2. Content
I.What is international business?
I.Why study International Business?
International Business activities?
The extent on Internationalization
The evolution of International Business
Reason for International business growth
Globalization of the world’s economy
4. • The exchange of Goods & Services, Resources, Knowledge, & Skills,
among individuals & businesses in two or more countries.
• Transaction that are carried out across national borders to satisfy the
objectives of individuals and organization.
• All commercial transactions that take place between two or more
countries.
Private & Government
Sales
Investments
Logistics
Transportation
5. 1. Nature of International Business
• All value-adding activities—including sourcing, manufacturing, and
marketing—can be performed in international locations.
• International trade can involve products, services, capital, technology,
know-how, and labor.
• Firms internationalize through various entry strategies, such as exporting
and foreign direct investment.
6. 2. Scope of International Business
International Marketing
International Finance and
Investments
Foreign Exchange
Global HR
7. 3. Feature of International Business
• Large scale operations
• Integration of economies
• Dominated by developed countries and MNCs.
• Benefits to participating countries
• Keen competition
• Special role of science and technology
• International restrictions
8. 4. Importance of International Business
• Earn foreign exchange
• Optimum utilization of resources
• Achieve its objectives
• To spread business risks
• Improve organization's efficiency
• Get benefits from Government
• Expand and diversify
• Increase competitive capacity
9. • Identify TWO (2) international companies that doing
their business internationally.
• Identify the scope of business for that companies.
11. To facilitate the global economy and interconnectedness. IB
brings nations closer together.
To contribute to national economic well-being. IB fuels economic
growth and rising living standards.
To provide a competitive advantage for the firm. IB provides
companies with many benefits, leading to profitability and competitive
advantages.
1. Benefit of Studying International Business
12. To gain a competitive advantage for yourself. Working
internationally offers a range of enlightening experiences, new
knowledge, and other benefits that enhance careers…and it’s exciting!
To provide an opportunity for global corporate citizenship. Firms
must be ethical and socially responsible in their dealings because IB
affects numerous constituents, often in unintended ways.
1. Benefit of Studying International Business (Cont)
13. • International business: Performance of trade and investment
activities by firms across national borders.
• Globalization of markets: Ongoing economic integration and growing
interdependency of countries worldwide.
• International trade: Exchange of products and services across
national borders, typically through exporting and importing.
• Exporting: Sale of products or services from a base in the home
country or a third country to customers located abroad. Boeing and
Airbus export billions of dollars in commercial aircraft products every
year.
2. Key Concepts in International Business
14. • Importing or Global Sourcing: Procurement of products or services
from suppliers located abroad for consumption in the home country or
a third country. Toyota imports many parts from China when it
manufactures cars in Japan.
• International investment: Transfer of assets to another country or the
acquisition of assets in that country. Also known as “foreign direct
Investment” (FDI). We will focus on this type of investment.
• International portfolio investment: Passive ownership of foreign
securities, such as stocks and bonds, in order to generate financial
returns.
2. Key Concepts in International Business (Cont)
28. International business:
• is conducted across national borders;
• uses distinctive business methods;
• is in contact with countries that differ in terms of culture,
language, political system, legal system, economic situation,
infrastructure,
• and other factors.
29. 1. International & Domestic Business? – How they differ
Domestic International
Communication and control are immediate
and direct
International communication and control
might be difficult
Business laws and regulations are clearly
understood
Foreign laws and regulations might not be
clear
Business is conducted in a single language Multilingual communication is requires
Business risks can usually identified and
assessed
Environments may be so unstable that it is
extremely difficult to identify and assess
risks
Planning and organizational control systems
can be simple and direct
The complexity of international trade often
necessitates the adoption of complex and
sophisticated planning, organization and
control systems
30. 2. The Risks of International Business
International Business Risks
Cross-
Cultural Risk
Country Risk
Currency
Risk
Commercial
Risk
31. 2. The Risks of International Business
Cross-
Cultural
Risk
• Cultural differences: Risks arise from differences in
language, lifestyle, attitudes, customs, and religion,
where a cultural miscommunication jeopardizes a
culturally valued mindset or behavior.
• Negotiation patterns: Negotiations are required in
many types of business transactions; e.g., Mexicans
are friendly and emphasize social relations, whereas
Americans are assertive and get down to business
quickly.
32. 2. The Risks of International Business
Cross-
Cultural
Risk
• Decision-making styles: Managers constantly make
decisions about the operations and future direction of
the firm.
• Ethical practices: Standards of right and wrong vary
considerably around the world.
33. 2. The Risks of International Business
Country
Risk
(Political
Risk)
• Government intervention, protectionism, and barriers
to trade and investment
• Bureaucracy, red tape, administrative delays,
corruption
• Lack of legal safeguards for intellectual property rights
• Legislation unfavourable to foreign firms
• Economic failures and mismanagement
• Social and political unrest and instability
34. 2. The Risks of International Business
Currency
Risk
(Financial
Risk)
• Currency exposure
• Asset valuation
• Foreign taxation
• Inflation
35. 2. The Risks of International Business
Commercial
Risk
• Weak partner
• Operational problems
• Timing of entry
• Competitive Intensity
• Poor execution of strategy
General commercial risks such as these lead to sub-optimal
formulation and implementation of the firm’s international value-chain
activities.
36. 3. Who Participate in International Business
Multinational enterprise
(MNE):
• A large company with
substantial resources that
performs various business
activities through a network of
subsidiaries and affiliates
located in multiple countries;
e.g., Caterpillar, Samsung,
Unilever, Vodafone, Disney.
