1. Overview Of Global Business


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1. Overview Of Global Business

  1. 1. <ul><li>To understand the basics of </li></ul><ul><li>international business and its </li></ul><ul><li>environment </li></ul><ul><li>To develop the analytical skills </li></ul><ul><li>required to compete effectively in </li></ul><ul><li>this environment </li></ul>International Business By Pankaj Agrawal
  2. 2. <ul><li>Evaluation and Grading </li></ul><ul><li>Internal Evaluation 50: </li></ul><ul><li>Individual Assignments: 20% </li></ul><ul><li>Attendance: 10% </li></ul><ul><li>Project work: 10% </li></ul><ul><li>Modular Tests 20% </li></ul><ul><li>End Term: 40% </li></ul><ul><li>--------------------------------------------------------------- </li></ul><ul><li>TOTAL 100% </li></ul><ul><li>External Evaluation 50: </li></ul><ul><li>PU Board Exam: 100% </li></ul><ul><li>Project work is group work and presentation at the end is </li></ul><ul><li>mandatory for it </li></ul><ul><li>Late submission of assignment will result in grade </li></ul><ul><li>reduction </li></ul>By Pankaj Agrawal
  3. 3. <ul><li>Reference Books </li></ul><ul><li>Hill, Charles W.L. & Jain, Arun Kumar (2007):International Business (Competing in the Global Marketplace): Tata McGraw Publishing Company Ltd. </li></ul><ul><li>Bennett, Roger (2006): International Business: Pearson Education </li></ul><ul><li>Daniels John D., Radebaugh Lee H. & Sullivan Daniel P.(2007): International Business (Environments and Operations): Pearson Education </li></ul><ul><li>Hill, Charles W.L. (2005):International Business (Competing in the Global Marketplace): Tata McGraw – Hill Edition </li></ul><ul><li>- Please make good use of INTERNET </li></ul><ul><li>- Please do keep update with the changes </li></ul>By Pankaj Agrawal
  4. 4. <ul><li>Meaning of international business and </li></ul><ul><li>globalization </li></ul><ul><li>Drivers of globalization </li></ul><ul><li>Overview of changing global picture </li></ul><ul><ul><li>Declining trade barriers </li></ul></ul><ul><ul><li>Change in communication, information </li></ul></ul><ul><ul><li>and transportation technologies </li></ul></ul>Overview of Global Business By Pankaj Agrawal
  5. 5. International Business <ul><li>International Business involves </li></ul><ul><li>Commercial activities that cross national frontiers </li></ul><ul><li>International movement of goods, capital, services, employees & technology, import and export </li></ul><ul><ul><li>licensing and franchisee </li></ul></ul><ul><ul><li>investment in physical infrastructure </li></ul></ul><ul><ul><li>buying and selling in foreign countries </li></ul></ul>By Pankaj Agrawal
  6. 6. <ul><li>Political risk </li></ul><ul><li>Commercial risk (market failure, product not appeal to customers) </li></ul><ul><li>Financial risk (inflation, tax rate, exchange rate) </li></ul><ul><li>Manager skill should be broad range </li></ul><ul><li>Dependence on foreign consultant, intermediaries, advisers </li></ul><ul><li>Difficult to monitor trends and activities in foreign countries </li></ul>International Business By Pankaj Agrawal
  7. 7. International Business & Domestic business <ul><li>Special problems and cases that arises in IB that normally not experienced in domestic </li></ul><ul><li>Deals carried out in foreign language under foreign law, customs and regulations </li></ul><ul><li>Information on foreign countries required difficult to obtain </li></ul><ul><ul><li>- Exchange rate </li></ul></ul><ul><ul><li>- Cultural differences </li></ul></ul><ul><ul><li>- Complex control and communication </li></ul></ul><ul><ul><li>- High risk level </li></ul></ul>By Pankaj Agrawal
  8. 8. Why IB? <ul><li>Expand Sales </li></ul><ul><li>Acquire source from foreign countries </li></ul><ul><li>Diversify activities </li></ul><ul><li>Saturation in domestic market </li></ul><ul><li>Discovery of lucrative opportunity in foreign </li></ul><ul><li>market </li></ul><ul><li>Obtain economics of scale and also </li></ul><ul><li>economics of scope might also be available </li></ul>By Pankaj Agrawal
