PAN AFRICAN INSTITUTE FOR DEVELOPMENT

-WEST AFRICA (PAID-WA) BUEA

DEPARTMENT OF BUSINESS AND

MANAGEMENT STUDIES

LECTURE NOTES FOR INTERNATIONAL

BUSINESS MANAGEMENT

PROGRAMME: MBA Strategic Management and Project

Management

COURSE TITLE: INTERNATIONAL BUSINESS MANAGEMENT

COURSE CODE: STMA622

TOTAL CREDITS: 3

BY
NGANG PEREZ
(MAJOR 1)

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 PAN AFRICAN INSTITUTE FOR DEVELOPMENT-
WEST AFRICA (PAID-WA) BUEA

LECTURE NOTES FOR INTERNATIONAL BUSINESS

PROGRAMME: MBA Strategic Management and Project Management

COURSE TITLE: INTERNATIONAL BUSINESS

COURSE CODE: STMA622

TOTAL CREDIT: 3

TOTAL LECTURE HOURS: 15

LECTURER: NGANG Perez (MAJOR 1)

A. COURSE OVERVIEW AND OUTLINE

1. Course Description: This course focuses on the challenges and prospects of engaging in
cross border businesses. Issues like differences in culture, policies, exchange rates and payment
processes; the course also examines the various entry strategies dealing with customs and
immigration, shipment and freights and documentation handling. How to conduct business in a
global marketplace. Dealing with differences in the political and economic milieu, and the effects
of the economic cycles on inflation rates.

2. COURSE OBJECTIVES: By the end of this course, student should be able to:
• Pedagogic Objectives
➢ Understand the complex and dynamic nature of the business environment in today’s
globalized economy in which the external and internal environments are not clearly separated.
• Learning Objectives: By the end of this course, student should be able to:
➢ To analyze different business environments and understand the development of
international business in emerging markets as well as the role of emerging market firms in the
global economy.
➢ To understand what makes a company do business internationally and stand out in
the process.
➢ Understand current issues and trends in international business

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 WEEK 1

SESSION 1/CHAPTER 1 INTRODUCTION TO INTERNATIONAL

BUSINESS
1.0 Brief Introduction: The international milieu has become a common feature of business
and trade. Today phrases such as “globalization”, “Multinational Corporation, and “cross border
transactions” have become common parlances. Despite this, doing business internationally is not
as easy as it seems. Whether in a broad sense, or in terms of the specific functions and activities
of a firm, international business involves interaction between multiple players, in a dynamic and
interconnected environment which comes with its own opportunities and challenges. Today,
thanks to globalization, states have become so interdependent that the political, socio-economic
and financial events in one country can seriously affect that of another country.

1.1 PEDAGOGIC OBJECTIVES

By the end of this session, students should be able to understand the nature and scope of
international business and describe the environment in which international business is carried
out.

1.2 LEARNING OBJECTIVES

By the end of this session, students should be able to define the international business concepts,
understand the reason for studying international business and identify the major stake holders in
international business as well as the role of globalization in the twenty first century business.

1.3 DEFINITION OF KEY TERMS

(a) International Business: International business can be defined as the carrying of economic
activities beyond national boundaries. Therefore, it relates to any situation where the production
or distribution of goods and services crosses national boundaries or country borders; these include
cross-border exchanges of goods, services or resources between two or more nations hence it can
also be referred to as cross-border business.

Multinational Company: This is an Organization with multicounty affiliates each of which is

left to adapt its product and marketing strategy to what local managers perceive to be unique aspect
of their individual markets

(b) Global company: It is an Organization that attempts to standardize operations worldwide in

all functional areas

(c) International Company: Could either be a global or multinational company

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(d) Business Environment: This is the sum of all the forces surrounding and influencing the life
and development of the firm. The domestic environment is composed of all the uncontrollable
forces originating in the home country. The foreign environment is composed of all the
uncontrollable forces originating outside the home country.

(e) Controllable and Uncontrollable Business Forces: Controllable forces are those variables
which management must administer in order to adapt changes in the uncontrollable environment.
Uncontrollable forces are those variables over which management has no direct control, although
it can exert some influence.

