Unit 1 - New Internatiomal Business (1).ppt

Ib

1. •.
Unit :1 Globalization and International Business -5hrs
Meaning of International Business:

3. Nepal

4. •Carrying of business activities beyond national
boundaries is international business
•Itisextensionofdomesticbusinesswhich
includesthetransactionsof economic
resources,goodsandservices,capital
comprisingoftechnology,skilledlabour,
transportationetcasglobally.
•It includes not only international trade of goods
and services, but also foreign investment

5. •According to Daniels; Rodebaugh and
Sullivan“International business is all
commercial transactions –private and
governmental between two or more
countries.”
•According to Taggart and
McDermott“International business
can be defined as those business
activities that involve the crossing of
national boundaries”.

6. International business includes
•Trade
•Foreign direct investment
•Intellectual property rights
•Technology transfer
•Movement of human resources.

7. Thus International Business is:
-indispensable for all Countries
-also known as global business
•No country is self-sufficientin producing
allthe products of its requirements
•Both large and small firms are active
players in international business.

8. Main points of international business
•Cross Border Transaction
•Competition
•Foreign currency
•Foreign Laws
•Foreign Environment
•Broader Management Skills

9. Objectives of international Business
. Sales Expansion
•Resource Acquisition
•Risk minimization
-Political
-Market:
-Financial

10. Importance of IB (opportunities of international
business/Reasons for IB expansion)
•Environmental adaptation
•Risk Reduction.
•New technology
•Liberalization
•Market Expansion
•Networking

11. Domestic Vs International
Business
•Scope:
•Currency:
•Legal Framework
•Risks:
•Environment
•Transfer Pricing
•Management

12. Challenges of International Business
•Changing Environments
-Political Environment
-Economic Environment
-Cultural Environment
●Need for new strategies
●Competition
●Information Gap
●Management Skills

13. Concept of Globalization
●Globalization means integration of national
economy with one world economy
•It is an important force in modern business
environment
•It is driven by international trade ,
Investment, information technology and
free market economic system. It is the
march of capitalism, open markets and
free trade.

14. •process of the integration of the world.
•through liberalization and removal of trade
barriers
•one single market place .
•Global interdependence increases
•offers diversified products , ability to compete
in free market
•domestic companies competing with global
companies on the home ground
•regarded as synonymous to multinational
enterprises.

15. Some economists' definitions
•According to sundaram and black:
“Globalization is the process by which on
activity or underlining becomes
worldwide in scope
•According to zia Qureshi ;
‘Globalization is the growing international
integration of markets for goods, services
and capital’

16. •According to M.P.todaro.
“Globalization is the increasing integration
of national economies into global
markets
•WDR –1999| 2000
“Globalization is the continuing integration
of the countries of the world”

17. Nature of Globalization
•Integration through interdependence .
•Free market economies.
•Free movement of products.
•Free flow of factors of production .
•Standardized technology.
•Information and communication .
•Global corporations with globalimage.

18. Forms of Globalization
•Economic Globalization
•Cultural Globalization.
•Political Globalization
•Environmental Globalization

19. Categories/Types of globalization
The pace of global interaction has become much
faster and dramatic because of unprecedented
(excess) advancements in science and technology,
communication, transport and industry.
1.World trade: goods and services due to technology
, banking and insurance services etc
2.Portfolio Investment:indirect foreign investment
,purchases of foreign securities(bonds or commercial
papers , stocks, in the form of getting dividends,
interest)
3.Foreign Direct Investment ( FDI)
4.Multinational Companies

20. Factors Affecting Globalization
1.Status of Technology
•Expansion of technology affects globalization.
•Advance in communication and transportation
increase globalization .
-Reduce cost .
•They enhance a manager 's ability to foreign
operations .
•Small companies can reach global customers and
suppliers by the help of internet