  9. 9. Why IB? <ul><li>High cost of new product development </li></ul><ul><li>process </li></ul><ul><li>Cross border trade is easier to organize than in </li></ul><ul><li>past (better communication, visit) </li></ul><ul><li>Spreading commercial risk in several </li></ul><ul><li>countries </li></ul><ul><li>Involvement in IB can facilitate ‘experience </li></ul><ul><li>curve’ effect </li></ul>By Pankaj Agrawal
  10. 10. Globalization <ul><li>Globalization: the trend towards a </li></ul><ul><li>more integrated and interdependent </li></ul><ul><li>global economic system </li></ul><ul><li>- Effects of globalization can be seen </li></ul><ul><li>everywhere: </li></ul><ul><ul><ul><li>- the cars people drive </li></ul></ul></ul><ul><ul><ul><li>- the food people eat </li></ul></ul></ul><ul><ul><ul><li>- the jobs where people work </li></ul></ul></ul><ul><ul><ul><li>- the clothes people wear </li></ul></ul></ul>By Pankaj Agrawal
  11. 11. Globalization <ul><li>Globalization of markets: </li></ul><ul><li>-Historically distinct and separate national markets are merging into one huge global marketplace </li></ul><ul><li>- Tastes and preferences of consumers in different nations are beginning to converge upon some global norm </li></ul><ul><li>Examples: Sony Playstation Citicorp credit cards , Coca-Cola, McDonald's hamburgers </li></ul>By Pankaj Agrawal
  12. 12. Globalization <ul><li>Globalization of production: </li></ul><ul><li>Source goods and services from different locations around the globe </li></ul><ul><li>Take advantage of national differences in the cost and quality of factors of production (such as land, labor, capital and energy) </li></ul><ul><li>Compete more effectively against their rivals. </li></ul><ul><li>Examples: Boeing, Adidas, Nike </li></ul>By Pankaj Agrawal
  13. 13. Globalization <ul><li>Emergence of GLOBAL INSTITUTIONS like WTO, IMF, World Bank, UN </li></ul><ul><li>Help to regulate, manage and police the global market place and promote the establishment of multinational treaties to govern global business system </li></ul><ul><li>Drivers of globalization </li></ul><ul><ul><li>Declining trade and investment barriers </li></ul></ul><ul><ul><li>- Technological change </li></ul></ul>By Pankaj Agrawal
  14. 14. Drivers of Globalization <ul><li>Declining Trade and Investment Barriers </li></ul><ul><li>- Industrialized countries of the West began the process of removing barriers to the free flow of goods, services, and capital between nations after World War II </li></ul><ul><li>- Under General Agreement of Tariffs and Trade GATT, over 100 nations negotiated further decreases in tariffs & also non-tariff barriers </li></ul>By Pankaj Agrawal
  15. 15. Drivers of Globalization <ul><li>Under the WTO: dispute resolution and the enforcement of trade laws, and cut tariffs on industrial goods, services, and agricultural products </li></ul><ul><li>Removal of barriers to trade has contributed to increased international trade (the export of goods or services to consumers in another country), world output, and foreign direct investment </li></ul><ul><li>With removal of trade barriers many countries have also removal of restrictions in FDI </li></ul><ul><li>Growth of FDI outflow increased from $ 25 billion in 1975 to a record of $1.3 trillion in 2006 </li></ul>By Pankaj Agrawal
  16. 16. Drivers of Globalization By Pankaj Agrawal
  17. 17. - Firms are dispersing parts of their overall production to different parts of location around the globe to drive down production costs and increase product quality - Economies of the world`s nation-sates are becoming more intertwined and expansion of trade nations are becoming increasingly dependent on each other for important goods and services Drivers of Globalization By Pankaj Agrawal
  18. 18. Drivers of Globalization By Pankaj Agrawal
