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1. Unit 1
Overview of Globalization

2. Overview of Globalization
Drivers, Changing Demographics of the Global Economy,
Managing the Global Marketplace, Country Differences
Political, Legal, Economic, Social, Technological &
Demographics, Micro and Marco business Environment
Difference in Cultural Aspects, Values & Norms, Social
Structure Language, Education ways to enter Foreign Market,
Ethics in international business Dilemmas, Roots of Unethical
Behavior, Ethical decision making.

3. International Business
• International business refers to the trade of goods, services, technology, capital
and/or knowledge across national borders and at a global or transnational
scale.
• It involves cross-border transactions of goods and services between two or
more countries. Transactions of economic resources include capital, skills, and
people for the purpose of the international production of physical goods and
services such as finance, banking, insurance, and construction. International
business is also known as globalization.

4.  Globalization
• It is the word used to describe the growing interdependence of the
world’s economies, cultures, and populations, brought about by
cross-border trade in goods and services, technology, and flows
of investment, people, and information.

5.  Forces Driving Globalization
• Globalization is driven by various new development and gradual changes in the
world economy.
• Generally, organizations go global for expanding their markets and increasing their
sales and profits. One of the major forces of globalization is the expansion of
communication systems.
• In the present era, it has become easy to distribute information to any part of the
world through the Internet.

7.  Advancement of Technologies
• Refers to one of the crucial factors of globalization. Since 1990s, enhancement in
telecommunications and Information Technology (IT) has marked remarkable improvements in
access of information and increase in economic activities. This advancement in technologies has led
to the growth of various sectors of economies throughout the world.
• Apart from this, the advancement in technology and improved communication network has facilitated
the exchange of goods and services, resources, and ideas, irrespective of geographical location. In
this way, advanced technologies have led to economic globalization.

8. • Reduction in Cross-trade Barriers
• Refer to one of the critical forces of globalization. Every- country restricts the movement of goods
and services across its border. It imposes tariffs and quotas on the goods and services imported
in its country. In addition, the random changes in the regulations create a chaos in global
business environment.
• Such practices impose limits on international business activities. However, gradual relief in the
cross-border trade restrictions by most governments induces free trade, which, in turn, increases
the growth rate of an economy.

9.  Increase in Consumer Demand
• Acts as a main driver to facilitate globalization. Over the years, with increase in the level of income
and standard of living, the demand of consumers for various products has also increased. Apart
from this, nowadays, consumers are well aware about products and services available in other
countries, which impel many organizations to work in association with foreign players for catering to
the needs of the domestic market.

10.  High Competition
• Constitutes an important driver for bringing about globalization. An organization generally strives
hard to grain competitive edge in the market. The frequent increase in competition in the domestic
market compels organizations to go global. Thus, various organizations enter other countries (for
selling goods and services) to expand their market share.
• They export goods in foreign markets where the price of goods and services are relatively high.
Many organizations have achieved larger global market shares through mergers and acquisitions,
strategic alliances, and joint ventures. So, these are the major factors that have contributed a lot in
globalization and the growth of global economy.

11.  Changing Demographics of the Global Economy
• The simplest way to adopt demographic segmentation is by using factors like age gender income, but
there are many non-character traits that you can focus on. Income and family structure are particularly
useful factors for retailers, allowing them to single out certain groups that might be interested in
purchasing a specific product or service.
• Business-to-business (B2B) marketers, however, are much more likely to rely
on occupational segmentation to ensure they are pitching their products to the people who actually make
purchases for their company, and not an intern who has no purchasing power.

