generally don’t find our economic status satisfactory unless
Globalization
Globalization refers to the widening set of interdependent
relationships among people from different parts of a world that
happens to be divided into nations. The term sometimes
refers to the elimination of barriers to international
movements of goods, services, capital, technology, and
people that influence the integration of world economies
(Daniels, Radebaugh, & Sullivan, 2019).
Globalization and the relaxation of trade barriers have led to
the growth of international trade. Growing demand for
products has also led to greater awareness of brands and
special services. Furthermore, international Trade is the
exchange of capital, goods and services across international
borders or territories, which could involve the activities of the
government and individual. In most countries, such trade
represents a significant share for gross domestic product
(GDP) (Dawson, 2017).
Factors in Increased Globalization
What factors have contributed the growth of globalization in
recent decades? Most analysts cite the following factors:
1. Increase in and application of technology.
2. Liberalization of cross-border trade and resource movements
3. Development of services that support international business
4. Growth of consumer pressures
5. Increase in global competition
6. Changes in political situations and government policies
7. Expansion of cross-national cooperation
The Costs of Globalization (Daniels, Radebaugh, &
Sullivan, 2019)
Threats to national sovereignty
You’ve probably heard the slogan “Think globally, act locally.”
In essence, it means that local interests should be
accommodated before global ones. Some observers worry
that the proliferation of international agreements, particularly
those that undermine local restrictions on how goods are
produced and sold, will diminish a nation’s sovereignty—its
freedom to “act locally” and without externally imposed
restrictions.
• The Question of Local Objectives and Policies
• The Question of Small Economies’ Overdependence
• The Question of Cultural Homogeneity
Environmental stress
The Argument for Global Growth and
Global. Cooperation Not everyone agrees with such a
conclusion. Others argue that globalization has positive
results for both sustaining natural resources and
maintaining an environmentally sound planet. Global
cooperation, they say, fosters superior and uniform
standards for combating environmental problems, while
global competition encourages companies to seek
resource-saving and eco-friendly technologies, such as
automobiles that use less gas and emit fewer pollutants.
Growing income inequality and personal stress.
In measuring economic well-being, we not only look at our
absolute situations but also compare ourselves to others. We
we’re doing better and keeping up with others.
Income Inequality. By various measurements, income
inequality, with some notable exceptions, has been
growing both among and within a number of countries.
Critics claim that globalization has affected this disparity
by helping to develop a global superstar system, creating
access to a greater supply of low-cost labor, and
developing competition that leads to winners and losers.
Personal stress. There is some evidence that the
growth in globalization goes hand in hand not only with
increased insecurity about job and social status but also
with costly social unrest
Characteristics of Global Trade (Dawson, 2017)
• Trading globally gives consumers and countries the
opportunity to be exposed to new markets and products (i.e.,
foods, clothes, spare parts, oil, jewelry, wine, stocks,
currencies and water).
• Services are also traded: tourism, banking, consulting, and
transportation.
• Export are product sold to the global market and products that
is bought from the global market is import.
• Imports and exports are accounted for in a country’s current
account in the balance of payments.
• Industrialization, advanced technology, including
transportation, globalization, multinational corporations, and
outsourcing are all having a major impact on the international
trade system.
• International trade is mostly restricted to trade in goods and
services, and only to a lesser extent to trade in capital, labor
or other factors of production.
• Trades in goods and services can serve as a substitute for
trade factors of production. Ex. Import of labor-extensive
goods by the United States from China. Instead of importing
Chinese labor, the United States imports goods that were
produced with Chinese labors.
• International trade is also a branch of economics, which,
together with international finance, forms the larger branch
called international economics.
Global Marketing
Global Marketing is “marketing on worldwide scale
reconciling or taking commercial advantage of global
operational differences, similarities and opportunities in order
to meet global objectives” (Dawson, 2017).
Companies today can no longer afford to pay attention only t
o their domestic market, no matter
how large it is. Many industries are global industries, and
those firms that operate globally achieve lower costs and
higher brand awareness. At the same time, global marketing
is risky because of variable exchange rates,
unstable governments, protectionist tariffs and trade barriers,
and several other factors. Given the potential gains and risks
of international marketing, companies a systematic way to
make their international marketing decisions. The company
must understand the international marketing environment
(Global marketing: International trade system, economic
environment, 2020).