21. 2. Liberalization of Cross-Boarder trade and
Resource Movement
-To protect its own industries , every country
restricts the movement across it borders.
-Over time , most governments have reduced
restrictions on international movements of products
and services mainly for three reasons
i) Their citizens want a greater variety of g/s at lower
price
ii) Competitionspurs domestic producers to
become more efficient
iii) They hope to introduce other countries to lower
their barriers in turn

22. 3.Services that support International Business
-Companies and governments have developed a
variety of services . Due to services of financial
institution,
e .g. Nike (US Company) sells sports wear to a
French soccer/football team . As soon as the
shipment arrives at French customer, a bank in
Paris can collect payment in Euros from the
soccers team and pay Nike in US dollars through
a US bank

23. 4.Consumer Pressure
-consumer know more about product and
services available in countries , that were once
considered luxuries .
-we want more , newer , better products and
differentiated.
-it gives pressure to companies and countries .
-to search worldwide -via the internet , industry
journals, trade fairs and trips abroad -for
innovations and products ,.
-consumers are more proficient at searching the globe
for better deals . ---US consumers regularly search
the internet for lower-priced prescription drugs
available from foreign seller

24. 5.Global Competition
-pressure ,both present and potential of
increased foreign competition can persuade
companies to buy or sell abroad
-introduce products in to markets where
competitors are getting cheaper .
-In recent years more companies have
merged acquired foreign companies to gain
operating efficiencies and large global market
shares .

25. 6.Changing Political Situation
•A major reason for growth in international business is
the end of the Schism(difference in beliefs/opinion)
between the non-communist world and what was
once the Communist world ? .
•After the world war II , business between these two
world was minimal .With the transformation of political
and economic policies in the former Soviet Union
,Eastern Europe , China and Vietnam , trade now
flourishes between those areas and the rest of the
world .
•By improving airport and seaport facilities , government
has fostered travel efficiencies which reduce cost of
delivering goods internationally
•Now government provides an array of servicesto help
domestic companies sell more abroad

26. 7.Cross-National Cooperation
•Government have to come realize that their interest
can be addressed through international cooperation
by means of treaties ,agreements and consultation.
•The willingness to pursue such policies is due to
following:
i) to join reciprocals advantages
ii) to attack problems jointly that one country acting
alone can't solve
iii) to deal with areas of concern that lie outside
the territory of any nation .
Governments sign treaties and agreements on a
variety of commercial activities .it may be bilateral
and multilateral.

27. Drivers of globalization / Factors in
increased globalization / Causes of
globalization
•Two macro factors seem toward greater
globalization.
•The first decline inbarriers to the free flow
of goods, services and capitalthat has
occurred since the end of World War II (1939).
•The second technological change,
particularly the dramatic developments in recent
years in communication, information
processing, and transportation technologies
•These factors are as follows

28. 1 Rapid Technological change
•Rapid advancements are taking place in new
product, process and information technology
.
-firms have moved towards globalization to reap
advantages of economics of scale
-telecommunication, computers and internet
have greatly facilitated the growth of
globalization,
-e-commerce, e-bankingare serving as the
engineof globalization.

29. 2. Liberalization of trade and resources
•To protect own industries, restrictsthe
movement across borders not only of goods
and services but also of the resources,
•Such restriction, of course sets limits on
international business activities, and
because regulations can change at any time,
they also contribute to climate of uncertainty.
•people want a greater varietyof goods and
services at lower prices.

30. •trade and investment barriers are
declining.
•volume of international business is
growing.
•Privatization of public enterprises
developing countries has boosted
globalization.

31. 3 Development of services that
support international business
•Companies and government have developed
a variety of servicesthat facilitate the
conduct of international business
•because of bank creditagreements
•many more countries have created different
types of services to send goods and capital
towards the other countries or rest of the
world.