12.  Managing the Global Marketplace
• The global marketplace means an effective absence of all such borders across the world. In a global
marketplace, organizations can target and access relevant customer bases regardless of their
proximity. A globally engaged organization may also participate in international supply chain
management, logistics, service partnerships, and similarly scaled operations — each conducted to
save that organization time, money, and resources by outsourcing particular activities to and through
local specialists.
• A company engaging in the global marketplace may look something like this: ZYX Inc. is a
headquartered in California but manages three flagship offices in Toronto, London, and Germany. To
make its products, ZYX, Inc. sources raw materials and manufactured components from Germany,
Mexico, China, South Korea, and Indonesia. ZYX’s products themselves are fabricated in China and
the United States, then shipped and distributed by multiple companies headquartered in multiple
countries to retail stores across North America and Europe. Company goals align with considerable
market research to reveal an expansion opportunity for its product lines in India, ushering ZYX Inc. to
consider opening another regional flagship office with local employees there to spearhead a long-term
Asian-market infiltration plan.

13. • Benefits of Participating in the Global Marketplace
1. Stability During Economic Turbulence
2. Expanded Market Share
3. Enriched Workforce

14. 4. Improved Technology
5. Expedited Access to Vital Resources

15. 6. Compete With Global Rivals in the Global Marketplace
7. Tap Into Emerging Markets Before Others
8. Leverage Turnkey Globalization

16.  The Challenges & Risks of the Global Marketplace
• Managing tax Liability
• Compliance and legal liability
• Aligning company strategy across different countries
• Cultural factors that impact on profitability

17.  PESTEL Factors in a Globalized World
 Political factors
• Brexit has been a global issue for years since 2016. Firms, large and small, and all countries have been facing uncertainty
about the future of the political environment in the UK in particular and Europe in general. Firms that would want to trade
with other firms in those countries still wonder how the future will be. For example, key questions can be: “Will the future
relationship between UK and EU27 be worse or better than it was before Brexit?”; “What will be the impact of such
relationship on exchange rates?” “Will some firms from some countries be banned from trading in Europe due to the future
relationship?” Such questions influence strategic direction of firms since events in any corner of the world can adversely or
positively affect performance of firms in another corner. Indeed the world has been compressed by globalisation.
• Another political issue is taxation. There has been trade war between China and the US. The Trump administration had
tried to regulate the influence of China in the world by levying ‘extra’ taxes on goods and services from China. Such political
moves make a firm’s strategic planning difficult since the future of cooperation between the US and China is uncertain. One
may wonder whether things will change after the current administration loses or again wins in the upcoming elections. For
example, President Trump rejected NFTA deal and pushed for a new Trump’s NAFTA deal. It is uncertain whether the old
NAFTA deal will be reinstated or the new deal will continue.

18.  Economic factors
• When the political environment is unstable, exchange rates can rapidly fluctuate. This makes loses to firms if the direction of
exchange rate is not in their favour. For example, it is not clear whether the British Pound will strengthen or weaken against the
US dollar after Brexit. Such uncertainty affects all countries and firms since the US dollar is the main foreign exchange
currency in several countries.
• Another economic issue is inflation. It is still remembered how very high inflation in Zimbabwe during President Mugabe’s
regime almost led to the collapse of the country’s economy. As the economy suffered from global sanctions on the regime, all
foreign firms that had business in the country incurred losses. Therefore, no matter where a firm is located, inflation in a certain
country can affect its performance provided there is a relationship between the firm and the country.
• Locating operations in countries with low wage rates or outsourcing labour from such countries. This has made people get
chances of being employed across borders: we can talk about ‘global employees’ as firms seek to overcome economic
pressures.
• Similarly, when a country’s gross domestic product (GDP)is expected to increase, firms start making strategic moves aiming at
exploiting growth in the country’s economy. This is the case for firms investing in BRICS countries to exploit opportunities in
Brazil, Russia, India, China, and South Africa. Therefore, there is increased movement of goods, services and resources
across national borders.

