006).15Globalization Debate And YouWorld Trade Organization (1999, Seattle)Extensive public protests about globalization and the liberalization of international tradeDebate –Waged by diametrically opposed groups with extremely different views on consequences of globalizationDramatic reductions in worldwide poverty are contrasted with anecdotal stories of people losing their livelihoods under the growing power of multinationals 16Environments of International Business Environment All the forces influencing the life and development of the firmForcesExternal Forces (Uncontrollable) – Forces over which management has no direct controlInternal Forces (Controllable) – Forces that management can use to adapt to external forces17External ForcesCompetitive Kind, number, locationDistributiveFor distributing goods and servicesEconomicGNP, unit labor cost, personal consumption expenditureSocioeconomicCharacteristics of human populationFinancialInterest rates, inflation rates, taxation18External Forces, cont’d.LegalLaws governing how international firms must operatePhysicalTopography, climate, and natural resourcesPoliticalForms of government, and international organizationsSocioculturalAttitudes, beliefs, and opinionsLaborSkills, attitudes of laborTechnologicalEquipment and skills that affect how resources are converted to products19Internal Environmental ForcesFactors of ProductionCapital, raw materials, and peopleActivities of the organizationPersonnel, finance, production, and marketing20Why Is International Business Different?Domestic Environment All the uncontrollable forces in the home country that surround and influence the firm’s life and developmentForeign Environment All the uncontrollable forces originating outside the home country that surround and influence the firmdifferent valuesdifficult to assessinterrelated21Why Is International Business Different? cont’d.International Environment Interaction between domestic and foreign environmental forces or between sets of foreign environmental forcesIncreased complexity for decision-makingDecision making more complex22International Business Model23