International Business course Chapter-2.ppt

International Business course

1. International Business: Strategy, Management, and the New Realities
Chapter 2
Globalization of Markets and the
Internationalization of the Firm

2. International Business: Strategy, Management, and the New Realities
Globalization of Markets: A Macro Concept
•Two mega trends have altered the international
business landscape: globalization and
technological advances.
•Market globalization refers to the
interconnectedness of national economies and
growing interdependence of buyers, producers,
suppliers, and governments in different countries.
•Globalization allows firms to view the world as one
large marketplace for goods, services, capital, labor,
and knowledge.

3. •Globalization is a term used to describe
how trade and technology have made
the world into a more connected and
interdependent place. Globalization
also captures in its scope the economic
and social changes that have come
about as a result.
International Business: Strategy, Management, and the New Realities

4. Globalization Example
•Cultural Globalization Examples
•1. Food 
People around the world are increasingly enjoying cuisine from
various nations. For instance, Japanese sushi restaurants are
present in New York, Indian curry houses in London, and
American fast-food businesses in Tokyo. Moreover, meals, such as
hummus, tacos, and sushi rolls, that were once known to be exotic
or foreign have now become common.
•2. Music
The internet, social media, and streaming services have helped
spread the popularity of particular music genres worldwide. For
example, K-pop (South Korean pop music) has become extremely
popular worldwide, with groups like BTS and Blackpink. Similarly,
hip-hop music from the United States has become a global
phenomenon, with worldwide artists contributing.
International Business: Strategy, Management, and the New Realities

5. Globalization Example
•Regional / Political Globalization Examples
•1. European Union (EU)
The EU is a 27-country economic and political union primarily based in
Europe. The purpose of its establishment was to encourage economic
cooperation and political stability among its members. Goods, services, and
people can flow freely across national boundaries thanks to the EU, and 19
member countries share a common currency (the Euro). It has substantially
improved intra-EU trade and travel, making expanding enterprises across
numerous countries easier.
•2. Asia-Pacific Economic Cooperation (APEC) 
APEC is a regional economic forum comprising 21 Asia-Pacific member
economies, including the United States, Japan, China, and Australia. By
easing trade and investment, lowering trade barriers, and supporting
sustainable development, APEC aspires to foster economic growth and
collaboration among its members. APEC economies account for
approximately 60% of global GDP and 48% of global commerce, making it a
critical platform for regional economic integration and globalization.
International Business: Strategy, Management, and the New Realities

6. Globalization Example
•Environmental Globalization Examples
•1. Climate Change
Climate change is an environmental issue impacting the entire planet
that can be controlled through cooperative globalization. Its leading
cause is the release of greenhouse gasses such as carbon dioxide and
methane by human activities such as the use of fossil fuels and
deforestation. Climate change’s effects, such as rising sea levels,
extreme weather events, and biodiversity loss, are global and
necessitate concerted action to mitigate and adapt to them.
•2. Invasive Species
Invasive species are non-native plants, animals, or microbes that
humans introduce into an ecosystem that can cause harm to the
environment, economy, or human health. They spread via international
trade and transportation as they board ships, planes, and vehicles.
Moreover, it requires worldwide collaboration and coordinated actions
to avoid the spread of invasive species and to save them from out-
competing native species for resources, habitats, and more.
International Business: Strategy, Management, and the New Realities

7. Globalization Example
•Social Globalization Examples
•1. Social Media
Social media platforms connect people worldwide and allow them to
share information, ideas, and experiences. Platforms like Facebook,
Instagram, Twitter, etc., facilitate individuals to communicate with
others with similar interests or backgrounds easier. It has led to global
online communities that transcend geographical and cultural
boundaries.
•2. Migration
The movement of people across borders is another example of
globalization. Migration can be due to economic, political, social, or
environmental factors and positively and negatively impact sending
and receiving countries. The movement of people has contributed to
cultural exchange, as people bring their customs, traditions, and
languages to new places. However, migration can also lead to social
tensions, conflicts, and challenges related to integration and diversity.
International Business: Strategy, Management, and the New Realities

