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001- Globalisationl- NOTES.ppt
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- 2. International Business by CharlesHill Lesson – 01 GLOBALISATION
- 3. 3 Learning Objectives: • Meaningof International Business • Importance of International Business • Problems in IB • Need for IB • Theories of IB
- 4. 4 What is InternationalBusiness ? • International Business is all business transactions that involve two or more countries. • International Business comprises a large and growing portion of the world’s total business. • International Business usually takes place within a more diverse external environment. • What does it cover ?
- 5. 5 It cover-------- • Exportand Import of goods and Services • Investments – FDI, FII • Human resources • IPR- Intellectual Property Rights- Licensing, Franchising. • Manufacturing • Commercial Borrowings
- 6. 6 IB is thewhole gamut of business activities that crosses national borders: • IB can effect people in many broad ways such as, • People's economic well being, • Political status • Skill level or knowledge
- 7. 7 Definition: • IB isa field of study and practice that encompasses public and private business activity affecting the persons or institutions of more than one national state, territory or colony
- 8. 8 Problems or Challengesin International Business: • Language, law, customs and regulations • Country information may be difficult to obtain • Foreign Exchange transactions • Cultural differences
- 9. 9 • Broader rangeof managerial skills required • Need to take help from intermediaries • Monitoring trends in foreign market may be difficult. • Control & communication systems • Market risks
- 10. 10 Why Firms engagein IB ? • To expand sales/ market – PLC • To acquire resources • To diversify sources of sales and supplies • To minimise competitive risk • Rapid increase in and expansion of technology • Development of the institutions needed to support and facilitate international trade • Increased global competition
- 11. What is globalization? The shift towards a more integrated and interdependent world economy Two components: The globalization of markets The globalization of production
- 12. Globalization of markets The merging of distinctly separate national markets into a global marketplace Tastes and preferences converge onto a global norm Firms offer standardized products worldwide creating a world market
- 13. Globalization of markets Significant differences still exist between national markets on many relevant dimensions These differences require that marketing and operating strategies and product features be customized to best match conditions in a country.
- 14. Globalization of markets Countries are different Range of problems are wider and more complex Government intervention in trade and investment creates problems International investment is impacted by different currencies
- 15. Globalization of production Refers to sourcing of goods and services from locations around the world to take advantage of Differences in cost or quality of the factors of production Labor Land Capital
- 16. Emergence of globalinstitutions Globalization has created the need for institutions to help manage, regulate and police the global marketplace GATT WTO IMF World bank United Nations
- 17. Global drivers Macrofactors that underlie trend towards greater globalization Decline in trade barriers Technological change
- 18. 18 WORLD TRADE ORGANISATION •Successor to GATT in 1995 • GATT established in 1947 • Headquartered in Geneva.
- 19. 19 INTERNATIONAL MONETARY FUND • Establishedin 1947 to manage fixed exchange rates and liquidity problems of countries. • Each country deposited with IMF a certain amount so that IMF accumulated a large pool of foreign exchange. • Countries with Balance of Payment problems would borrow from IMF.
- 20. 20 IMF’s objectives : •Promote exchange rate stability • Maintain orderly exchange arrangements • Avoid competitive currency devaluations • Establish multilateral system of payments • Eliminate exchange restrictions • Create standby resources
- 21. 21 UNITED NATIONS CONFERENCE ONTRADE AND DEVELOPMENT • Formed in 1964 as a permanent body attached to UNO • To bridge the gap between developing and developed nations. • Conferences held once in 4 years.
- 22. 22 Functions of UNCTAD •Promote international trade • Speed up economic development of developing nations • Negotiate multilateral trade agreements. • Co-ordinate the activities of other insitutions.
- 23. Declining barriers totrade Globalization of markets and production has been facilitated by Reduction in trade barriers Removal of restrictions to foreign direct investment
- 24. Globalization debate-Pro Lowerprices for goods and services Economic growth stimulation Increase in consumer income Creates jobs Countries specialize in production of goods and services that are produced most efficiently
- 25. Globalization debate-Con Destroysmanufacturing jobs in wealthy, advanced countries Wage rates of unskilled workers in advanced countries declines Companies move to countries with fewer labor and environment regulations Loss of sovereignty
- 26. The drivers ofglobalisation Market drivers Per capita income converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Other drivers Revolution in information and communication Globalisation of financial markets Improvements in business travel
- 27. Market drivers Per capitaincome converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Other drivers Revolution in information and communication Globalisation of financial markets Improvements in business travel The drivers of globalisation
- 28. Market drivers Per capitaincome converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Other drivers Revolution in information and communication Globalisation of financial markets Improvements in business travel The drivers of globalisation
- 29. Market drivers Per capitaincome converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Other drivers Revolution in information and communication Globalisation of financial markets Improvements in business travel The drivers of globalisation
- 30. Market drivers Per capitaincome converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Other drivers Revolution in information and communication Globalisation of financial markets Improvements in business travel The drivers of globalisation
- 31. Market drivers Per capitaincome converging among industrialised nations Convergence of lifestyles and tastes Organisations beginning to behave as global customers Increasing travel creating global consumers Growth of global and regional channels Establishment of world brands Push to develop global advertising Cost drivers Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialised countries with productive capability and low labour costs. Increasing cost of product development relative to market life Government drivers Reduction of tariff barriers Reduction of non-tariff barriers Creation of blocs Decline in role of governments as producers and customers Privatisation in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe Increasing participation of China and India in the global economy Competitive drivers Continuing increases in the level of world trade Increased ownership of corporations by foreign acquirors Rise of new competitors intent upon becoming global competitors Growth of global networks making countries interdependent in particular industries More companies becoming globally centred rather than nationally centred Increased formation of global strategic alliances Other drivers Revolution in information and communication Globalisation of financial markets Improvements in business travel The drivers of globalisation