Globalization International Business

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Study of International Business Articles.
Part 1: Essential of International Business.
Part 2: Theories applied to International Business.
Part 3: Bargaining Approach and Resources.
Part 4: International Business Phenomena.
Part 5: Internalization.
Part 6: Competitive advantages.

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Globalization International Business

  1. 1. Master of Business Administration University of Hertfordshire, UK July 2009 Prepared by Yaw Chooi Fun Norazian Abdullah Lee Tai Keong Eu Wee Khai
  2. 2. <ul><li>International business (IB) is the study of business activities that cross national borders. </li></ul><ul><li>It is concerned with firms that undertake business and the national governments that regulate them </li></ul><ul><li>Business with interventions of governments of home and host countries in inter-country business activity </li></ul>
  3. 3. <ul><li>No unique theory to explain responses of business to government policies and policy making of governments towards international firms </li></ul><ul><li>Lack of theoretical focus has diverted emphasis on policies to conflicts and cooperation among corporations and governments. </li></ul>
  4. 4. <ul><li>Seek growth (efficiency) and distribution of benefits (equity) </li></ul><ul><li>Markets appropriately distorted to achieve objectives </li></ul><ul><li>Provide differential barriers and incentives to foreign business </li></ul>
  5. 5. <ul><li>Free trade and stable or fixed exchange rates; </li></ul><ul><ul><li>same considerations for inter/intra – national trade and investments </li></ul></ul><ul><li>Theory of specialisation and division of labour (comparative advantage); </li></ul><ul><ul><li>general explanation of benefits of division of labour for domestic & international </li></ul></ul><ul><li>Other theories applied; explains production and income generation </li></ul>
  6. 6. <ul><li>Adapted for us in IB to characterise and analyse business govt negotiation </li></ul><ul><ul><li>policy making and behaviour </li></ul></ul><ul><li>Focuses on bargaining resources and stakes of participant </li></ul><ul><ul><li>economic and commercial conclusions </li></ul></ul><ul><li>Focuses on collection of assets, interests and abilities of bargaining parties </li></ul><ul><ul><li>economic, political and social issues </li></ul></ul>
  7. 7. <ul><li>Resources of businesses </li></ul><ul><ul><li>technology, funds, skills, foreign markets, employment opportunities & trade relations with home govt </li></ul></ul><ul><li>Resources of host govts </li></ul><ul><ul><li>access to market, natural resources, low cost labour, funding opportunities </li></ul></ul>
  8. 8. <ul><li>Stakes of businesses </li></ul><ul><ul><li>availability of markets, sources of supplies, importance of successful negotiation and inter-relatedness of host country to business’s global interests </li></ul></ul><ul><li>Stakes of host govts </li></ul><ul><ul><li>vailability of business opportunities, importance of business and negotiation to host govt and relevance to country’s overall interests. </li></ul></ul>
  9. 9. <ul><li>Strategic alliance with business for desired resource – technology, local ownership or foreign distribution network </li></ul><ul><li>Purchase / contracting agreement for acquiring desired resource </li></ul>
  10. 10. <ul><li>Diversification and Multiple Locations of activities </li></ul><ul><ul><li>reduce control of host govt </li></ul></ul><ul><li>Joint venture with local businesses </li></ul><ul><ul><li>lobbying govt for favourable policies </li></ul></ul><ul><li>Strategic alliance with other businesses </li></ul><ul><ul><li>raise govt’s stakes in bargain </li></ul></ul>
  11. 11. <ul><li>Offer more benefits to host country during initial negotiations </li></ul><ul><li>Involve host govt in business venture (GLCs) – mutual interests </li></ul><ul><li>Meet key concerns of host govt – profit remittances, financing, imports or training </li></ul>
  12. 12. <ul><li>Government concerns with TNC – negotiations, trade offs and resolutions </li></ul><ul><li>Patterns of exports and imports </li></ul><ul><li>Gains from trade </li></ul><ul><li>Reasons and directions of FDI and contractual relations </li></ul>
