This document provides definitions and context for key terms related to international business and globalization. It discusses how declining trade barriers and technological changes have driven globalization by facilitating greater cross-border trade and foreign direct investment. Specifically, it explains how trade liberalization through agreements like GATT and WTO has reduced tariffs and encouraged countries to specialize according to comparative advantage. It also outlines some characteristics of global firms and how production and markets have become globalized.

1. International Business
Study Mission (IBSM)
to Vietnam
15 – 24 Sept 2009

2. Dictionary (Words you
need to know)
• Investment
= holding an asset that earns $$$ for
you.
• Trade
= „doing business‟; to buy and sell;
exchanging assets (including
money) with another.

3. Dictionary (Words you
need to know)
• International Business (p.35)
= any FIRM
(what is a firm? Remember Micro / Macro
Econs?)
… engaging in investment or trade across
national borders (“inter-national trade”)

4. Dictionary (Words you
need to know)
• International Business (p.35)
= includes a firm based only in 1
country eg. Singapore, with no
offices outside Singapore
… but selling (import) or buying
(export) from overseas.

5. Dictionary (Words you
need to know)
• International Business (p.35)
= includes a firm based only in 1
country eg. Singapore, with no
offices outside Singapore
… but selling (EXport) or buying
(IMport) from overseas.

6. Dictionary (Words you
need to know)
• International Business (p.35)
= includes selling or buying
services as well as goods.

7. Example of International
Business:
A.L. WANTS TO BE YOUR GIRLFRIEND
SHE WANTS TO BE YOUR
GIRLFRIEND… IN 8
LANGUAGES

8. Dictionary (Words you
need to know)
• MultiNational Enterprise (p.21)
= any firm producing goods,
services, in more than 1 country.
… All MNEs are Int‟l Businesses
… but not all Int‟l Biz = MNE

9. Dictionary (Words you
need to know)
•Globalization (pgs. 5, 7)
= shift towards a more
INTEGRATED (WORK TOGETHER)
INTER-DEPENDENT
(DEPEND ON EACH OTHER)
World Economy

10. Dictionary (Words you
need to know)
• Foreign
• Direct
• Investment (pgs. 12, 20)
=Foreigners buy & directly own
assets in the country. (not merely
export to it or import from it)

11. Dictionary (Words you
need to know)
• Example of F. D. I.

12. What is
International Business?
International business involves transactions across
borders, primarily through export-import trade and
foreign direct investments.

13. Why is International
Business so Important ?
Globalization

14. What is Globalization?
Globalization refers to
the trend towards
a more integrated
global economic system.

15. Globalization
= shift towards a more
INTEGRATED (WORK TOGETHER)
INTER-DEPENDENT
(DEPEND ON EACH OTHER)
World Economy

16. Avril Lavigne is GLOBALIZED
because…
• A. Avril Lavigne is pretty
• B. Avril Lavigne can sing in Chinese
• C. Avril Lavigne understands the
GLOBALIZATION OF MARKETS, and the
EVOLUTION OF A GLOBAL CULTURE due to
GLOBAL MEDIA.
• D. all of the above.
ANSWER: see PAGE 17.

17. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers
a. General Agreement on Tariffs and Trade (GATT)
b. World Trade Organization
Led to an increase in foreign direct investments
2. Technological Change
Micro-processors and Telecommunications
Internet, Transportation
Made it possible for greater and faster interaction.

18. Main Drivers of
Globalization
Example of a TRADE BARRIER: tariffs (ie.
import taxes) on cigarettes imported into
Singapore.
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers

19. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers
General Agreement on Tariffs and Trade (GATT)
- The Free Western world‟s response to Communist economics
after World War 2:
- FREE TRADE will make us RICHER than YOU. Haha.

20. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers
World Trade Organisation (WTO)
- Established after negotiations in Uruguay 1993, after
Communism died.
- A NEW WORLD ORDER!! FREE TRADE ROCKS! See page
24. Haha.

21. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers
World Trade Organisation (WTO)
- How to encourage free trade?
- Cut tariffs.
(2 words, 3 syllables)

22. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers
How can? I cut tariffs, foreign
competitors come and take all my
jobs!
… cutting tariffs encourages
countries to specialise for export.

23. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers: comparative advantage
… when countries specialise in
what they do best, COSTS go
down. My own people have more
$$$ to spend on other things.

24. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers: comparative advantage
… the people in the other country
earn more $$$ from me, to spend
on other things (which I make
relatively better than them).

25. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers: comparative advantage
… the $$$ comes back to me! My
peeps pay you but your peeps
buy from my peeps, so my peeps
are not poorer!
… and that‟s before we even start to consider the multiplier
effect …

26. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers: comparative advantage
… see page 29.
Example: Nokia phones in China.

27. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
1. Decline in Trade Barriers: comparative advantage
… see page 29.
Example: Nokia phones in China.

28. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
2. Technological Change
Micro-processors and Telecommunications
Internet, Transportation
Made it possible for greater and faster interaction.

29. Main Drivers of
Globalization
Two Macro Factors (pgs 11-16):
2. Technological Change
Micro-processors and Telecommunications
Internet, Transportation
Made it possible for greater and faster interaction.

30. Key Characteristics of a
Global Firm
1. Searches the world for sources
of products, raw materials, and
financing.
International
2. Seeks to maintain a presence dimension
in key markets.
Sell or Source

31. Key Characteristics of a
Global Firm
Can include small companies
(“mini-multinationals”) as well as
very big ones. See pages 21-24.

32. Globalization
Globalization of Markets
Globalization of Production

33. Globalization of Markets
Refers to the fact that in many
industries, historically distinct and
separate national markets are
merging into one huge global
marketplace
The tastes and preferences of
consumers in different nations
are beginning to converge
upon some global norm.
Examples: Coca-Cola, Levi’s, Apple, Nokia
Sony Walkman, McDonalds.

34. Globalization of Markets
Top Global Brands
1. Coca – Cola 6. Sony
2. Marlboro 7. Kodak
3. IBM 8. Intel
4. McDonald’s 9. Gillette
5. Disney 10.Nike
Source: Sunday Times 7/2/99

35. Globalization of Markets
Google
Microsoft
Coca Cola
IBM
Mcdonald‟s
Apple
China Mobile
General Electric
Vodafone
Marlboro
2009 BRANDZ™ TOP 100 RANKING; THE TOP 10 BRANDS
Millward Brown Optimor (UK)

36. Globalization of Markets
See pgs. 3 onwards – global markets lead
to global production? The best Global is
Local?

37. Globalization of Production
Refers to the tendency among many
firms to source goods and services
from different locations around the
globe.
This is an attempt to take advantage
of national differences in the cost and
quality of factors of production,
thereby allowing them to compete
more effectively against their rivals.
Examples: Boeing (pg.8)
Apple (“assembled in China; designed in California”)

38. Globalization of Production
Refers to the tendency among many
firms to source goods and services
from different locations around the
35% made in Japan.
globe.
Italians make the wings
This is an attempt fly?
to take advantage
of national differences in the cost and
quality of factors of production,
(Something down here may be to compete
thereby allowing them
more effectively against their rivals.
made in Singapore)

39. What are the factors of
production??
Land
Labor
Capital
Energy?? Pg.8
Entrepreneurship?

40. Globalization of Production
Includes
hiring
employees
globally, not
locally

41. Globalization
Production Markets

42. Managing an
International Business
Different from managing a domestic business
• Countries are different
• Range of problems more complex
• Limits imposed by government intervention
• Transactions involves international
currencies

43. Managing an
International Business
Different from managing a domestic business
• Different Work Culture, Language
• Corruption, Ethics (remember BLAW business
ethics?)
• Unclear laws, no laws, laws not enforced, laws
abused. Legal systems not well developed eg.
China‟s comprehensive property law – only
since 2007.

44. Managing an
International Business
Different from managing a domestic business
• Business Ownership Limits on Foreigners
• Poor infrastructure
• Poor security, politically risky eg. Temasek
in Thailand (Shin Corp 2006)
• Foreign Exchange Risk (MYR manipulated
downwards against SGD)

45. Managing an
International Business
Different from managing a domestic business
• Should you even go overseas in the first
place? Which foreign markets to enter?
• Which country to best source for factors of
production so that cost is minimal but value
added is at maximum level?

46. Managing an
International Business
Different from managing a domestic business
• How exactly to sell overseas?
– Just export from home? Appoint a sales agent or
distributor?
– Grant a licence to a local partner to assemble & sell in the
foreign country?
– Set up your own subsidiary? (not always possible
depending on law)
– Joint venture with local partner (can you really work with
them?)

47. The story continues…
End of lecture on globalization