Pdf introduction to international business rutgers university

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International Business
Definitions
1) IB field is concerned with the issues facing international
companies and governments in dealing with all types of cross-
border transactions.
2) IB involves all business transactions that involve two or more
countries.
3) IB consists of transactions that are devised and carried out
across borders to satisfy the objectives of individuals and
organizations.
4) IB consists of those activities private and public enterprises
that involve the movement across national boundaries of goods
and services, resources, knowledge or skills.
Multinational Enterprises
A MNE has a worldwide approach to
foreign markets and production and
an integrated global philosophy
encompassing both domestic and
international markets.
International Management
defined as a process of accomplishing the global
objectives of a firm by (1) effectively
coordinating the procurement, allocation, and
utilization of the human, financial, intellectual,
and physical resources of the firm within and
across national boundaries and (2) effectively
charting the path toward the desired
organizational goals by navigating the firm
through a global environment that is not only
dynamic but often very hostile to the firm's very
survival.
1
International Trade: When a firm exports goods
or services to consumers in another country.
Foreign Direct Investment: When a firm invests
resources in business activities outside its home
country.
The Globalization of the World
Economy
uGlobalization of markets
uGlobalization of production
uDecline of barriers to trade (WTO)
uIncreased technological capabilities
u60,000 international firms with 500,000
foreign affiliates that generate $11 trillion in
sales in 1998
Globalization
u Trade and investment barriers
are disappearing.
u Perceived distances are
shrinking due to advances in
transportation and
telecommunications.
u Material culture is beginning
to look similar.
u National economies merging
into an interdependent global
economic system.
2
Globalization: Pros& Cons
u Pros u Cons
- Increased revenue - Different nations = different
opportunity through problems.
global sales. - Similarities between nations
- Reduced costs by may be superficial.
producing in `low cost' - Global planning may be
countries. easy, but global execution
is not.
What is "Globalization"?
Markets
"The shift toward a
more integrated and
interdependent world
economy."
Production
Globalization of Markets
u "Merging of historically distinct and separate national
markets into one huge global marketplace."
- Facilitated by offering standardized products:
Citicorp
Coca-Cola
Sony PlayStation
McDonalds
- Does not have to be a big company to participate:
Over 200,00 U.S. companies with less than 100 employees had
foreign sales in 2000.
3
The Largest Global Markets
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Globalization of production
uRefers to sourcing of goods and services
from locations around the world to take
advantage of
- Differences in cost or quality of the factors of
production
Labor
Land
Capital
Globalization of Production
u "The sourcing of goods and
services from locations
around the globe to take
advantage of national "Global Products"
differences in the cost and
quality of factors of
production (labor,energy, land
and capital)."
u Companies hope to lower
their overall cost structure
and/or improve the quality or
functionality of their product
offering - increasing their
competitiveness.
4
Volume of world trade and production,
1950-2002
Fig: 1.1
Macro Factors
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Globalization
TTeecchhnnoollooggiiccaall
CChhaannggee
General Agreement on Tariffs and
Trade
Member states (140) in eight negotiating `rounds'
worked to lower barriers to the free flow of
goods and services.
In the most recent round, the Uruguay Round,
nations agreed to enhanced patent, copyright and
trademark protections and established the
World Trade Organization.
5
Average Tariff Rates on
Manufactured Products as Percent of
1913
Value
1950 1990 2000
France 21% 18% 5.9% 3.9%
Germany 20 26 5.9 3.9
Italy 18 25 5.9 3.9
Japan 30 5.3 3.9
Holland 5 11 5.9 3.9
Sweden 20 9 4.4 3.9
Britain 23 5.9 3.9
U.S.A. 44 14 4.8 3.9
Table 1.1
Fewer FDI Restrictions
Between 1991 and 2000
of the 1,121 changes worldwide in laws
governing FDI, 95% created a more
favorable investment environment.
During 2000, 69 countries made 150
changes to FDI regulations, 147 or 98%
were more favorable to investment.
The Growth of World Trade and
Output
2500
2000
Trade
1500 Trade
1000 O utput
5 0 0 GDP
0
1950 1960 1970 1980 1990 2000
Figure 1.1
6

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