Overview of International Business


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Overview of International Business

  2. 2. Case: Wal-mart’s global expansion <ul><li>Largest retailer in the world –Over 4500 stores </li></ul><ul><li>International expansion in 1991begins with Mexico in response to market saturation in the US </li></ul><ul><ul><li>Localization strategy adopted after trial and error </li></ul></ul><ul><li>Global buying power has allowed it to reap economies of scale </li></ul><ul><li>Wal-mart faces significant competition from other global retailers, but has the first mover advantage in some markets </li></ul>1-
  3. 3. International Management 1- <ul><li>International Management refers to the study of issues and problems that arise from the management of international, multinational and global organisations </li></ul><ul><li>However, organisation and management theorists are: </li></ul><ul><li>Virtually all western in their cultural assumptions </li></ul><ul><li>By and large Anglo-American in their values </li></ul>
  4. 4. What is globalization? <ul><li>The shift towards a more integrated and interdependent world economy </li></ul><ul><li>Two components: </li></ul><ul><ul><li>The globalization of markets </li></ul></ul><ul><ul><li>The globalization of production </li></ul></ul>1-
  5. 5. Globalization of markets <ul><li>The merging of distinctly separate national markets into a global marketplace </li></ul><ul><ul><li>Tastes and preferences converge onto a global norm </li></ul></ul><ul><ul><li>Firms offer standardized products worldwide creating a world market </li></ul></ul>1-
  6. 6. Globalization of markets <ul><li>Significant differences still exist between national markets on many relevant dimensions </li></ul><ul><li>These differences require that marketing and operating strategies and product features be customized to best match conditions in a country. </li></ul>1-
  7. 7. Globalization of markets <ul><li>Countries are different </li></ul><ul><li>Range of problems are wider and more complex </li></ul><ul><li>Government intervention in trade and investment creates problems </li></ul><ul><li>International investment is impacted by different currencies </li></ul>1-
  8. 8. Globalization of production <ul><li>Refers to sourcing of goods and services from locations around the world to take advantage of </li></ul><ul><ul><li>Differences in cost or quality of the factors of production </li></ul></ul><ul><ul><ul><li>Labor </li></ul></ul></ul><ul><ul><ul><li>Land </li></ul></ul></ul><ul><ul><ul><li>Capital </li></ul></ul></ul>1-
  9. 9. Global Production 1- Swan Optical Manufacturing 1-5 Design Example 1
  10. 10. Volume of world trade and production, 1950-2002 1- Fig: 1.1
  11. 11. Emergence of global institutions <ul><li>Globalization has created the need for institutions to help manage, regulate and police the global marketplace </li></ul><ul><ul><li>GATT </li></ul></ul><ul><ul><li>WTO </li></ul></ul><ul><ul><li>IMF </li></ul></ul><ul><ul><li>World bank </li></ul></ul><ul><ul><li>United Nations </li></ul></ul>1-
  12. 12. Global drivers <ul><li>Macro factors that underlie trend towards greater globalization </li></ul><ul><ul><li>Decline in trade barriers </li></ul></ul><ul><ul><li>Technological change </li></ul></ul>1-
  13. 13. Pattern of declining tariffs 1-
  14. 14. Declining barriers to trade <ul><li>Globalization of markets and production has been facilitated by </li></ul><ul><ul><li>Reduction in trade barriers </li></ul></ul><ul><ul><li>Removal of restrictions to foreign direct investment </li></ul></ul>1-
  15. 15. The changing pattern of world output and trade 1-
  16. 16. Percentage share of total FDI stock 1- Fig: 1.3
  17. 17. Volume of FDI inflows, 1994-2002 ($ billions) 1- Fig: 1.4
  18. 18. The role of technological change <ul><li>Microprocessors and telecommunications </li></ul><ul><li>The internet and world wide web </li></ul><ul><li>Transportation technology </li></ul>1-
  19. 19. The shrinking globe 1- Fig: 1.2
  20. 20. Changing demographics of the world economy <ul><li>World output and trade </li></ul><ul><li>Changing foreign direct investment </li></ul><ul><li>Changing nature of multinationals </li></ul><ul><ul><li>Mini multinationals </li></ul></ul><ul><ul><li>Non US multinationals </li></ul></ul>1-
  21. 21. National origin of largest multinational corporations 1- Fig: 1.5
  22. 22. Globalization debate-Pro <ul><li>Lower prices for goods and services </li></ul><ul><li>Economic growth stimulation </li></ul><ul><li>Increase in consumer income </li></ul><ul><li>Creates jobs </li></ul><ul><li>Countries specialize in production of goods and services that are produced most efficiently </li></ul>1-
  23. 23. Environmental performance and income 1- Fig 1.6
  24. 24. Globalization debate-Con <ul><li>Destroys manufacturing jobs in wealthy, advanced countries </li></ul><ul><li>Wage rates of unskilled workers in advanced countries declines </li></ul><ul><li>Companies move to countries with fewer labor and environment regulations </li></ul><ul><li>Loss of sovereignty </li></ul>1-