Regional and Global Strategy

Slide 1.
Chapter 1
Regional and global strategy
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013
Slide 1.2
Regional and global strategy
Objectives
Introduction
World business: a brief overview
Todays international environment
Globalization and strategic management
The study of international business
Framework for this book.
Slide 1.3
Objectives
Define the terms international business and MNE.
Discuss the two primary ways in which international
business occurs: trade and FDI.
Examine the impact of the triad on international trade
and investment.
Describe the current state of world economies and the
role of government and trade regulations in the
conduct of international business.
Discuss the importance of technology and the role of
SMEs in the international business arena.
Examine how MNEs use triad/regional strategies to
compete effectively in the international marketplace.
Discuss the determinants of national competitive
advantage.
Slide 1.4
Introduction
International business: the study of
transactions taking place across national borders
for the purpose of satisfying the needs of
individuals and organizations.
Multinational enterprises (MNEs): a company
headquartered in one country but having
operations in other countries.
Slide 1.5
World business: a brief overview
Slide 1.6
MNE activity
Most MNE activity can be classified into two major
categories:
(1) Trade (exports and imports): More than 50%
of all trade is made by the worlds largest 500 MNEs.
(2) Foreign direct investment (FDI): 80% of all
FDI is made by the worlds largest 500 MNEs.
Slide 1.7
Trade and investment

Trade consists of exports and imports:
Exports: goods and services produced in one
country and then sent to another country.
Imports: goods and services produced in one
country and brought in by another country.
Foreign investment: consists of companies

investing funds to start or improve operations in
another country.
Slide 1.8
Table 1.1
World Trade, 2008
Note: Data for European Union include intra-EU trade. Exports are calculated by including freight and insurance, while
imports do not include freight and insurance. As a result, data might not be consistent with other data in this book.
Source: Adapted from International Monetary Fund, Direction of Trade Statistics Yearbook, 2009 (Washington, DC: IMF,
2009), pp. 25.
Slide 1.9
Table 1.2
Intra-regional trade in the triad, 19802008
Note: Asia data were calculated using information for exports from Japan, China, India, Indonesia, South Korea, Malaysia,
Singapore, Thailand and Australia to the Asian region and the world. Data for EU are for intra-EU exports in 2000 and 2008
and intra-EEC Exports in 1980.
Source: Authors calculations based on the IMF, Direction of Trade Statistics Yearbook, 2009 and 1985.
Slide 1.10
Table 1.3a
Foreign direct investment in the United States, 2008 (by US$ size ranking)
Note: Data are on a historical-cost basis. Numbers might not add up due to rounding.
Sources: Authors calculations and ranking by US$ size and US Department of Commerce, Survey of Current Business, July
2009; Table 1255. Foreign Direct Investment Position in the United States on a Historical-Cost Basis by Selected Country,
and by Industry
Slide 1.11
Table 1.3b Foreign direct investment by the United States, 2008 (by US$ size ranking)
Note: Data are on a historical-cost basis. Numbers might not add up due to rounding.
Sources: Authors calculations and ranking by US$ size and US Department of Commerce, Survey of Current Business, July
2009; Table 1260. U.S. Direct Investment Position Abroad on a Historical-Cost Basis by Selected Country
Slide 1.12
The triad
Most global transactions take place within and
between three key regions: the United States, the
European Union and Japan; these are referred to
as the triad.
Slide 1.13
The triad: the United States (US)

The US has the largest economy in the world with
a GDP of over $14.14 trillion (2009 estimate).
The US is part of the North American Free Trade
Agreement (NAFTA) with Canada and Mexico.
The US economy is significantly larger than that of
its two trading partners and is therefore a triad
member on its own.
Slide 1.14
The triad: the European Union (EU)

The EU (or EU27) is composed of the countries in
the EU15 (Austria, Belgium, Denmark, Finland,
Germany, Greece, France, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain,
Sweden and the UK) and 12 new, mainly Central
European, countries that joined in 2004 and 2007.
The collective GDP of the EU is greater than that
of the US and Japan.
The EU27 is the worlds largest importer and
exporter.
Slide 1.15
The triad: Japan

