Introduction to International business

1. B U S I N E S S
International Business & Globalization
Nur Adriana Abu Bakar

2. Learning Outcomes
Nur Adriana Abu Bakar
 Able to understand the concepts & Relationship between IB &
Globalization
 Forces in Increased Globalization
 Able to understand why companies engage in IB

3. What is Globalization and International Business
Globalization :
• the widening and deepening of interdependent relationships among people from different nations.
• it also refers to the elimination of barriers to international movements of goods, services, capital,
technology, and people that influence the integration of world economies.
Relation between Globalization and International Business?
a. Global connections between supplies and markets results from the activities of IB, which consist of
all commercial transactions (including sales, investments, and transportation) that take place in a
country
International Business :
• any firm that engages in international trade or investment
• the company do not have to be big to do international business, if the company engage in exporting
and importing, they are already an international business
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4. Why must you study International Business?
Studying IB is important because:
• most companies are either international or compete with international companies
• modes of operation may differ from those used domestically
As a manager, why IB is important?
a) where you can obtain the best inputs at the best possible price for your production
• it helps managers to decide where to find resources and to sell
• helps you decide what governmental policies to support
b) where you can sell the product or service you’ve put together from those inputs
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5. Factors in increased Globalization
i) Rise in and application of technology
@ population growth and rising productivity
@ Rising of productivity means that on average people can buy more, including the new products
by working the same number of hours.
@ Introduction to new product has created opportunity for complimentary products (phone cases, screen
protectors) hence accelerating the number of scientist and engineers.
@ Creating new product requires high financial and intellectual resources hence high production of output
hence they need to sell the product globally to spread the production cost over units of production.
ii) Liberalization of Cross-Border trade and resource movements
@ to protect its own countries, every country restricts the entry and exit of its goods, services and
resources (workers, capital, tools)
@ restriction created limits on iB activities but most government reduced these restrictions due to:
a. citizens wants greater variety of goods and services at lower price
b. hope other countries lower their barriers too
Nur Adriana Abu Bakar

6. Factors in increased Globalization
iii) Growth in consumer pressure
@ consumers are exposed to new products and services everyday due to technology, and afford to
acquire them
@ consumer demand better service, high quality, lower prices being offered to them
iv) Changes in Political situations and Government policies
@ After WWII, business between Communist countries (China, Cuba, Laos, Vietnam) and the rest of the
world is minimal
@ Now, only a few countries are isolated economically like North Korea
@ government shows support in international relations by improving airports and seaport facilities
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7. Why companies engage in International Business
@ Company’ sales depend on consumer demand; high demand = high sales
@ Extending sales to other market (countries) can reduce the per-unit costs of a company
@ company seek out products, services, resources and components from foreign countries
@ reasons company venture into foreign countries:
a. lower operating cost (labor, raw material)
b. gain new operating knowledge or talents
c. provide new or better product (coffee beans)
Nur Adriana Abu Bakar

8. Why companies engage in International Business
@ Selling in countries with different timing of business cycles can decrease swings in sales and profits
@ Some companies expand globally as a defensive reason, to counter competitor’s advantage in foreign
markets.
Nur Adriana Abu Bakar
Jollibee History

9. International Business Operating Modes
• Imports tangible products
• term used for exporting and importing intangible item or reffered as invisible
Merchandise Exports and Imports
• Most popular form of operating modes
• Country like China and US rely heavily on export and import as their sources of international revenues
Service Exports and Imports
• Service export: provider and receiver of payment
• Service import: recipient and payer of payment
• Example of services:
a. Tourism and transportation ; travel, transportation, banking
b. Service performance ; construction
c. Asset Use ; licensing and franchising
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10. International Business Operating Modes
• Dividens and interest are considered as service exports and imports because they represent the use of
Investments
• Foreign Investment means ownership of foreign property in exchange for a financial return
assets (capital)
• two forms of foreign investment: Direct and Portfolio
a. Direct Investment
@ investor takes a controlling interest in a foreign country
@ if an investor has high stake in the company, the decision making falls on to investor with high shares
b. Portfolio Investment
@a noncontrolling financial interest in another entity
@consists of shares in or loans to a company in the form of bonds, biils or notes purchased by investor
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11. The Emergence of Global Institutions
World Trade Organization (WTO)
As markets globalize and an increasing proportion of business activity transcends national boarders.
institutions are needed to help manage, regulate, and police the global marketplace and to promote the
• responsible for policing the world trading system and making sure nation-states adhere to the rules
establishment of multinational treaties to govern the global business system
laid down in trade treaties signed by WTO member states
• In 2021, there are about 164 members registered under WTO
• Countries that is not part of WTO are Iran, Turkmenistan, Serbia, Sudan and Belarus
• Contribution:
a. promoted lowering of barriers to cross-border trade and investment

12. Example of countries the IMF has helped in the past decade:
a. Turkey
b. Indonesia
c. Mexico
d. Thailand
e. South Korea
The Emergence of Global Institutions
International Monetary Fund (IMF)
• Created in 1944 by 44 nations that met at Bretton Woods, New Hampshire, NY
• Established to maintain order in the international monetary system
• IMF is often seen as the lender of last resort to nations-states whose economies are in turmoil and
whose currencies are losing value against those of other nations
World Bank
• Created in 1944 by 44 nations that met at Bretton Woods, New Hampshire, NY
• Set up to promote economic development
• Focus on making low-interest loans to cash-strapped governments in poor nations that wish to
undertake significant infrastructure investment (building dams, roads and highways)
Keratan akhbar berkenaan hutang negara Malaysia
Nur Adriana Abu Bakar

13. • The UN has four proposes:
1. to maintain international peace and security
2. to develop friendly relations among nations
3. to cooperate in solving international problems and in promoting respect for human rights
4. to be a centre for harmonizing the actions of nations
The Emergence of Global Institutions
United Nations
• Introduced on October 24, 1945 by 51 countires
• Committed to preserving peace through international cooperation and collective security
• As of 2021, the total countires under United Nation is 193 countries
The federation of Malaya joined
the UN on 17 Sept 1957, just after
the independence day however,
on 16 Sept 1963, its name changed
to Malaysia
Nur Adriana Abu Bakar

14. Class Activity
Students are required to sit in groups and find at least THREE (3) international
companies in the given industry.
• explain each company's products and background
• choose ONE out of three companies for the next class activity
Group 1: Automotive industry
Group 2: Cosmetic industry
Group 3: Fashion industry
Group 4: Food and Beverage industry
Nur Adriana Abu Bakar