37. 3. Who Participate in International Business
Small and medium-sized enterprise (SME): Typically, a company with
500 or fewer employees. Over 90% of all firms in most countries are SMEs.
SMEs increasingly engage in international business. The companies are (in
Malaysia)
• Coastal Contracts Bhd (marine transportation),
• Efficient E-Solutions Bhd (information technology outsourcing),
• ETI Tech (batteries),
• Hai-O Enterprise Bhd (cosmetics),
• Kumpulan Fima Bhd (food processing),
• NTPM (paper products),
• Success Transformer (electrical manufacturing) and
• YNH Property Bhd (palm oil).
38. 3. Who Participate in International Business
• Starting from 1 January 2014, new SME definition in Malaysia will require
higher sales turnover to be classified as small or medium enterprises, as
compared to the existing definition.
New SME definition based on Size
Category Micro Small Medium
Manufacturing Sales turnover of less
than RM 30,000
OR
employees of less than
5
Sales turnover from RM
30,000 to less than RM
15 mil OR employees
from 5 to less than 75
Sales turnover from RM
15 mil to not exceeding
RM 50 mil OR
employees from 75 to
not exceeding 200
Service and Other
Sector
Sales turnover of less
than RM 300,000 OR
employees of less than
5
Sales turnover from RM
300,000 to less than
RM 3 mil OR
employees from 5 to
less than 30
Sales turnover from
RM3 mil not to
exceeding RM 20 mil
OR employee from 30
to not exceeding 75
39. 3. Who Participate in International Business
Born global firm
• A young, entrepreneurial SME that undertakes substantial international
business at or near the time of its founding. From inception, seeks to derive
significant competitive advantage from the use of resources and the sale of
outputs in multiple countries.
40. 3. Who Participate in International Business
Geographic Locations of the 500 Largest Multinational Enterprises
41. 3. Who Participate in International Business
• Non-governmental organizations: Many of these nonprofit organizations
conduct cross-border activities. They pursue special causes and serve as
advocates for social issues, education, politics, and research.
Examples
• The Bill and Melinda Gates Foundation and the British
Wellcome Trust both support health and educational initiatives.
• CARE is an international nonprofit organization dedicated to
reducing poverty.
45. 3. Who Participate in International Business
1. Multinational Enterprise
2. Small and Medium Enterprise
3. Born Global Firm
4. Non-Governmental Organizational
47. • To seek opportunities for growth through market diversification
• E.g., Harley-Davidson, Sony, Whirlpool.
1. Why do Firms Participate in International Business
48. • To earn higher margins and profits
• Often, foreign markets are more profitable.
• To gain new ideas about products, services, and business methods
• E.g., GM refined its knowledge about making small,
fuel-efficient cars in Europe.
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1. Why do Firms Participate in International Business
49. • To better serve key customers that have relocated abroad
• E.g., when Toyota launched its operations in Britain, many of its suppliers
followed suit.
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1. Why do Firms Participate in International Business
50. • To be closer to supply sources, benefit from global sourcing
advantages, or gain flexibility in the sourcing of products
• E.g., sources parts and components from the
best suppliers worldwide.
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1. Why do Firms Participate in International Business
51. • To gain access to lower-cost or better-value factors of production
• E.g., Sony does much of its manufacturing in China.
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1. Why do Firms Participate in International Business
52. • To develop economies of scale in sourcing, production,
marketing, and R&D
• E.g., Boeing lowers its overall costs by sourcing, manufacturing, and selling
aircraft worldwide.
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1. Why do Firms Participate in International Business
53. • To confront international competitors more effectively or to thwart
the growth of competition in the home market
• Chinese appliance maker Haier established operations in the United
States, partly to gain competitive knowledge about Whirlpool, its chief US
rival.
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1. Why do Firms Participate in International Business
54. • To invest in a potentially rewarding relationship with a foreign partner
• French computer firm Groupe Bull partnered with Toshiba in
Japan to gain insights for developing information technology.
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1. Why do Firms Participate in International Business
56. • global factors have contributed to the growth of the transportation
and logistics industry
oAdvance technology
oSeparation of raw material
oRisk of supply chain
oThe environment
oExchange rate
oThe competitive
58. • Competitive strategy for products: cost or differentiation strategies, the latter
usually by:
– Developing a favourable brand image
– Developing unique characteristics – R & D efforts or different means of distributions
• Competitive resources & experience: size and resources compared to those of
its competitors
– Eg: Coca-Cola has more resources than its competitor – over 200 countries.
• Competitors faced in each market: To success in market, does not matter it is
domestic or foreign, often depends on whether the competition is international or
local.
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1. The Competitive Environment
59. • Investment in research, equipment, plants and personnel training can take
years to plan out.
• Forecasting foreign opportunities and risks is always challenging.
• Company’s management has better chance of avoiding unpleasant
surprises.
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2. Capitalize on International Opportunities
61. • Shift in national boundaries – e.g: former Soviet Union or reunification of East and
West Germany.
• The increase in economic interdependence – 25% of world production is sold
outside its country of origin.
• Restriction on imports have generally been decreasing – output from foreign-
owned investments as a percentage of world production has increased.
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1. The Forces Driving Globalization
62. • Increase in and application of technology.
• Liberalization of cross-border trade and resource movements.
• Development of services that support International Business.
• Growth of consumer pressures
• Increase in global competition
• Changes in political situations and government policies
• Expansion of cross-national cooperation.
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2. The Forces Driving Globalization