Japan is the largest economy in Asia.
Japan is the 4th largest importer and 4th largest
exporter in the world.
Slide 1.16
Todays international environment
Slide 1.17
International business environment

The international business environment has
changed rapidly in recent years as a result of:
an overall slowdown of triad economies;
increased trade liberalization through trade
agreements;
improvements in technology;
the emergence of SMEs.
Slide 1.18
Slowdown of triad economies

In the late 1990s and early 2000s, the United
States, the EU and Japan all experienced a
reduction in economic activity, which, in turn,
decreased international business activity.
Slide 1.19
International trade regulation

An important international business trend has
been the emergence of regional and global trade
and investment liberalization and international
regulation.
The World Trade Organization (WTO).
General Agreement on Tariffs and Trade (GATT).
Slide 1.20
The World Trade Organization

Established on January 1, 1995.
An international organization that deals with rules
of trade among member countries.
Enforces the provisions of the General Agreement
on Tariffs and Trade (GATT).
Acts as a dispute-settlement mechanism.
Slide 1.21
The General Agreement

on Tariffs and Trade (GATT)
Established in 1947 to liberalize trade and to
negotiate trade concessions among member
countries.
Today, the WTO is enforcing the provisions of the
GATT.
Slide 1.22
Improved technology
More powerful and affordable technology has
promoted fast, easy worldwide communication
and improved production capabilities enabling
organizations to operate more effectively in the
international marketplace.
Slide 1.23
Small and medium-sized

enterprises (SMEs)
The definition of SMEs varies according to the
nation. In general, it refers to companies with
between 11 and 500 employees with sales of less
than $5 million.
MNEs often purchase from SMEs. This is because
their specialized workforces, innovation and
technology allow SMEs to provide goods and
services more efficiently than if the MNE were to
source these internally.
Slide 1.24
Regional triad strategies
Slide 1.25
Misconceptions about MNEs

Common misconceptions about MNEs:
MNEs have far-flung operations or earn most of
their revenues overseas.
MNEs are globally monolithic and excessively
powerful in political terms.
MNEs produce homogeneous products for the
world market and through their efficient techniques
are able to dominate local markets everywhere.
Slide 1.26
Misconceptions about MNEs

(Continued)
In fact,
MNEs earn most of their revenues in their
home regions.
The largest 500 MNEs are not spread around
the world but are clustered around the triad.
These MNEs engage not in global competition
but in triad/regional competition; this rivalry
effectively eliminates enduring political
advantage.
MNEs adapt their products for the local market.
Slide 1.27
Maintaining economic competitiveness
Slide 1.28
Porters determinants of
national competitive advantage
Why are some firms able to innovate consistently
while others are not?
Factor conditions
Demand conditions
Related and supporting industries
Firm strategy, structure, and rivalry.
Each of these determinants depends on the

others as a system.
Slide 1.29
The study of international business
From general to strategic emphasis
Slide 1.30
Table 1.4
Comparative differences in the study of international business, 19502010

Slide 1.31
Framework for this book
Slide 1.32
Figure 1.1
Model for this book


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Slide 1.

Regional and global strategy

Regional and global strategy

World business: a brief overview

Trade and investment

Foreign investment: consists of companies

World Trade, 2008

Intra-regional trade in the triad, 19802008

The triad: the United States (US)

The triad: the European Union (EU)

The triad: Japan

Todays international environment

International business environment

Slowdown of triad economies

International trade regulation

The World Trade Organization

The General Agreement

Small and medium-sized

Regional triad strategies

Misconceptions about MNEs

Misconceptions about MNEs

Maintaining economic competitiveness

Each of these determinants depends on the

The study of international business

From general to strategic emphasis

Comparative differences in the study of international business, 19502010

Framework for this book

Model for this book

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