Worldwide Competition
 One of the product categories in which global competition has
been easy to track in U.S. automotive sales. The increasing
intensity of competition in global markets is a challenge facing
companies at all stages of involvement in international
markets. As markets open up, and become more integrated,
the pace of change accelerates, technology shrinks distances
between markets and reduces the scale of advantages of
large firms, new sources of competition emerge, and
competitive pressures mount at all levels of the
organization. Also, the threat of competition from companies
in countries such as India, China, Malaysia, and Brazil on the
rise, as their own domestic markets are opening up for foreign
competition, stimulating greater awareness of international
marker opportunities and of the need to be internationally
competitive. Companies which previously caused on
protected domestic markets are entering into markets in other
countries creating new source of competition, often targeted
to price-sensitive market segments. Not only is competition is
intensifying for all firms regardless of their degree of global
market involvement, but the basis for competition is
changing. Competition continues to be market-based and
ultimately relies on delivering superior value to
customers. However, success in global markets depends on
knowledge accumulation and deployment. Today, more and
more marketing companies specialize in translating products
from one country to another (Dawson, 2017).
Domestic Marketing (Dawson, 2017)
• A marketing restricted to the political boundaries of a country.
A company marketing only within its national boundaries only
has to consider domestic competition.
• Products and services are developed for customer in the
home market without thought of how the product and services
could be used in other markets and the marketing decisions
are made at headquarters.
• The biggest obstacle these marketers are facing is being
blindsided by emerging global marketers.
• The domestic market is a large market that every nation
needs. These marketers are all restricted to be under control
of certain boundaries in that company or country.
• A firm operating in a domestic market also gets the
opportunity to operate in different areas and this gives the
company an opportunity to have bigger marketers to advertise
to.
International Marketing (Dawson, 2017)
• International marketing is the export, franchising, joint venture
of full direct of an organization’s product or services into
another country.
• Development of the marketing mix for that country is then
required.
• It can be a straightforward as using marketing strategies, mix
and tools for export on the one side, to a highly complex
relationship strategy including localization, local product
offering, pricing, production and distribution with customized
promotion, offers, website, social media and leadership.
• Internationalization and international marketing meet the
needs of selecting foreign countries where company’s value
can be exported and there is inter-firm and firm learning,
optimization and efficiency in economies of scale and scope.
• The firm does need to export or enter all world markets to be
considered an international marketer.
Global Marketing (Dawson, 2017)
• Global marketing is a firm’s ability to market to almost all
countries on the planet.
• The global firm retains the capability, reach, knowledge, staff,
skills, insights and expertise to deliver value to customers
worldwide.
• The firm understands the requirement to service customers
locally with global standard solutions or products, and
localizes that products as required to maintain an optimal
balance of cost, efficiency, customization and localization in a
control-customization continuum to best meet local, national
and global requirements to position itself against or wit
competitors, partners, alliances, substitutes and defend
against new global and local market entrants per country,
region or city.
• The firm will price its products appropriately worldwide,
nationally and locally, and promote, deliver access and
information to its customers in the most cost-effective way.
• The firm needs to understand, research, measure and
develop loyalty for its brand and global brand equity (stay on
brand) for long term.
Elements of Global Marketing (Dawson, 2017)
Not only do standard marketing approaches, strategies,
tactics and processes apply, global marketing requires
an understanding of global finance, global operations
and distribution, government relations, global human
capital management and resource allocation, distributed
technology, development and management, global
business logic, interfirm and global competitiveness,
exporting, joint ventures, foreign and direct investments
and global risk management.
The standard “Four P’s” of marketing: product, price,
place and promotion are all affected as a company
moves through five revolutionary phases to become a
global company.
Product. A global company is one that can create a
single product only have to tweak elements for different
marketers.
Example: Coca-Cola uses to formulas (one with sugar, one
with corn syrup) for all markets. The product packaging in
every county incorporates the contour bottle design and the
dynamic ribbon in some way, shape, or form. However, the
bottle can also include the country’s native language and in
the same sizes as other beverage bottles or cans in that same
country.
Luxury products, high-tech products, and new
innovations are the most common products in the
global marketplace. They are easier to market in a
standardized way than other products because
there are no traditional cultural values attached to
their meanings.
Price. Price will always vary from market to
market. Price is affected by many variables: cost of
product development (product locally or incorporated),
cost of ingredients, cost of delivery (transportation,
tariffs, etc.) and much more. Additionally, the product’s
position in relation to the competition influences the
ultimate profit margins. Whether this product is
considered high-end, expensive choice, the economical,
low-cost choice, or something in-between helps
determine the price point.