  19. 19. <ul><li>The Role of Technological Change </li></ul><ul><li>The lowering of trade barriers made globalization of markets and production a theoretical possibility, technological change made it a tangible reality </li></ul><ul><li>Microprocessors and Telecommunications : Major advances in communications and information processing have lowered the cost of global communication and therefore the cost of coordinating and controlling a global organization </li></ul>Drivers of Globalization By Pankaj Agrawal
  20. 20. <ul><li>The Internet and the World Wide Web: Web-based transactions have grown from virtually zero in 1994 to nearly $7 trillion in 2004 </li></ul><ul><li>Transportation Technology : the most important developments are probably development of commercial jet aircraft and super freighters and the introduction of containerization, which greatly simplifies trans-shipment from one mode of transport to another </li></ul><ul><li>Improvements in transportation technology have enabled firms to better respond to international customer demands </li></ul>London – New York 1930: Steam ships, 10 days 1950s: Propeller Aircraft 200-300 mph, 2 days 1960s: Jet Aircraft 500-700mph, 8 hours 1990s: Supersonic Jets, 3 hours Drivers of Globalization By Pankaj Agrawal
  21. 21. The Shrinking Globe By Pankaj Agrawal
  22. 22. Changing Demographics Of Global Economy <ul><li>In the 1960s: </li></ul><ul><li>-U.S. dominated the world economy and the world trade picture </li></ul><ul><li>-U.S. multinationals dominated the international business scene </li></ul><ul><li>-About half the world-- the centrally planned economies of the communist world-- was off limits to Western international business </li></ul>By Pankaj Agrawal
  23. 23. Changing World Output and World Trade Picture <ul><li>In the early 1960s, the U.S. - world's dominant industrial power , 40.3 percent of world manufacturing output </li></ul><ul><li>By 2005 the United States accounted for only 20.1 percent </li></ul><ul><li>Rapid economic growth is now being experienced by countries such as China, Thailand, and Indonesia with share of world output </li></ul><ul><li>Decline in the share of world output by industrialized countries such as Britain, Japan, and the United States </li></ul>By Pankaj Agrawal
  24. 24. Changing World Output and World Trade Picture By Pankaj Agrawal
  25. 25. Changing Foreign Direct Investment Picture <ul><li>-Share of world output generated by developing countries has been steadily increasing since the 1960s </li></ul><ul><li>-Stock (total cumulative value of foreign investments) generated by rich industrial countries has been in decline </li></ul><ul><li>- Flow of foreign direct investment (amounts invested across national borders each year) has been directed at developing nations especially China </li></ul>By Pankaj Agrawal
  26. 26. <ul><li>Stock of FDI by the world’s six most important national sources </li></ul>By Pankaj Agrawal
  27. 27. <ul><li>- A multinational enterprise is any business that has productive activities in two or more countries. </li></ul><ul><li>Non-U.S. Multinationals </li></ul><ul><li>Expect the growth of new multinational enterprises from the world's developing nations e.g. Wipro, Infosys </li></ul><ul><li>Rise of Mini-Multinationals </li></ul><ul><li>- Number of mini-multinationals (small and medium-sized companies) is on the rise </li></ul>Changing Nature of Multinational Enterprises By Pankaj Agrawal
  28. 28. <ul><li>-Collapse of communism in Eastern Europe represents a host of export and investment opportunities for Western businesses </li></ul><ul><li>- Economic development of China presents huge opportunities and risks (in spite of its continued Communist control) </li></ul><ul><li>Mexico and Latin America also present tremendous new opportunities both as markets and sources of materials and production </li></ul><ul><li>In recent days there is some socialist movement/trend in Latin America (Bolivia, Venezuela) </li></ul>The Changing World Order By Pankaj Agrawal