  13. 13. <ul><li>Strategies and operations in international production – effects of govt intervention </li></ul><ul><li>Cross cultural aspects </li></ul><ul><li>Differential barriers and incentives imposed by govts to determine distribution of benefits. </li></ul>
  14. 14. <ul><li>Difference among Governments as to their goals in dealing with TNC/INC initiatives and operations </li></ul><ul><ul><li>Assessment and management of conflicting rules of the game, i.e difference in lega, regulatory and institutional enviroments in the two or more countries </li></ul></ul><ul><ul><li>country risk that arises from different treatment of business activities by home and host countries </li></ul></ul><ul><ul><li>Exchange risks </li></ul></ul>
  15. 15. <ul><li>Synthesis with culture differences for IB Phenomena? </li></ul><ul><li>Brian Toyne and Douglas Nigh </li></ul><ul><ul><li>“ Introduce a new paradigm that believe would enrich IB inquiry by shifting attention away from the firm as the central unit of analysis to a more comprehensive multilevel, hierarchical view of the international business process.” </li></ul></ul><ul><ul><ul><li>http://www.jstor.org/pss/155414 </li></ul></ul></ul>
  16. 16. <ul><li>International product cycle </li></ul><ul><ul><li>The international product cycle removes the classical assumption that factors and products are immobile internationally. </li></ul></ul>
  17. 17. <ul><li>Synthesis </li></ul><ul><ul><li>Conflict with Hamel? Product can sustain longer now with globalization </li></ul></ul><ul><ul><li>McKinsey Quarterly quoted Gary Hamel, </li></ul></ul><ul><ul><ul><li>“ Company must become as purposefully and creatively experimental in thinking about their management systems and processes as they already are in thinking about R&D or new-product development.” </li></ul></ul></ul><ul><ul><ul><ul><li>http://www.interknowledgetech.com/Innovative%20Management.pdf </li></ul></ul></ul></ul>
  18. 18. <ul><li>Imperfect competition success factors </li></ul><ul><ul><li>Proprietary technology </li></ul></ul><ul><ul><li>Multi-country access to factors of production and to consumers </li></ul></ul><ul><ul><li>additional scale economies in production distribution, purchasing etc. </li></ul></ul>
  19. 19. <ul><li>Production, distribution and consumption of materials, components, factors and some products and services occur entirely within the units of the firm </li></ul><ul><ul><li>Economics of vertical and horizontal integration </li></ul></ul><ul><ul><li>Emphasis on the advantage to the individual firm of keeping decisions internal </li></ul></ul><ul><ul><li>Dynamic nature of competition </li></ul></ul>
  20. 20. <ul><li>Transactions are carried out internally </li></ul><ul><li>Reduce cost of transaction in larger markets, with improved, unfettered communications and transportation. </li></ul><ul><li>Difference from internalization: does not considers the functioning of all the firm’s internal activities such as managing people and use of a monopoly position </li></ul>
  21. 21. <ul><li>Firm specific competitive advantages that enable individual firms to outcompete </li></ul><ul><li>Synthesis with the FSA and CSA article “The international competitiveness of asian firms”? Or porters diamond model </li></ul>
  22. 22. <ul><li>Combination of location theory, competitive advantages and the concept of internalization </li></ul><ul><li>Covers all the market-related factors </li></ul><ul><ul><li>Product, firm, industry and economy </li></ul></ul><ul><li>But interactions between Governments and companies and among Governments are left aside </li></ul>
  23. 23. <ul><li>Finance theory, arbitrage national financial conditions </li></ul><ul><li>National currencies create unique difference for INCs and directly involve governmental decisions </li></ul><ul><li>International firms must pass through the foreign-exchange barrier </li></ul>
  24. 24. <ul><li>Existence of governmental policies differentiates a theory of international business from domestic business </li></ul><ul><li>Governments are satisfied with gains generated by an IB activity in open markets, they impose no barriers and, hence no theory of international business is necessary </li></ul>
  25. 25. <ul><li>More synthesis? </li></ul>

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