 Place. How the product is distributed is also a country-
by-country decision influenced by how the competition is
being offered to the largest market. Using Coca-Cola as
an example again, not all cultures use vending
machines.
• In the United States, beverages are sold by the pallet via
warehouse stores.
• In India, this is not an option.
Placement decisions must also consider the product’s
position on the market place.
For example, a high-end product would not want to be
distributed via a “dollar store” in the United
States. Conversely, a product promoted as the low-cost
option in France would find limited success in a pricey
boutique.
Promotion. After product research, development and
creation, promotion (specifically advertising) is generally
the largest line item in a global company’s marketing
budget. At this stage of a company’s development,
integrated marketing is the goal. The global corporation
seeks to reduce costs, minimize redundancies in
personnel and work, maximize speed of implementation,
and to speak with one voice.
Advantages and Disadvantages of Global Marketing
(Dawson, 2017)
Advantages
The advantages of global market include:
• Economies of scale in production and
distribution
• Lower marketing costs
• Power and scope
• Consistency in brand image
• Ability to leverage goods ideas quickly
and efficiently
• Uniformity of marketing practices
• Helps to establish relationships outside
of the “political arena”
• Helps to encourage ancillary industries to
be set up to cater for the needs of the global player
• Benefits of eMarketing over traditional
marketing
Disadvantages
The disadvantages of global market include:
• Differences in consumer needs, wants,
and usage patterns for products
• Differences in consumer response to
marketing mix elements
• Differences in brand and product
development and the competitive environment
• Differences in legal environment, some
of which may conflict with those of the home market
• Differences in the institutions available,
some of which may call for the creation of entirely new ones
(e.g, infrastructure)
• Differences in administrative procedures
• Differences in product development
• Differences in administrative procedures
and product placement can occur
International business
International business comprises all commercial transactions
(private and governmental sales, investments, logistics and
transportation) that take place between two or more regions,
countries and nations beyond their political boundaries. The
term “international business” refers to all those business
activities which have cross-border transactions of goods,
services, resources between two or more
nations. Transactions of economic resources include capital
skills, people etc. for international production of physical
goods and services such as finance, banking, insurance,
construction etc. (Dawson, 2017).
International business consists of all commercial transactions
between two or more countries (Daniels, Radebaugh, &
Sullivan, 2019).
• The goal of private business is to make profits.
• Government business may or may not be motivated by profit.
Studying international business is important because
(Daniels, Radebaugh, & Sullivan, 2019)
• Most companies either are international or compete with
international companies.
• Modes of operations may differ from those used domestically.
• The best way of conducting business may differ by country.
• An understanding helps you make better career decisions.
• An understanding helps you decide what governmental
policies to support.
A multinational enterprise (MNE) is a company that has a
worldwide approach to markets and production or one with
operations in several countries. Well-known MNEs include
fast-food companies such as McDonald’s and Yum Brands,
vehicle manufacturers such as General Motors, Ford Motor
Company and Toyota, consumer-electronics producers like
Samsung, LG and Sony, and energy companies such as
ExxonMobil, Shell and BP. These multinational enterprises
can make business in different types of market (Dawson,
2017).
Figure 1.1.1. Factors in International Business Operations
Source: International Business: Environments and Operations by Daniels,
Radebaugh, & Sullivan (2019)
The conduct of a company’s international operations as
shown in Figure 1.1.1. depends on two factors: its objectives
and the means by which it intends to achieve them. Likewise,
its operations affect, and are affected by two sets of factors:
physical/social and competitive. Understanding the
complexities may be useful to you. Companies’ international
operations and their governmental regulations affect overall
national conditions—economic growth, employment,
 consumer prices, national security—as well as the success of
individual industries and firms. A better understanding of
international business will help you make more informed
decisions, such as where you want to work and what
governmental policies you want to support (Daniels,
Radebaugh, & Sullivan 2019).
Why Companies Engage in International
Business (Daniels, Radebaugh, & Sullivan 2019)
1. Expanding Sales. Pursuing international sales usually
increases the potential market and potential profits.
2. Acquiring Resources. Foreign sources may give
companies: lower cost, Lower costs, new or better products
and additional operating knowledge.