19.  Socio-cultural factors
• With the popularity of social media in most countries, there is convergence of lifestyles. This is because
people of all ages in many countries can access pictures, videos, etc. globally within seconds. Firms
which would target for a lifestyle, for example, in Canada now find Canadians having lifestyles that
resemble those of the British. This makes targeting customers difficult as lifestyles converge.
• There is a trend of some countries having an aging population, for example, Japan. This implies that all
firms targeting customers in such countries must offer goods and services valued by the aged groups.
Therefore, demographic trends globally influence what firms produce and sell.
• Due to social media like Facebook and Twitter, there is convergence of religious beliefs. For example,
some countries which were predominantly Muslim/Hindu are having their attitudes and opinions
influenced by other religions such as Christianity/Sikhs/Jainism. This implies that firms now have to
provide product and service features that appeal to several religions. This is only when the offering can
be consumed by several people across religious boundaries.

20.  Technological factors
• With the current wave of technological advancement, several governments are funding research and
innovation initiatives. For example, some countries have uplifted technology to a level of ministerial
position. Ministries such as Science Technology and Innovation are now common. Such focus on
technology has intensified competition among firms across borders. This is because, technology has
shortened product life cycles and what seems to be a great product today can become a commodity
tomorrow. This has made firms invest heavily in research and development as they are faced with
intense global competition. Disruptive technologies can make a firm’s products obsolete overnight.

21.  Environmental factors
• People all over the world are becoming environmentally aware. Effect of a firm’s operations on the
environment is now widely viewed as key in determining whether to purchase the firm’s products and
services. For example, firms whose operations are seen as polluting the environment, for example,
through carbon emissions can be boycotted. This can adversely affect the firm’s performance since a
boycott campaign message can flow through social media and reach a global audience within seconds.
The fear of such a global boycott has seen firms increasing their involvement in corporate social
responsibility initiatives and reporting them in their annual reports. Such involvement and reporting is
greatly influenced by environmental activists such as Greenpeace and Earth First!. The influence of such
activists has made environmental protection a key issue in firms’ strategies even if they are operating in
countries with weak environmental protection laws, for example, laws about waste disposal.

22.  Legal factors
• All the factors above have legal implications. For example, firms that are accused of polluting the
environment can face legal action from environmental activists. Even countries that have weak consumer
protection laws can be held accountable by people’s outcry on social media. For example, when some
people in a developing country post on social media that company X is offering products that are harmful to
human health, international agencies like World Health Organisation can have their attention captured.
Thus international agencies have ability to pressure countries to act and force such firms to stop
threatening human health.
• Similarly, there are countries that have weak or no intellectual property laws. This make innovative firms
face unfair competition as their innovative products are pirated. Their genuine products end up competing
with counterfeit products. This can damage the firm’s reputation globally when counterfeit products are
communicated about on social media.

23.  Micro and Marco Business Environment
• Micro Environment, refers to the environment comprising of all the actors of an organization’s immediate
environment which influences the performance of the company, as they have a direct bearing on the firm’s
regular business operations.
 Elements of Micro Environment
 Competitors
• Competition is what keeps the firm thriving. Competitors are the rival sellers operating in the same
industry. It must be noted that the nature and intensity of competition highly influence the firm’s products
and services. Product Differentiation is something that helps the firm to beat the cut-throat competition in
the market.
• For a firm to survive competition it is required to keep a close watch on the competitors (both existing and
potential) future moves and actions, so as to prepare in advance, as well as to predict the response of
competitors to company’s moves. Moreover, competitor analysis also helps in maintaining or improving
market share and position.

24.  Suppliers
• Suppliers are the one who provides inputs such as material, components, labor and other stock of goods
to the firm, which is required to undertake manufacturing activities. when there is uncertainty as to the
supply constraints, it usually builds pressure on the firms and they are required to maintain high
inventories, which leads to cost increases.
 Customers
• The success of the organization greatly depends on how effectively the firm fulfils the needs and wants of
the customers, which is profitable to the firm and also provides value to the customer. The firm needs to
analyze what the customers expect from their products and services so that the firm can satisfy them.
 Intermediaries
• Intermediaries refer to marketing intermediaries which cover agents, merchants, distributors, dealers,
wholesalers, etc. that participate in the company’s supply chain, in stocking and transporting the goods
from their source location to their destination.