8. Globalization Example
•Economic Globalization Examples
•1. Employment 
MNCs are operating globally with satellite offices and branches
in numerous locations. For instance, Coca-Cola operates
worldwide, with its head office in Atlanta, US. They might
outsource their job to a person residing in struggling countries,
bringing much-needed jobs to the country and saving costs for
the MNCs. It would be a win-win situation for the company and
the individuals.
•2. Manufacturing
Due to globalization, the production of even a single product
might use work from many countries to complete the job
efficiently and cost-effectively. For instance, a shirt made using
Chinese cotton by Spanish workers in a factory in Thailand ships
to the United States market on a French aircraft. 
International Business: Strategy, Management, and the New Realities

9. Globalization Example
•Automotive & Technological Globalization Examples
•1. Automobile Manufacturing
Exports of automotive products have grown tremendously because of
globalization, as cooperation among countries provides better economies of
scale. In America USA, the Big 3, GM, Ford, and Chrysler, have invested heavily
in Mexico for car manufacturing. Due to the low cost of production in Mexico,
these companies manufacture cars in Mexico and, after manufacturing, ship
them back to the US. 
Following this, they were able to become the price maker. Some automobile
industries use parts manufactured in other countries for cost-saving. For
instance, a car assembled in the United States uses parts from Japan,
Germany, or Korea.
•2. Internet & Gadgets
The internet is a significant contributor to globalization. It is not only confined
to technology but also quickly helps in the cultural exchange of arts. The
global news network CNN can spread and telecast its news using technology.
The cell phone connects people from all over the world, and that too at a
multimedia level.
International Business: Strategy, Management, and the New Realities

10. Globalization Example
•Banking Industry Globalization Example
•1. HSBC
Hongkong and Shanghai Banking Corporation Limited, also
known as HSBC, is one of the top banks operating in the world.
Founded in the year 1865, it holds operations in 85 countries
globally, with its headquarters in London. It shows that
globalization has a good presence in the banking industry.
•2. Letter of Credit
Letter of credit that the bank issues to a person are a
representative for the payee as a guarantee for the defined level
of credit. It has facilitated trade across the world. As a result,
people don’t have the risk of bad debt for business done with a
person in another country, as the instrument provided by the
bank backs up the transaction.
International Business: Strategy, Management, and the New Realities

11. Phases of Globalization
1
st
Phase: 1830, peaking around 1880
Aided by railroads, ocean transport; resulting in the rise of mass
production and growing trade
2
nd
Phase: 1900, peaking late 1920s
Fueled by electricity and emergent modern technologies; early
MNEs
3
rd
Phase: 1948, peaking around 1970
End of WW II; Marshall Plan; Gradual reduction of trade barriers,
especially under General Agreement on Tariffs and Trade (GATT)
4
th
Phase: 1980, peaking around 1997
Fueled by information and communications technologies. Rapid
liberalization in Emerging Markets

12. International Business: Strategy, Management, and the New Realities
https://youtu.be/Z9uj81Mng78
https://youtu.be/vRTuaTg0V5c

13. Advantages and Disadvantages of
Globalization: Preparing for Expansion
•Advantages of Globalization
•1. Access to New Markets
•2. Spread of Knowledge and Technology
•3. Enhanced Global Cooperation and
Tolerance
•4. Promotes Economic Growth
International Business: Strategy, Management, and the New Realities

14. Advantages and Disadvantages of
Globalization: Preparing for Expansion
•Disadvantages of Globalization
•1. Increased Competition
•2. Exploitation of Labor and Resources
•3. Imbalanced Trade
•4. Domestic Job Loss
International Business: Strategy, Management, and the New Realities

15. The Drivers and Consequences of Market
Globalization

16. International Business: Strategy, Management, and the New Realities
Firms are Compelled to Internationalize
•Firms implement internationalization
proactively are more successful than
those reactively engaging.
•E.g., Vodafone has established
production and marketing operations
all around the world. Has some 200
million customers in 30 countries.

