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Are We on the “Fun Ship” Yet?

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Seminar 1
Chapter 1
Globalization and
International
Business
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
1-2
Learning Objectives


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To define globalization and international
business and show how they affect each other
To understand why companies engage in
international business and why international
business growth has accelerated
To discuss globalization’s future and the major
criticisms of globalization
To become familiar with different ways in which
a company can accomplish its global objectives
To apply social science disciplines to
understanding the differences between
international and domestic business
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
1-3
Introduction
Learning Objective 1:
To define globalization and international
business and show how they affect each
other
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
1-4
Introduction
Globalization is the ongoing process that
deepens and broadens the relationships
and interdependence among countries
 International business is a mechanism to
bring about globalization

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21 Ekim 13 Pazartesi
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Introduction

International business consists of all
commercial transactions—including sales,
investments, and transportation—that
take place between two or more countries

increasingly foreign countries are a source of
both production and sales for domestic
companies
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Introduction

It is important to study international
business because

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Most companies are either international or
compete with international companies
Modes of operations may differ from those
used domestically
The best way of conducting business may differ
by country
An understanding helps you make better
career decisions
An understanding helps you decide what
government policies to support
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
1-7
Introduction
Factors in International Business Operations
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21 Ekim 13 Pazartesi
1-8
Forces Driving Globalization
1.
2.
3.
4.
5.
6.
7.
Increase in and application of technology
Liberalization of cross-border trade and
resource movements
Development of services that support
international business
Growing consumer pressures
Increased global competition
Changing political situations
Expanded cross-national cooperation
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Measuring Globalization
Globalization can be difficult to measure
 The A.T. Kearney/Foreign Policy
Globalization Index ranks countries by

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

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Economic dimensions
Technological dimensions
Personal contact
Political dimensions
 recently ranked Singapore and Hong Kong
as most globalized
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
1-10
Costs of Globalization
Learning Objective 3:
To discuss globalization’s future and the
major criticisms of globalization
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Costs of Globalization

Threats to national sovereignty


Economic growth and environmental
stress

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lose freedom to “act locally”
growth consumes nonrenewable natural
resources and increases environmental
damage
Growing income inequality and personal
stress

promotes global superstars at the expense of
others
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Costs of Globalization

Offshoring involves the transferring of
production abroad



it can be beneficial because it reduces costs
but, it also means that jobs move abroad
Yet, offshoring may also create new,
better jobs at home
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
1-13
Why Companies Engage in IB
Learning Objective 2:
To understand why companies engage in
international business and why
international business growth has
accelerated
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
1-14
Why Companies Engage in IB

To expand sales

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To acquire resources
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pursuing international sales increases the
potential market and potential profits
may give companies lower costs, new and
better products, and additional operating
knowledge
To diversify or reduce risks

international operations may reduce operating
risk by smoothing sales and profits, preventing
competitors from gaining advantage
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Why Companies Engage in IB

These three reasons
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sales expansion
resource acquisition
risk minimization
guide all decisions about whether, where,
and how to engage in international
business
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Modes of Operations in IB
Learning Objective 4:
To become familiar with different ways in
which a company can accomplish its global
objectives
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Modes of Operations in IB

Merchandise exports


Merchandise imports


goods that are sent out of a country
goods that are brought into a country
Sometimes referred to as visible exports
and imports
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Modes of Operations in IB


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Service exports
 provider and receiver of payment
Service imports
 recipient and payer of payment
Examples
 Tourism and transportation
 Service performance
 turnkey operations and management
contracts
 Asset use
 licensing and franchising
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21 Ekim 13 Pazartesi
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Modes of Operations in IB