3. Reducing Risk. International operations may reduce
operating risk by smoothing sales and profits and preventing
competitors from gaining advantages.
Modes of Operations in International Business (Daniels,
Radebaugh, & Sullivan 2019)
1. Merchandise Exports and Imports. Merchandise exports
and imports are usually a country’s most common
international economic transactions. Merchandise exports are
tangible products—goods—that are sent out of a country;
merchandise imports are goods brought into a country.
2. Service Exports and Imports. The terms export and import
often apply only to merchandise. For non-merchandise
international earnings, we use the terms service exports and
service imports and are referred to as invisibles. The provider
and receiver of payment makes a service export; the recipient
and payer makes a service import. Services constitute the
fastest growth sector in international trade and take many
forms. In this section we discuss the most important:
• Tourism and transportation. The economies of some countries
depend heavily on revenue from these sectors
• Service performance. Some services, including banking,
insurance, rental, engineering, and management services, net
companies earnings in the form of fees: payments for the
performance of those services
• Asset use. When one company allows another to use its
assets—such as trademarks, patents, copyrights, or
expertise—under contracts known as licensing agreements,
they receive earnings called royalties.
3. Investments. Dividends and interest paid on foreign
investments are also considered service exports and imports
because they represent the use of assets (capital). The
investments themselves, however, are treated in national
statistics as separate forms of service exports and imports.
Note that foreign investment means ownership of foreign
property in exchange for a financial return, such as interest
and dividends, and it may take two forms: direct and portfolio.
4. Types of International Organizations. Companies work
together—in joint ventures, licensing agreements,
management contracts, minority ownership, and long-term
contractual arrangements—all of which are known as
collaborative arrangements.
• Multinational Enterprise A multinational enterprise (MNE)
usually refers to any company with foreign direct investments.
This is the definition we use in this text. However, some writers
reason that a company must have direct investments in some
minimum number of countries to be an MNE. The term
multinational corporation or multinational company (MNC) is
often used as a synonym for MNE, while the United Nations
uses the term transnational company (TNC).
Why International Business Differs from Domestic
Business (Daniels, Radebaugh, & Sullivan 2019)
1. Physical and Social Factors. The physical and social factors
we show above can affect how companies produce and
market products, employ personnel, and even maintain
accounts. Remember that any of these factors may require a
company to alter its operation abroad (compared to
domestically) for the sake of efficiency.
1. Geographic Influences. Managers who are knowledgeable
about geography are in a position to determine the location,
quantity, quality, and availability of the world’s resources, as
well as ways to exploit them. The uneven distribution of
resources throughout the world helps explain why different
products and services are produced in different places.
Further, countries differ in size of landmass and population.
2. Political Policies. Not surprisingly, a nation’s political policies
influence how international business takes place within its
borders (indeed, whether it will take place). Obviously, political
disputes—particularly military confrontations—can disrupt
trade and investment. Even conflicts that directly affect only
small areas can have far-reaching effects.
3. Legal Policies. Domestic and international laws play a big
role in determining how a company can operate abroad.
o Domestic law includes both home- and host-country
regulations on such matters as taxation, employment, and
foreign-exchange transactions.
o International law — in the form of legal agreements between
countries—determines how earnings are taxed by all
jurisdictions. International law may also determine how (and
whether) companies can operate in certain places.
o Finally, the ways in which laws are enforced also affect a firm’s
foreign operations. In the realm of trademarks, patented
knowledge, and copyrights, most countries have joined in
international treaties and enacted domestic laws dealing with
violations.
4. Behavioral Factors. The related disciplines of anthropology,
psychology, and sociology can help managers better
understand different values, attitudes, and beliefs. In turn,
such understanding can help managers make operational
decisions abroad.
5. Economic Forces. Economics explains why countries
exchange goods and services, why capital and people travel
among countries in the course of business, and why one
country’s currency has a certain value compared to another’s.
2. The Competitive Environment. Companies’ competitive
situations may differ by: (1) their rankings among countries,
(2) the competitors they face by country; and (3) the resources
they can commit internationally.
• Competitive Strategy for Products. Products compete by
means of cost or differentiation strategies, the latter usually
by:
o developing a favorable brand image, usually through
advertising or from long-term consumer experience with the
brand; or
o developing unique characteristics, such as through R&D
efforts or different means of distribution.
• Competitors Faced in Each Market. Finally, success in a
market (whether domestic or foreign) often depends on
whether the competition is also international or local.