17. International Business: Strategy, Management, and the New Realities
Technological Advances as a
Driver of Market Globalization
•Advances in technology provide the means
for internationalization of firms
•Advances in technology:
–Reduces cost of doing international
business;
–Enables even small firms to go international
–Helps coordinate worldwide activities;
–Mitigates geographic distance

18. International Business: Strategy, Management, and the New Realities
Communications Technology
•Especially important. Includes
telecommunications, satellites, optical fiber,
wireless technology, and the Internet.

•The Internet, and Internet-dependent systems
such as intranets, extranets, and e-mail, connect
millions of people across the globe.
•The Internet opens up the global marketplace to
all firms, large and small

19. International Business: Strategy, Management, and the New Realities
Manufacturing and Transportation Technologies
•Manufacturing
–Revolutionary developments now permit manufacturing
that is both low-scale and low cost, with the support of
computer-aided-design of products (CAD), robotics, and
production lines managed and monitored by
microprocessor-based controls.
•Transportation
–Fuel-efficient jumbo jets, giant ocean-going freighters, and
containerized shipping.
•Thus
–, the cost of transportation has declined substantially,
spurring rapid growth in international trade.

20. International Business: Strategy, Management, and the New Realities
Societal Consequences of Market Globalization
•Positive consequences
–More jobs
–Economic development and growing prosperity
–Technology and knowledge transfer
•Negative consequences
–Natural environment
–Disruptive effects in national economies
–Human rights violations abroad (e.g., sweatshops)
–Job losses at home

21. International Business: Strategy, Management, and the New Realities
Economic Freedom Enhances Income Growth
•In the long run, globalization generally
leads to:
–higher living standards
–more efficient resource usage
–greater access to technology, products, and
services
•In particular, liberalization of markets
appears to enhance income levels

24. International Business: Strategy, Management, and the New Realities
Partial Index of Economic Freedom, 2010
source: http://www.heritage.org/index/ranking.aspx

25. What inferences can you make from this chart?

26. International Business: Strategy, Management, and the New Realities
Unintended Consequences of Market
Globalization
•Loss of national sovereignty
–Power shifts to MNEs and larger countries
•Offshoring and the flight of jobs
–Dislocation of jobs
•Effect on the poor
–Benefits of globalization are not evenly distributed
•Effect on the natural environment
•Effect on national culture
–Loss of national cultural values and identity
•QEUST

27. International Business: Strategy, Management, and the New Realities
Corporate Social Responsibility
•Over time, governments pass legislation that
promotes improved environmental conditions.
Question: How, when, why?

•In addition, many firms now consider the
societal consequences of their actions --
Corporate Social Responsibility (CSR)
Discuss how this works in a global
environment vs. a national environment.

28. International Business: Strategy, Management, and the New Realities
Firm Level Consequences of Market
Globalization
•Countless new business opportunities for
internationalizing firms
•New risks and intense rivalry from foreign
competitors
•More demanding buyers who source from
suppliers worldwide
•Greater emphasis on proactive internationalization

•Internationalization of firm’s value chain

29. Examples of How Firms’ Value
Chain Activities Can Be Internationalized
Value Chain: Sequence of value adding activities
performed in the course of developing, producing,
marketing, and servicing a product.

30. International Business: Strategy, Management, and the New Realities
Implications for Management
•Global orchestration’ of value-chain activities
(e.g., to cut costs, access resources, target new
markets)
•Exploit knowledge acquired worldwide
•Increase productivity
•Collaborate with foreign partners

31. International Business: Strategy, Management, and the New Realities
• Open-mindedness
• Tolerance for ambiguity
• Perceptiveness
• Premium on personal relationships
• Flexibility, adaptability, and self-reliance
 
• Good sense of humor
• Warmth in human relationships
• A curious mind
Implications for Managers: Acquiring Global
Competence is a Requirement