1.4 MAIN CONTENT

There is no longer any such thing as a purely national economy. The rest of the world is just too
big to ignore, either as a market or as a competitor. If business schools do nothing other than to
train their students to think internationally, they would have accomplished an important task.

This first topic of the course shall cover the following subtopics which are (a) why study
international business (b) participants and stakeholders, (c) the concept of globalization

1.4.1 REASONS FOR INTERNATIONAL BUSINESS

a. Sales Expansion: This is the main objective of international business. When a firm or
company sells its products in both the national and international markets, its sales are bound to
improve and this goes a long way to improve capital and foster the growth of the business.
b. Resource Acquisition: As seen above, it is impossible for any country to have all the
resources it needs for the production of goods, therefore; through international business, one
country can import the resources or goods it needs from another country.
c. Diversification: Companies are always looking for new ways to diversify production,
sources of sales and supplies. Moving to the foreign market is one way in which this can be done.
d. Minimize Competitive Risk: Every business, no matter its size, faces competition of some
sort. Some companies engage in international business so as to minimize competitive risks.
e. Others: Profit Maximization; Wider Market Coverage; Economies of Scale; Reduce
Effects of Business; Increase Company’s Image and legacy; Favorable Foreign Economic and
Political Policies; Favorable Country Culture and Social Acceptability; etc.

1.4.2 PARTICIPANTS AND STAKEHOLDERS IN INTERNATIONAL BUSINESS

A stakeholder is an individual or organization whose interests may be affected as the result of what
another individual or organization does. A stakeholder can be easily identified using the
stakeholder analysis. Stakeholder analysis is a technique used to identify and assess the importance
of key people, groups of people, or institutions that may significantly influence the success of an
activity, project, or business. In the context of international business, individuals or organizations
will have an interest in international business if it affects them in some way—positively or
negatively. In this regards, they are considered to have something important at stake as a result of
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some aspects of international business. There are three main stakeholders in international business,
namely: multinational corporations or enterprises, non-governmental organizations and
governments;

a. Multi-National Enterprises/Corporations (MNEs or MNCs)

Multinational enterprises (also known as multinational corporations) have historically been the
most active participants or stakeholders in international business. Because of their nature, they
tend to carry out research and development (R&D), procurement, manufacturing, and marketing
activities wherever in the world. In addition to a home office or headquarters, the typical MNE
owns a worldwide network of subsidiaries and collaborates with numerous suppliers and
independent business partners abroad (sometimes termed affiliates). Examples of MNEs include
goggle, Disney, DHL, etc. In recent years, the largest MNEs are found in the oil industry (such as
Exxon Mobil, Royal Dutch Shell, and BP) and the automotive industry (General Motors, Renault-
Nissan, Toyota, and Ford), as well as retailing (Wal-Mart).

While MNEs are among the leading participants, international business is not the domain of large,
resourceful firms alone. Many small and medium-sized enterprises (SMEs) participate as well.
The definition of an SME depends on the country in question given that it mostly has to do with
certain criteria. In Nigeria, small and medium enterprises are defined according to asset base and
number of staff employed. The criteria are an asset base between N5 million and N500 million,
and a staff strength between 20 and 300 employees; In Cameroon, an SME is a company which
has more than 15 employees. In addition to being smaller players in their respective economies,
SMEs tend to have limited managerial and other resources, and primarily use exporting to expand
internationally. In most nations, SMEs constitute between 90 and 95 percent of all firms. With the
globalization of markets, advances in various technologies, and other facilitating factors, more and
more SMEs are pursuing business opportunities around the world. One type of contemporary
international SME is a born global firm: this refers to a young entrepreneurial company that
initiates international business activity very early in its evolution, moving rapidly into foreign
markets.