25.  Shareholders
• Shareholders are the real owners of the company who invest their money in the company’s business, by purchasing the
shares, for which they are paid a dividend every year as a return. Shareholders have the right to vote in the company’s
general meeting.
 Employees
• Placing the right person at the right job and retaining them for the long term by keeping the staff motivated is very important
for the strategic planning process. Training and development act as a guide to the firm’s employees which ensures an up-to-
date workforce.
 Media
• We all know the power of media these days, it can make or break an organization or its products/services overnight.
• Management of media whether electronic media, press media or social media is really important not just to create a positive
and clean image of the company and its products in front of the audience but also to support the firm in building a good
reputation in the market. The right use of media can do wonders for the company and boost its sales.
• When the firm competes with the firm operating in the same industry, with the same micro environmental factors, the relative
success of the company is based on the relative effectiveness of the company in dealing with these factors.

26. • A macro environment refers to the set of conditions that exist in the economy as a whole, rather than in a
particular sector or region. In general, the macro environment includes trends in the gross domestic
product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro-environment
is closely linked to the general business cycle as opposed to the performance of an individual business
sector.
 Elements of Micro Environment
 Gross Domestic Product
• Gross Domestic Product (GDP) is a measure of a country’s output and production of goods and services.
The Bureau of Economic Analysis releases a quarterly report on GDP growth that provides a broad
overview of the output of goods and services across all sectors. An especially influential aspect of GDP is
corporate profits for the economy, which is another measure of an economy’s comprehensive
productivity.
 Macro Environment

27.  Inflation
• Inflation is a key factor watched by economists, investors, and consumers. It affects the purchasing
power of the US dollar and is closely watched by the Federal Reserve. The target rate for annual
inflation from the Federal Reserve is 2%. Inflation higher than 2% significantly diminishes the
purchasing power of the dollar, making each unit less valuable as inflation rises.
 Employment
• Employment levels in the United States are measured by the Bureau of Labor Statistics, which
releases a monthly report on business payrolls and the status of the unemployment rate.
• The Federal Reserve also seeks to regulate employment levels through monetary policy stimulus and
credit measures. These policies can ease borrowing rates for businesses to help improve capital
spending and business growth, resulting in employment growth.
 Consumer Spending
• Consumer spending made up 54% of the U.S. GDP in the second quarter of 2021 and is widely
considered to be an important indicator of macroeconomic performance. Slow growth or decline in
consumer spending suggests a decline in aggregate demand, which economists consider to be a
symptom or even a cause of macroeconomic downturns and recessions.

28.  Monetary Policy
• The Federal Reserve’s monetary policy initiatives are a key factor influencing the macro environment in the
United States. Monetary policy measures are typically centered around interest rates and access to credit.
Federal interest rate limits are one of the main levers of the Federal Reserve’s monetary policy tools. The
Federal Reserve sets a federal funds rate for which federal banks borrow from each other, and this rate is
used as a base rate for all credit rates in the broader market. The tightening of monetary policy indicates
rates are rising, making borrowing more costly and less affordable.
 Fiscal Policy
• Fiscal policy refers to government policy around taxation, borrowing, and spending. High tax rates can
reduce individual and business incentives to work, invest, and save. The size of a government’s annual
deficits and total debt can influence market expectations regarding future tax rates, inflation, and overall
macroeconomic stability. Government spending drives borrowing and taxation; it is also widely used as a
policy tool to try to stimulate economic activity during slow times and make up for sluggish, consumer
spending and business investment during recessions.

