chapter 1 an overview of international...

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Chapter 1An Overview of International Business

International Business

Su Jin Victoria Yeon, Copyright 2015

Learning Objectives


Discuss the meaning of international business Explain the importance of understanding international business Identify and describe the basic forms of international business activities Discuss the causes of globalization Comprehend the growing role of emerging markets in the global

economy

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Outline of Chapter 1


What is International Business? Why Study International Business? International Business Activities

Exporting and Importing International Investments Other Forms of International Business Activity

The Era of Globalization The Contemporary Causes of Globalization

Strategic Imperatives To leverage core competencies To acquire resources an supplies To seek new markets To better compete with rivals

The Environmental Causes of Globalization Changes in the political environment Technological changes

Globalization and Emerging Markets

1. What is International Business?


International Business (IB) Business transactions between parties from more than one country

E.g. Buying materials in South Africa and shipping them to Korea, Shipping finished products from Korea to China for retail sale, Building a plant in China to capitalize on lower labor costs, Borrowing money from a bank in the US to finance operations in Europe

International Business vs. Domestic Business How does IB differ from domestic business?

Different currencies Different legal systems

Different culture

Different availability of resources E.g. skilled labor, cheap labor cost, natural resources, financial capital etc.

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Why Study International Business?


1. To give yourself more opportunities for your future / career developmentIf you would like to become a manager in a successful company… Most large companies operate in more than one country or at least influenced by the global e

conomy Even small businesses are becoming more involved in international business

A basic grasp of international business would help you understand more fully what the company expect to accomplish, how you might most effectively interactive with your colleagues or clients from other countries

If you would like to start a new business… Increased potential for larger success with global consumers

Development of technology – e.g. internet, smart devices etc.; globalization movement

2. To keep pace with your future competitors Your future competitors may not just be the people from your own country You need to ensure that your global skills and knowledge will aid your career

Why Study International Business?


To stay abreast of (i.e. not to be lagged behind) the latest business techniques and tools No single country has a monopoly on good ideas Discussions of case studies, theories or research work on issues relating international

business Managers who remain ignorant of the innovations of their international competitors are bound

to fail in the global marketplace E.g. American automotive, electronics industries in the 70s and 80s; Sony in the 21st Century

To obtain cultural literacy Understanding and appreciating the similarities and difference of the world’s peoples

have become more important than ever You may have colleagues, customers, partners, suppliers from other countries

Knowing something about how and where their countries and companies fit into the global economy can help you earn their respect and confidence

Give you a competitive edge dealing with them

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International Business Activities


Exporting and Importing International Investments Other forms of International Business Activates International licensing International franchising International management contract

Exporting and Importing (Trade)


Exporting The selling of products made in one’s own country for use/resale in other countries

Importing The buying of products made in other countries for use/resale in one’s own country

Merchandise exports and imports (Visible Trade) Trade activities in goods – tangible products

E.g. clothing, computers, raw materials etc.

Service exports and imports (Invisible Trade) Trade activities in services – intangible products

E.g. banking, travel, accounting activities etc.

The importance of trade For companies

E.g. 70% of Boeing’s commercial aircraft sales from foreign countries For countries

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Source: UN Statistics Division (2013), Retrieved from: http://data.un.org/ Su Jin Victoria Yeon, Copyright 2015

0 50 100 150 200 250

BrazilUnited States

North AmericaJapan

AustraliaLatin America & Caribbean (all income levels)

SenegalChina

Least developed countries: UN classificationHigh income: OECD

OECD membersUzbekistan

FranceItaly

New ZealandUnited Kingdom

WorldCanadaGreeceMexico

East Asia & Pacific (all income levels)Israel

Europe & Central Asia (all income levels)European Union

Middle East & North Africa (all income levels)Korea, Rep.