32. 4. Growing consumerpressures
•more new, better products and more
finely differentiated.
•greater affluence has been unevenly
spread, both among and within countries,
•more and more countries are to those
markets, such as china, which incomes
and consumptions are growing most
rapidly

33. •Many companies spend more heavily on
research and development to search on
worldwide;
•namely the internet, industry journals,
and trade fairs.
•Some consumers are searching the
internet for lowered priced prescript by
foreign sellers.

34. 5. Increased Global Competition
•pressures of both present and potential of
increased foreign competition can
persuade companies to buy or sell abroad
•Qualitative productshave already been
introduced in the markets.
•Technological advances, especially in
communicationgive them a good idea in
the market
•communication and transportation
technology, global competition has been
increased

35. 6. Changing political situation
•Due to political and economic policies in the former
Soviet Union,Eastern Europe, china and Vietnam,
trade flourishes between those areas and the rest of
the world
•governments have fostered travel efficienciesthat
speed the process and reduce the cost of delivering
goods internationally
•governments now provide an array of services to
help domestic companies sell more abroad
-collecting information about foreign markets
-offering insurance

36. 7. Supportive Institutions
•The emergence of supportive international
institutions has facilitated the growth of
globalization
•WB & IMF
•They generally prescribe Uniform economic,
fiscal and monetary policiesthrough
structural adjustment programs in developing
countries.

37. •. They advocate:
-Free market economies & private sector
development.
-Privatization of public enterprises
-Removal of subsidies
-Liberalization through deregulation &
decontrol
-Devaluation of currencies
-Incentives for FDI, by globalcorporations.

38. •WTO
-Established in 1995, it is the champion of
globalization
-It is legal & institutional foundation of
multinational trading system.
-trade in goods, services & intellectual property
rights.
-encourages open trade & prescribes uniform
trade policies & rules.

39. 8. Regional Economic Groupings.
•economic integration
•harmonize trade polices, laws and regulations of all
member
•EU Association of South East Asian Nation (ASEAN),
•SAARC (South Asian Association for Regional Co-
operation).
•NAFTA
•BIMSTEC
•Give pressure to IB

40. # Overview of changing global
picture
•Declining trade barriers
-IB is affected by ‘Trade Barriers’
-After World War II,1939
-advanced industrial countries of the west
committed themselves to remove barriers to the
free flow of goods & services and capital
between nations.
-This goal was protected in the general
agreement on tariffs and trade (GATT)
-WTO is established to solve such restrictions

41. Tariff Barriers
-Export Tariff
-Import Tariff
-Specific Duty
-Compound Duty
-Transit Tariff

42. Para Tariff Barriers
•Border Changes
•Fees
•Local Taxes

43. Non-Tariff Barriers
•Quotas
•Subsidies
•Local content requirement
•Technical Barriers
•Procurement Policies
•Exchange Controls.
•Bureaucratic delay

44. The role of Technological change
•change in communication.
•Information
•transportation Technologies
•the end of World War II,
-advances in communication, information
processing, and transportation technology
-Telecommunications is creating a global
audience.
-Transportation is creating a global village.

45. Microprocessors and
Telecommunications
•innovation in microprocessor,
•enabled the explosive growth of high-power,
•low cost computing, vastly increasing the
amount of information
•processed by individuals and firms.
•underlies many recent advances in
telecommunications technology

46. Cont..
•Developments in:
•satellite,
•optical fiber,
•wireless technologies,
•internet and the World Wide Web

47. Transportation Technology:-
•development of
•commercial jet aircraft
•super fighter
•introduction of containerization,
•simples’ transshipment from one mode of
transport to another.
•Simplified g/s worldwide
•New York is now “closer” to Tokyo

48. Cont…
•Containerization has revolutionized the
transportation business,
•lowering the costs of shipping goods over
long distances
•the real cost of information processing and
communication have fallen dramatically in
the past two decades

49. Cont………
•Using jet travel:
•an American manager need spend a day
at most traveling to her firm’s European or
Asian operations.
•This enables her to oversee a globally
dispersed production system