International business requires specialized knowledge, commitment of resources, and considerable

time to develop foreign business partnerships. How then do SMEs succeed in international
business despite resource limitations? For several reasons: First, compared to large MNEs, smaller
firms are often more innovative, more adaptable, and have quicker response times when it comes
to implementing new ideas and technologies and meeting customer needs. Second, SMEs are
better able to serve niche markets around the world that hold little interest for MNEs. Third,
smaller firms are usually avid users of new information and communication technologies,
including the Internet. Fourth, as they usually lack substantial resources, smaller firms minimize
overhead or fixed investments. Instead, they rely on external facilitators such as FedEx and DHL,
as well as independent distributors in foreign markets. Fifth, smaller firms tend to thrive on private

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knowledge that they possess or produce. They access and mobilize resources through their cross-
border knowledge networks, or their international social capital.

b. Non-Governmental Organizations

It is not only profit-seeking firms who are involved in international business; there also exist
numerous non-profit organizations that conduct cross-border activities. These include charitable
groups and non-governmental organizations (NGOs). Non-governmental organizations (NGOs)
include any nonprofit, voluntary citizens’ groups that are organized on a local, national, or
international level. International NGOs (NGOs whose operations cross borders) date back to at
least 1839. They pursue special causes and serve as an advocate for the arts, education, politics,
religion, and research. They operate internationally to either conduct their activities or raise funds.
Examples of nonprofit organizations include the Bill and Melinda Gates Foundation and the British
Wellcome Trust, which support health and educational initiatives. There is also CARE which is
an international non-profit organization dedicated to reducing poverty. Moreover, many MNEs
operate charitable foundations that support various initiatives worldwide.

c. Governments

A government is generally considered to be the body of people that sets and administers public
policy and exercises executive, political, and sovereign power through customs, institutions, and
laws within a state, country, or other political units. Unlike popular believes that international
business is meant only for corporate bodies, governments are also involved in international
business through various forms. For instance, most national governments maintain embassies and
consulates in foreign countries. Apart from this, they also participate in international treaties
related to such issues as trade, the environment, or child labor. For example, the North American
Free Trade Agreement (NAFTA) is an agreement signed by the governments of the United States,
Canada, and Mexico to create a trade bloc in North America to reduce or eliminate tariffs among
the member countries and thus facilitate trade. The Kyoto Protocol is an agreement aimed at
combating global warming among participating countries. In some cases, such as with the
European Community (EC), agreements span trade, the environment, labor, and many other
subjects related to business, social, and environmental issues. The Atlanta Agreement, in turn, is
an agreement between participating governments and companies to eliminate child labor in the
production of soccer balls in Pakistan and the CEMAC treaty is an agreement between Central
African states to enhance free trade and movement within the Central African Sub Region. Finally,
supra-organizations such as the United Nations (UN) or the World Trade Organization (WTO) are
practically separate governments themselves, with certain powers over all member countries.

Beyond the company and governments, other stakeholder groups might include industry
associations, trade groups, suppliers, and labor. For instance, you’ve already learned that Google
is an Internet search-engine company, so it could be a member of various computer-related
industry associations. Labor is also a stakeholder: this can include not only the people immediately

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employed by a business-like Google but also contract workers or workers who will lose or gain
employment opportunities depending on where Google chooses to produce and sell its products
and services

1.4.3 THE CONCEPT OF GLOBALIZATION

Globalization can be defined as the shift toward a more interdependent and integrated global
economy. It can take place in terms of markets, where trade barriers are falling and buyer
preferences are changing or in terms of production, where a company can out-source goods and
services easily from other countries. In all globalization has created greater opportunities in
several domains such as that of ICT, institutionalization and of course, international business.

The globalization concept is not so much a debate as it may sound. Actually, it’s a stark difference
of opinion on how the internationalization of businesses is affecting countries’ cultural, economic,
and political identities—and whether these changes are desirable. Remember, globalization refers
to the shift toward a more interdependent and integrated global economy. This shift is fueled
largely by (1) declining trade and investment barriers and (2) new technologies, such as the
Internet. The globalization concept surrounds whether and how fast markets are actually merging
together. We however, examine globalization from the perspective presented by Thomas
Friedman.

a. “The World is Flat” View of Globalization

The flat-world view is largely credited to Thomas Friedman and his 2005 best seller, The World
Is Flat. Friedman covers the world for the New York Times, and his access to important local
authorities, corporate executives, local Times bureaus and researchers, the Internet, and a voice
recorder enabled him to compile a huge amount of information. Many people consider
globalization a modern phenomenon, but according to Friedman, this is actually the third stage of
globalization.