MalaysiaBelgium

United Arab EmiratesIreland

Hong Kong SAR, China

Exports of goods and services as % of GDP in 2013

International Investments


International Investments Capital supplied by residents of one country to residents of another country

Two Categories of International Investments Foreign Direct Investments (FDI)

Investments made for the purpose of actively controlling property, assets, or companies located in host countries Home country: the country which the parent company’s headquarter is located Host country: any other company in which the company operates

Foreign Portfolio Investments (FPI) Purchases of foreign financial assets for a purpose other than control Financial assets: stocks, bonds, and certificates of deposit

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Other forms of International Business Activities


International licensing A contractual arrangement in which a firm in one country licenses the use of its intellectual

property to a firm in a second country Intellectual property: patents, trademarks, brand names, copyrights, or trade secrets

The company gets a royalty payment E.g. the Walt Disney Company permitting a German clothing manufacturer for the use of Mickey Mouse smiling

face

International franchising A specialized form of international licensing When a firm in one country (the franchisor) authorizes a firm in a second country (the franchisee)

to utilize its operating systems as well as its brand names, trademarks and logos The franchisor gets a royalty payment

E.g. McDonald's Corporation

International management contract An arrangement wherein a firm in one country agrees to operate facilities or provide other

management services to a firm in another country E.g. Hilton Hotel, Marriott Hotel often do not own the hotel but operate under management contracts

Copyright © 2013 Pearson Education

International Business


Cross-Border Commercial Transactions

Multinational Corporation (MNC)

Multinational Enterprise (MNE)

Multinational Organization (MNO)

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The World’s Biggest Public Companies

Su Jin Victoria Yeon, Copyright 2015Source: Forbes (2014), Retrieved from: http://www.forbes.com

* Values calculated in May 2014

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Selected Readings in International Business

Su Jin Victoria Yeon


Business English


Lecturer: Su Jin Victoria Yeon [email protected] Office hour: by appointment (N-14, Room 506)

Hours Wednesday: 10 a.m. - 12 p.m. Friday: 11 a.m. – 12 p.m.

15 week course Lecture Room

Building 56 (N-14), Room 401 Learning Materials Griffin & Pustay (2013), International Business, (7th Ed.), Pearson Hand-outs (if possible) Lecture Video files

http://ecampus.cbnu.ac.kr

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Course Outline


Purpose To develop knowledge in International Business To enhance debating skills in relations to the topics related to the International

Business issues To improve English reading comprehension and discussion skills

This course is an INTENSIVE course with discussions based on weekly reading assignments.

Grading


Absolute Grading Grade Distribution 90% A+ 85% A 80% B+ 75% B 70% C+ 65% C 60% D+ 55% D 49.9% or lower: Fail

Anyone who works hard and got certain mark is eligible to get a high grade regardless of the class competitiveness

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Evaluation Method


Professionalism (Attitude & Attendance) 8% Discussion & Participation 15% Homework (1 pg. summary of readings) 22% Weekly Group Discussion Report 20% Mid-Term Exam 15% Final Exam 20%

Evaluation and Grading


Attitude & Attendance 8 %1. Be on time.2. Except break time, do not leave classroom in the middle of lecture / class

discussion. This disrupts other students and lecturer. Go to restroom before or after the lecture, not during the lecture.

3. Do not eat meals in classroom.4. Web surfing and checking email are prohibited during class time. Do NOT turn

on the computer unless the lecturer say so. 5. Turn off your cell phone during class. No text messaging or phone calling during

class.

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Evaluation & Grading

Attitude & Attendance 8 %6. Be prepared for class. 7. Submit every assignment on time or before deadline. (Late

assignment will be panelized) 8. No hand-written submission.9. Respect everyone in class.10. Any behavior people will consider unprofessional (e.g. sleeping, yelling,

phoning or texting during class etc.) Attitude & Attendance 8% Easy mark, but essential 2 late arrivals = 1 absence = 1 % penalty Be on time If you miss out more than ¼ of the lecture, you will get an automatic “F”

(This is the RULE of the university)




Discussion & Participation: 15 % Be Confident /Be Active (Don’t be afraid to speak out) Be involved during the discussion time Discussion will be based on the weekly discussion group meeting Be prepared for the in-class discussion!