Investments


Foreign Direct Investment (FDI)
 investor takes a controlling interest in a
foreign company
 joint venture
Portfolio Investment
 a non-controlling financial interest in
another entity
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
1-20
Types of International
Organizations
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Collaborative arrangements
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Joint ventures
Licensing arrangements
Management contracts
Minority ownership
Long-term contractual arrangements
Strategic alliance
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companies that work together, but the
agreement is critical to at least one partner
an agreement that does not involve joint
ownership
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Types of International
Organizations

Multinational enterprises (MNEs)


take a global approach to markets and
production or have operations in more than
one country
Sometimes they are referred to as



multinational corporations (MNCs)
multinational companies (MNCs)
transnational companies (TNCs)
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Types of International
Organizations

In foreign markets, companies may have
to adapt their typical methods of doing
business


foreign conditions may dictate a particular
method
operating modes may be different from those
used domestically
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Why IB is Different
Learning Objective 5:
To apply social science disciplines to
understanding the differences between
international and domestic business
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Why IB is Different
The external environment affects a
company’s international operations
 Managers must understand social science
disciplines and how they affect functional
business fields
 Consider
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
physical factors
social factors
competitive factors
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21 Ekim 13 Pazartesi
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Physical and Social Factors
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Geographic influences
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Political policies
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influence how a company operates
Behavioral factors
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determines where and how business occurs
Legal policies
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natural conditions influence production locations
may require changes in operations
Economic forces

explain differences in costs, currency values, market
size
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The Competitive Environment

Competitive strategy for products
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Company resources and experience
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Cost strategy
Differentiation strategy
Focus strategy
market leaders have more resources for
international operations
Competitors faced in each market

local or international
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The Competitive Environment
So, a company’s competitive strategy
influences how and where it can best
operate
 Its competitive situation may differ from
country to country in terms of its relative
strength and which competitors it faces

Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
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Looking to the Future
Learning Objective 3:
To discuss globalization’s future and the
major criticisms of globalization
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Looking to the Future

Three major perspectives on the future of
international business and globalization



Further globalization is inevitable
International business will grow primarily along
regional rather than global lines
Forces working against further globalization
and international business will slow down both
trends
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Background for International Business
activities

Chapter 1: Globalization and International
Business

(ACTIVITIES: pp. 4, p. 8)
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21 Ekim 13 Pazartesi
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POINT—COUNTERPOINT:
Is Offshoring Good Strategy?
POINT:

Offshoring is good because it reduces costs. Although a firm may
temporarily need fewer workers in its home country, eventually domestic
employment (particularly high-value jobs) will increase because of the
firm’s growth.

In addition, offshoring not only contributes to the economic growth of
less- developed countries, but it increases their need and ability to import
products from developed countries and thus indirectly contributes to the
growth of all nations.

There is also a natural extension from outsourcing to offshoring. Some
industries and companies have actually seen some reversal of th

e outsourcing trend.
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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COUNTERPOINT:


Only a few people benefit from offshoring.
Cheaper labor inputs have not resulted in cheaper prices
for consumers.

Further, firms that grow as a result of offshoring do so at
the expense of their competitors; thus, there is no real
economic growth.

Displaced workers are forced to take jobs with fewer, if
any, benefits and lower pay, while multinationals take
advantage of their foreign workers, who are powerless.

While a few countries are growing economically, world
poverty levels have increased significantly in recent
decades.
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Reading from activities on WIKI
(wk_1_IB_pdf) ….
CLOSING CASE:
 Are We on the “Fun Ship” Yet?
Read the case
ii. Work together with peers in your row
and
iii.Answer the questions that follow
iv.Present your ideas to the larger peer
group.
i.
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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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Next seminar…..
Comparative Environmental Frameworks
Chapter 2: The Cultural Environments
Facing Business (ACTIVITIES: p. 24)
 Chapter 3: The Political and Legal
Environments Facing Business
 (ACTIVITIES: p. 33)

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publishing as Prentice Hall
21 Ekim 13 Pazartesi
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All rights reserved. No part of this publication may be reproduced, stored in
a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
21 Ekim 13 Pazartesi
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