29.  Importance and Role of Culture in International Business
• Culture has various definitions, but in the simplest terms, culture refers to the norms, beliefs, ideas,
attitudes, and social behavior of an individual or society. In a way, culture is the coming together of
different experiences, values, beliefs, and ideas that influence the behavior and attitude of a
community, a particular person, or a group. Some essential cultural elements are religion, language,
gender roles, social structure and dynamics, traditions, laws, and customs.
• Cultural adaptation in international business encompasses organizational culture as well as national
cultures and traditions. It helps the organizations to have a better understanding of how local
businesses and the workforce function.
• Let’s look at some aspects of the significance of culture in international business to better understand
how it shapes global companies:
 Entry into new markets
• Conducting international business involves entering new markets. Companies must display sensitivity
towards different cultures when dealing with foreign clients or planning a marketing campaign for their
foreign subsidiaries. Business executives should start by studying the local market's beliefs, values,
and customs.

30.  Business Negotiations
• Different cultures have distinct perspectives on business negotiations. While some consider
negotiations a signed contract between two parties, others view it as the beginning of a strong
business relationship. Therefore, you must understand how your counterpart views a negotiation’s
purpose, whether they want to build a long-term rewarding relationship or are looking at it as a one-
time deal.
 Personal Styles
• Culture in international business strongly influences personal style, from an individual’s dressing
sense to interacting with others. Each culture has its customs and formalities for business
negotiations and meetings. Hence, knowing the subtleties of foreign cultures and respecting
appropriate formalities go a long way in making the right impression and bagging crucial business
deals.

31.  Team organization
• Culture is a decisive factor that affects how organizations negotiate a deal. While some believe in
consensus decision-making, others believe in the supremacy of a single leader who takes all decisions.
Whether the culture promotes hierarchical roles or societal equality, these values affect all parties in a
business deal. Hence, business executives should understand how teams in different cultures organize
and participate in decision-making.
 Inclusion and Diversity
• An organization that welcomes cross-cultural people, ideas, and customs create a benchmark as an
inclusive and diverse workspace. Sensitivity and acceptance of diverse cultures help create a dynamic
and talented workforce. Plus, these values leave a lasting impression on clients, customers, investors,
and stakeholders.

32.  Cultural Differences in International Business
• Recognizing how culture influences international business is indispensable to avoiding
misunderstandings among employees and clients and create a stellar image in new markets.
Accepting cultural diversity in global organizations gives you a broad spectrum of business
experience and novel insights to tackle real-world business problems.
• Culture in international business differs from the general meaning of culture per se, affecting global
companies in five broad areas: interaction, communication, organizational hierarchy, and workplace
etiquette.
 Interaction
• Professional gestures and interactions that are acceptable in one culture may be offensive or
inappropriate in a different cultural setup. Thus, if you are accustomed to shaking hands, making eye
contact, as part of formal interactions in your country, the same may not apply to foreign clients and
business partners. Learning about acceptable and suitable business etiquette becomes crucial.
• For instance, while the Japanese consider addressing someone by their first name in a first
meeting disrespectful, Americans are more comfortable using first names in a formal setup.

33.  Communication
• Communication methods vary across cultures. So, understanding the language and communication
style of your target market is an excellent way to bridge cultural gaps in the international business
arena. For example, Israeli and American cultures emphasize straightforward methods of
communication, unlike the Japanese, who rely on indirect communication. Likewise, Finns
tend to be brief and use direct communication strategies, whereas Indians typically
communicate in indirect and subtle ways.
 Organizational Hierarchy
• Different cultures perceive organizational hierarchy differently. When expanding into new markets, you
must realize that your host country’s approach and attitude towards the corporate structure may differ
from yours. Hence, it could be challenging to define roles in cross-cultural teams or determine who
has the authority on the other side.
• While Japan has a straightforward organizational structure promoting hierarchy, Sweden has a
flat organizational hierarchy that emphasizes equality. Furthermore, while the Chinese and
Japanese stress consensus decision-making, it is more common for American teams to have a
leader with ultimate authority.

