In this first lecture, we review some basic concepts and theories pertaining to international business. Concepts such as recent trade developments, foreign direct investment, GDP and GDP growth rates, risks of internationalisation (4 C Framework), and IB participants such as SMEs (small and medium-sized enterprises, multinational firms, and born globals) are covered.

1. Lecture 1
Fundamentals of International Business
Lecturer: Dr. Preston Teeter
BUSS 2067
International Business Environment

2. Before we start:
1) Phones/electronics: silent, off, and away!
2) Say hello to the people around you;
you need a small group to discuss
questions (online: consult textbook)
BUSS 2067
International Business Environment

3. Outline
• Course introduction
• Trade and GDP
• Risks of internationalization
• IB participants

4. COURSE INTRODUCTION

5. Topics covered
1. Fundamentals of IB (today)
2. Globalization and internationalization
3. Participants in IB
4. Cultural environment of IB
5. International trade and investment
6. Political environment
7. Emerging markets
8. Global strategic structure
9. International entry strategy
10. Global sourcing and HRM

6. Teaching format
• Lecture
1. Short case/problem
2. Group discussion
(online: consult text)
3. Class discussion
4. Link to concepts in text
5. Go beyond the text
• Tutorial
1. Review of text material
2. Case discussion
• In groups
• As a class
3. Work on major
assignment

7. Textbook
• Cavusgil, et al. 2015,
International
Business, 2nd Ed.,
Pearson, Australia
• e-book

8. Assessment
• 40%: Case study report
• 60%: Final exam
– All topics covered (lecture + text + cases)
– True/false, multiple choice, open ended, case
analysis
– 3 hours, closed book

9. Support
• Tutorials (VCs)/tutors
• IB page
• Assignment help page
• Discussion forum (learnonline)
• Sample exam (learn online)
• Lecture recordings
• Consultation: 10-11am, Tues/Wed (WL3-36)

10. TRADE AND GDP

11. Trade and GDP
Recently, there has been much debate, on a
global scale, about the trends, benefits, and
consequences associated with international trade.
In addition, debate simmers as to whether living
standards are even rising these days.
Consider the following articles…

12. Source: http://www.theaustralian.com.au/opinion/free-trade-brings-heaps-of-
benefits/news-story/187f7d5f9e143ae06d10e671726adc42

13. Source: http://www.minister.industry.gov.au/ministers/macfarlane/media-releases/australian-
industry-benefits-asian-trade-deals

14. Source: http://theconversation.com/election-factcheck-has-the-coalition-presided-over-the-
most-sustained-fall-in-australian-living-standards-since-records-began-60327

15. Source: http://www.smh.com.au/good-weekend/why-australian-factories-are-on-their-
knees-20150209-139w1v.html

16. Trade and GDP
So this all ‘begs the questions’:
1) What are the real trends in trade? Globally and in
Australia?
2) What are the real trends in GDP? Globally and in
Australia?
3) Do the benefits of international trade outweigh the
problems?
Please discuss in small groups, or, if online, consult your
textbook and other sources. We will reconvene in 4 minutes to
discuss as a class.

21. Source: http://www.businessinsider.com.au/australia-just-posted-its-largest-trade-surplus-
on-record-2017-2

22. Source: http://www.businessinsider.com.au/australia-just-posted-its-largest-trade-surplus-
on-record-2017-2

23. Source: http://dfat.gov.au/about-us/publications/trade-investment/australias-trade-in-goods-
and-services/Pages/australias-trade-in-goods-and-services-2015-16.aspx

24. Source: http://dfat.gov.au/about-us/publications/trade-investment/australias-trade-in-goods-
and-services/Pages/australias-trade-in-goods-and-services-2015-16.aspx

25. Source: http://dfat.gov.au/about-us/publications/trade-investment/australias-trade-in-goods-
and-services/Pages/australias-trade-in-goods-and-services-2015-16.aspx

26. Source: http://dfat.gov.au/about-us/publications/trade-investment/australias-trade-in-goods-
and-services/Pages/australias-trade-in-goods-and-services-2015-16.aspx

27. Source: http://dfat.gov.au/about-us/publications/trade-investment/australias-trade-in-goods-
and-services/Pages/australias-trade-in-goods-and-services-2015-16.aspx

28. Source: http://www.tradingeconomics.com/australia/gdp

29. Source: http://www.tradingeconomics.com/australia/gdp-per-capita

30. RISKS OF
INTERNATIONALIZATION

31. Risks of
internationalization
In the mid to late 1990s, foreign investment
poured into Southeast Asia, particularly the
economies of Thailand, South Korea, Indonesia,
and the Philippines. By 1997, however, a
financial crisis gripped this region, a crisis that
raised fears of a worldwide economic meltdown
due to financial contagion.
Watch video

32. Source: http://www.frbsf.org/economic-research/publications/economic-
letter/1998/august/what-caused-east-asia-financial-crisis/

33. Source:
https://www.newyorkfed.org/medialibrary/media/research/economists/pesent
i/whatjapwor.pdf

34. Based on what you just saw and read, and anything else
you’ve read previously, answer the following:
1. As outlined in the text, what categories of risk were
involved in the Asian financial crisis of 1997? Be specific
and use examples.
2. For each risk that you identified, what are one or two ways
in which companies can mitigate such risks in the future,
in Asia and elsewhere?
Please discuss in small groups, or, if online, consult your
textbook and other sources. We will reconvene in 6 minutes to
discuss as a class (extended break).
Risks of
internationalization

39. • Cross-cultural risks
– Hiring local managers
– Investing in similar
cultures
– Localize product/service
• Country risks
– Joint ventures
– Invest in ‘safe’ countries
– Portfolio approach
• Currency risks
– Options contracts/etc.
– Move products/not cash
– Portfolio approach
• Commercial risks
– Use referrals
– Learn from best practice
– Hiring local managers
Mitigating risks

40. Source: http://www.heritage.org/index/heatmap

41. IB PARTICIPANTS

42. IB participants
Consider the case of Diesel jeans (intro provided in
text). Diesel was founded in Italy in the 1970s by
Renzo Rosso. After starting small, Diesel grew to be
one the premier fashion companies of the 1990s. In
1996, the company was recognized as “Best Italian
Company of the Year” and in 1998 the Wall Street
Journal called Diesel “the label of the moment.”
However, soon after, questions emerged over the
company’s image, strategy, and growth.

43. Source: http://www.sddt.com/News/article.cfm?SourceCode=19981209fd

45. Source: https://www.bloomberg.com/news/articles/2003-01-19/diesel-is-smokin
Example Diesel ad

46. IB participants
Based on this information, answer the following:
1) What kind of organization is Diesel: MNE, SME,
born-global, NGO, or other?
2) Why was Diesel facing such a challenge, what is this
case an instance of?
3) Do you believe Diesel could continue to be successful
with such a strategy?
Please discuss in small groups, or, if online, consult your
textbook and other sources. We will reconvene in 4
minutes to discuss as a class.

47. Source: https://www.forbes.com/sites/andreamurphy/2012/12/21/diesel-jeans-
mogul-is-new-italian-billionaire/#b9121d574257

48. Source: http://www.italy24.ilsole24ore.com/art/business-and-economy/2015-11-
05/diesel-passato-titolare-082803.php?uuid=ACcxruTB

49. Questions?