The First Stage of global development, what Friedman calls “Globalization 1.0,” started with
Columbus’s discovery of the New World and ran from 1492 to about 1800. Driven by nationalism
and religion, this lengthy stage was characterized by how much industrial power countries could
produce and apply. Here nations dominated global expansion.

The Second Stage; “Globalization 2.0,” from about 1800 to 2000, was disrupted by the Great
Depression and both World Wars and was largely shaped by the emerging power of huge,
multinational corporations. Globalization 2.0 grew with the European mercantile stock companies
as they expanded in search of new markets, cheap labor, and raw materials. It continued with
subsequent advances in sea and rail transportation. This period saw the introduction of modern
communications and cheaper shipping costs. Globalization in this era was driven by the ascension
of multinational companies, which pushed global development.

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The Third Stage; “Globalization 3.0” began around the year 2000, with advances in global
electronic interconnectivity that allowed individuals to communicate as never before. Here major
software advances have allowed an unprecedented number of people worldwide to work together
with unlimited potential. Friedman compares the shape of globalization in this phase to how
friendly local accountants in India do taxes. They can easily outsource the work via a server to a
tax team in Mumbai, India. This increasingly popular outsourcing trend has its benefits. As
Friedman notes, in 2003, about 25,000 US tax returns were done in India. By 2004, it was some
100,000 returns, etc. This development was enabled by a software program specifically designed
to let midsized US tax firms outsource their files. This innovation is not limited to accountants.
With the “globalization of innovation,” multinationals in India are filing increasing numbers of
US patent applications, ranging from aircraft-engine designs to transportation systems and
microprocessor chips. Japanese-speaking Chinese nationals in Dailian, China, now answer call-
center questions from Japanese consumers. JetBlue uses home sourcing for reservation clerks.
Today, about 16 percent of the US workforce works from home. In many ways, outsourcing and
home sourcing are related; both allow people to work from anywhere.

As Friedman advices, the world’s flattening and it can’t be stopped, so new workers and those
facing dislocation should refine their skills and capitalize on new opportunities. One key is to
become an expert in a job that can’t be delegated offshore. This ranges from local barbers and
plumbers to professionals such as surgeons and specialized lawyers.

1.4.4 Challenges of Conducting International Business

Due to the complexities of engaging and managing businesses across national boundaries, many
factors exist that, if not adequately addressed, can become great challenges.
Reflecting the discontinuous, diverse and complex backdrop against which it is enacted,
international business (IB) is synonymous with big challenges. Familiar challenges such as cultural
and institutional differences are perpetually potent, but ‘new’ concerns are also constantly
surfacing to engage the attention and interest of businesses: climate change and sustainability;
international terrorism/security threats; subprime crisis; global credit squeeze; rising energy and
food prices; threats of global recession; corruption and corporate scandals; digital piracy and
intellectual property theft and so on. These headline issues bear varying levels of relevance to
businesses operating around the world, with the extent of salience dictated by firms’ geographical
location, nature of industry and spread of activity. Nevertheless, international businesses tend, by
their typically expansive nature, to be more exposed to these contemporary challenges than purely
domestic businesses.
a. Cultural challenges
Cultural elements such as social institutions, gender roles, language, religion, aesthetics, education,
and time orientation are closely intertwined with national culture and have a major impact on the
acceptability and adoption of new products and services. The effect of culture is multifaceted in