34.  Workplace Etiquette
• Differences in workplace etiquette are a vital consideration when discussing culture's impact on
international business. When you engage with multinational teams, you will encounter stark differences in
workplace etiquette, reflecting cultural diversity. Let’s consider punctuality. You must reach in time
when dealing with American, Japanese, Russian, or South Korean clients and colleagues. On the
other hand, arriving early for an appointment is standard in Germany. But when in Malaysia, China,
Mexico, Ghana, or Nigeria, arriving late for meetings is acceptable.
 Negotiation Style
• While engaging in international business, negotiation becomes a principal component. The way people
behave and communicate reflects their negotiation style. Organizations must understand the accepted
negotiation norms in different countries and act accordingly.
• For instance, in some Asian countries, negotiations are deemed crucial for building stronger
business relations. However, it is seen as a contract focusing on a win-lose process in Spain.

35.  Business Ethics
• It is accepted principles of right or wrong that direct the behavior of a person, the members of a
profession, or the actions of an organization in the business environment .
 Ethical Issues in International Business
1. Ethics and Employment Practices Question:
• When work conditions in a host nations are clearly poorer to those in a multinational’s home nation,
what standards should be applied?
• The standards of the home nation?
• The standards of the host nation?
• Something in between?

36. 2. Ethics and Environmental Pollution Question:
• Should a multinational feel free to pollute in a developing nation if doing so does not break up laws?
• When environmental regulations in host nations are far inferior to those in the home nation, ethical issues
arise.
3. Ethics and Corruption Question:
• Is it ethical to make payments to government officials to secure business?
• In the United States, the Foreign Corrupt Practices Act forbid the practice of paying bribes to foreign
government officials in order to gain business.
4. Ethics and Moral Obligations Question:
• Do multinationals have a responsibility to give back to the societies that enable them to grow and
succeed?
• The concept of social responsibility refers to the idea that business people should take the social benefits
into account when making business decisions, and that there should be a belief in decisions that have
both good economic and good social benefits.

37. 1. Personal Ethics:
• Business ethics reflect personal ethics (the generally accepted principles of right and wrong leading
the conduct of individuals).
• International managers may face pressure to violate their personal ethics because they are away from
their ordinary social context and supporting culture, and they are psychologically and geographically
distant from the parent company .
2. Organizational Culture
• Unethical behavior may exist in firms with an Organization Culture (the values and standards that are
shared among employees of an organization) that does not stress business ethics.
• Values and standards shape the culture of a firm, and that culture influences decision making.
 Roots of Unethical Behaviour

38. 3. Decision Making Processes
• Studies show that business people may behave unethically because they fail to ask the relevant
question—is this decision or action ethical?
• Decisions are made based on economic logic, without consideration for ethics.
4. Leadership
• If a firms leaders fail to act in an ethical manner, other employees may not act ethically
• Actions speak louder than words.
5. Unrealistic Performance Expectations
• Pressure from the parent company to meet performance goals that are unrealistic, and can only be
achieved by acting in an unethical manner which cause unethical behavior.

39.  Ethical Decision Making
1. Hire and promote people with a well grounded sense of personal ethics.
• refrain from promoting individuals who have acted unethically
• prospective employees should find out as much as they can about the ethical climate in
an organization prior to taking a position
2. Build an organizational culture that places a high value on ethical behavior.
• emphasize importance of code of ethics -
• Code of ethics: is a written document that clearly states what acceptable and
unacceptable behaviors are for all of the employees in the organization.
3. Develop a moral courage:
• Enables Managers to walk away from a decision that is profitable, but unethical.
• Gives an employee the strength to say no to a superior who instructs her to pursue
actions that are unethical.

40. 4. Ethics Officers:
• To encourage ethical behavior in a business, a number of firms now have ethics officers
• Ethics officers ensure that:
1. Employees are trained to be ethically aware.
2. Ethical considerations enter decision‐making.
3. The company’s code of ethics is followed.

41. THANK
YOU