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International Business

Chapter 1
Globalisation and International Business
Answer these questions...
• What is your favourite drink?
• What is the brand of your PC?
• What is the name of the publisher of you
book?
• Which cell phone do you use?

Where were these made?


Globalisation
• Globalisation refers to the increase in
relationship among the people from different
parts of the world.
• it also means reduced barriers for the
movement of:
– Trade
– Capital
– Technology
– People
International Business
• International business is the study of
transactions taking place between two or
more countries for the purpose of satisfying
the needs of individuals and organizations.
• These economic transactions consist of
– Trade (exporting and importing),
– foreign direct investment (companies funding
operations in other countries)
Why should we study
International Business?
Why International Business is
important?
– Most companies are either international or
compete with international companies

– We rely on a lot of imported goods for


consumption or as a raw material

– Many people visit our country every year

– Oil and roses from our country is purchased by


other countries
Why globalization has increased?
A. Increase in and application of technology
B. Reduction in rules and regulation for cross-
border trade and resource movements
C. Development of services that support
international business e.g. DHL
D. Growing consumer pressures
E. Increased global competition
F. Changing political situations
G. Expanded cross-national cooperation

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What is wrong with globalisation
• Threats to national sovereignty (safety of
country)
• Economic growth can damage environment
• Growing income inequality and personal
stress
• Many people are loosing jobs because of
offshoring and outsourcing
What is wrong with globalisation
• Off shoring: • Outsourcing
– the process of shifting – the process of purchasing
domestic production to a component of product
a foreign country for or service from another
the purpose of serving company rather than
the home market at a making it within company
reduced cost

•it can be beneficial because it reduces costs


•but, it also means that jobs move abroad
Why Companies Engage in
International Business?
1. To expand sales

2. To acquire resources

3. To diversify or reduce
risks
A. give companies lower B. reduce operating risk by
C. It increases the
costs, new and better smoothing sales and
potential market (number
products, and additional profits, preventing
of customers) and
operating knowledge competitors from gaining
potential profits
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How a company can be involved in
international business?
Collaborative
Trade Investment
Agreements
Export/import of
Foreign Direct investment Joint ventures
Merchandise

Export/import of Services Portfolio Investment Licensing arrangements

Management contracts

Minority ownership

Long-term contractual
arrangements
How a company can be involved in
international business?
• Modes of operations in International Business
– Merchandise Exports and Imports (visible trade)
How a company can be involved in
international business?
• Modes of operations in International Business
– Service exports and imports (invisible trade)

Examples
– Tourism and transportation
– Service performance
• turnkey operations and management contracts
– Asset use
• licensing and franchising
How a company can be involved in
international business?
• Modes of operations in International Business
– Investments
• Foreign Direct Investment (FDI)
– investor takes a controlling interest in a foreign
company
• Portfolio Investment
– a non-controlling financial interest in another entity
Types of International Organizations
• Collaborative arrangements
– Joint ventures
– Licensing arrangements
– Management contracts
– Minority ownership
– Long-term contractual arrangements

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Types of International Organizations
• Multinational enterprises (MNEs)
– take a global approach to markets and production
or have operations in more than one country
• Sometimes they are referred to as
– multinational corporations (MNCs)
– multinational companies (MNCs)
– transnational companies (TNCs)

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