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the sense that cultural values that are important to one group of people may mean little to another.
Cultural differences deeply affect adoption of products and services and other forms of market
behavior.
b. Language
Now that businesses are being conducted around the globe, managers must take language and
cultural factors into account when entry in to new markets. Language represents the most obvious
factor that makes international business so challenging. While many middle and upper
management executives worldwide have some command of the English language that does not
mean that English must be employed in conducting all business transactions. To make matters
even more complicated, variations within the same language may exist.
c. National norms
Following language, the most significant variable in successful foreign market research is cultural
norms. These norms are very influential forces, and can represent the difference between
successful product introduction and failure. Unfortunately, national norms are usually very subtle
rather than blatant and obvious, which makes them hard to discern and detect. Ignoring important
norms has caused other problems for international marketers. For example, Chase and Sanborn
met resistance when it tried to introduce its instant coffee into the French market. In the typical
French home, the consumption of coffee plays a very significant role. Since the preparation of real
coffee is a ritual in the life of the French consumer, they will generally reject instant coffee because
of its impromptu characteristics.
d. Time zones
Time zones present difficulties in conducting any type of business in foreign markets. During
business transactions, businessmen frequently find it necessary to communicate with each other
from a distant. Differing time zones in other countries impact business communication and,
ultimately. Even the time of day matters in places like Japan, where business-to-business
rendezvous is very difficult to negotiate during business hours.
e. Foreign holidays
The United States has a list of approximately 12 standard holidays per year. Other countries have
different lists, which can be much longer and certainly differ from the American calendar. Holidays
are yet another factor that can add to the total time frame required to complete an international
business project.
f. Market research infrastructure
Media availability, Internet penetration, quality control, and the overall market infrastructure
significantly impact the success of international business projects.

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g. Currency fluctuations
Doing business around the world always involves the risk of changes in a particular country's
currency.
h. Legal issues
Legal and privacy restrictions pose unique challenges in the international business arena. Asian
countries with strict privacy regulations potentially shut down certain business activities that
infringe privacy.
1.5 REVIEW QUESTIONS
➢ What is international business and why is study of international business important?
➢ Who is a stakeholder and why is stakeholder analysis important in international business?
➢ Describe the concept of globalization from the perspective of Thomas Friedman

1.6 REFERENCES

➢ “Global Economies,” Culture Quest Global Business Multimedia Series (New York:
Atma Global, 2010).
➢ Betz, F. 2002. Strategic Business Models. Engineering Management Journal, Vol. 14,
No. 1, pp. 21–27.
➢ Georges Enderle, ed., International Business Ethics: Challenges and Approaches (Notre
Dame, IN: University of Notre Dame Press, 1999), 1.
➢ William M. Pride, Robert James Hughes, and Jack R. Kapoor, Business, 9th ed. (Boston:
Houghton Mifflin, 2008Alt, R. & H.-D. Zimmermann. 2001. Preface: Introduction to Special
Section – Business Models. Electronic Markets, Vol. 11, No. 1, pp. 3-9.

1.7 TASKS

➢ Read the lecture notes on unit 1.4.3 ( the concept of globalization) and provide a brief
summary of not more than half a page

1.8 READING ASSIGNMENT | SUGGESTED READINGS

➢ Soft copy pdf text book. Download Thomas L. Friedman, “It’s a Flat World, After All,”,
April 3, 2005, using this web link http://www.nytimes.com/2005/04/03/magazine.html. Read
section 3, the globalization debate.

1.9 READING ASSIGNMENT SUPPLEMENTARY SOURCE

➢ You Tube Video lecture: International Business: Introduction and Essentials

➢ Video Highlights-Describes new trends in global businesses

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 ➢ Note: To access the video, copy and paste this Playlist
➢ URL: https://youtu.be/THJ6_lpWOYD9?V=39
➢ Source: https://www.youtube.com/watch?v=WOYDawOPT4 Retrieved 25 October 2014,

WRITTEN ASSIGNMENT

➢ The international business environment is surrounded by a host of stake holders. Outline

the fundamental stakeholders and explain their role in influencing today’s international business

DISCUSSION ASSIGNMENT

➢ Explain with examples the importance of international business

GRADED QUIZ

(1) The following factors explain the reasons for international business except one. What is the
exception?

➢ For profit maximization

➢ To gain a wider market coverage
➢ To understand better international relations
➢ To gain access to cheap resources

(2) The following are the major stakeholders in international business except one

➢ Multinational companies
➢ Non-Governmental Organizations
➢ Governments
➢ Churches

(3) The “World is Flat” describes the concept of globalization put forward by

(a) Henry Fayol

(b) Thomas Friedman
(c) David Foster
(d) Flamholtz

(4) The Term “Born Global” in international business describes;

(a) Companies with a share capital of more $15000 in foreign markets

(b) Firms operating only in foreign markets
(c) Companies with 100 employees engage in international business

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 (d) Companies that initiates international business activity very early in its evolution, moving
rapidly into foreign markets.

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