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 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-5 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-6 Introduction It is important to study international business because 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-9 Measuring Globalization Globalization can be difficult to measure The A.T. Kearney/Foreign Policy Globalization Index ranks countries by 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-11 Costs of Globalization Threats to national sovereignty Economic growth and environmental stress 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-12 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 To acquire resources 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 1-15 Why Companies Engage in IB These three reasons 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 1-16 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 1-17 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-18 Modes of Operations in IB 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-19 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-20 Types of International Organizations Collaborative arrangements Joint ventures Licensing arrangements Management contracts Minority ownership Long-term contractual arrangements Strategic alliance companies that work together, but the agreement is critical to at least one partner an agreement that does not involve joint ownership Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-21 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) Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-22 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 1-23 Why IB is Different Learning Objective 5: 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 1-24 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 physical factors social factors competitive factors Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-25 Physical and Social Factors Geographic influences Political policies influence how a company operates Behavioral factors determines where and how business occurs Legal policies natural conditions influence production locations may require changes in operations Economic forces explain differences in costs, currency values, market size Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-26 The Competitive Environment Competitive strategy for products Company resources and experience Cost strategy Differentiation strategy Focus strategy market leaders have more resources for international operations Competitors faced in each market local or international Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-27 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 21 Ekim 13 Pazartesi 1-28 Looking to the Future Learning Objective 3: To discuss globalization’s future and the major criticisms of globalization Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-29 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-30 Background for International Business activities Chapter 1: Globalization and International Business (ACTIVITIES: pp. 4, p. 8) Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-31 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. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-32 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. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-33 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. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-34 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) Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 21 Ekim 13 Pazartesi 1-35 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 1-36
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