Mark Question or Response= 1 point Thoughtful response or question= 2 points Maximum points per class = 15 points

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Exams Multiple Choice

Questions Short Answer Questions Case Study Question Essay Question

(this can be changed) Questions will be

written in English You may write in Korean

Midterm Exam 15% Week 8 – Wednesday, 22nd of April Based on the readings

for Week 1 ~ 7 Midterm Exam Review

in week 7

Final Exam 20% Week 15 – Wednesday, 10th of June Based on the readings

for Week 9 ~ 14 Midterm Exam Review

in week 14



Homework Assignment– total of 22 (22%) This is essential for this class (Before every class) Must do the readings before class Chapter summary (Answers to the learning objectives) or Case Study answering

(summary) 1 page (can be more, but don’t spend too much time) Bullet point is ok

Each worth 1% of your total grade 0 – if you don’t hand in on time or just copy & paste 0.5 – typed, handed in but showed little effort 1 – typed, handed in on time, showed effort (showed your thinking)

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Weekly Group Discussion Report– total of 20 (20%) Hand in every Friday Group: Maximum 5 people in a group Everyone need to hand in an individual report The leader of the group hand in a “group” report Leader must be rotated every week in order to get a full mark The maximum mark you can get for not being a leader: 15% The report sheets will be available online (http://ecampus.cbnu.ac.kr) Everyone in group will get different point

Each worth 2 % of your total grade 0 – absent for the group meeting 1 or 2 – based on your individual / group discussion report

Course Outline


Week 1 (Wed – March 4th) Introduction of the course Tips for the readings Overview of International Business

Week 1 (Fri – March 6th) Chapter 1: Overview of International Business Formation of discussion group Homework & group discussion question will be provided

Week 2 (Wed – March 11th) Chapter 2: Global Marketplaces and Business Centers Homework #1 due: Chapter 2 (or 1) summary (Answers to the Chapter Questions)

Week 2 (Fri – March 13th) Case study discussion: China’s Quest for Natural Resources Homework #2 due: answers to the case study questions Group discussion report #1 due

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Course Outline


Week 3 (Wed – March 18th) Chapter 3: Legal, Technological, Accounting and Political Environments Homework #3 due: Chapter 3 summary (Answers to the Chapter Questions)

Week 3 (Fri – March 20th) Case study discussion: Risky Business in Venezuela Homework #4 due: answers to the case study questions Group discussion report #2 due

Week 4 (Wed – March 25th) Chapter 4: The Role of Culture Homework #5 due: Chapter 4 summary (Answers to the Chapter Questions)

Week 4 (Fri –March 27th) Case study discussion: Quacking Up a Storm of Business Homework # 6 due: answers to the case study questions Group discussion report #3 due

Week 5 (Mon – April 1st) Chapter 5: Ethics and Social Responsibility in International Business Homework # 7 due: Chapter 5 summary (Answers to the Chapter Questions)

Course Outline


Week 5 (Fri – April 3rd) Case study discussion: A Pipeline of Good Intentions Homework # 8 due: answers to the case study questions Group discussion report #4 due

Week 6 (Wed – April 8th) Chapter 6: International Trade and Investment Homework # 9 due: Chapter 6 summary (Answers to the Chapter Questions)

Week 6 (Fri – April 10th) Case study discussion: Twenty-First Century Pirates Homework # 10 due: answers to the case study questions Group discussion report # 5 due

Week 7 (Wed – April 15th) Chapter 7: The International Monetary System and the Balance of Payment Homework # 11 due: Chapter 7 summary (Answers to the Chapter Questions)

Week 7 (Fri –April17th) Midterm Exam Review

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Course Outline


Week 8 (Wed – April 22nd) Mid-term Exam

Week 9 (Wed – April 29th) Chapter 8: Foreign Exchange and International Financial Markets Homework #12 due: Chapter 8 summary (Answers to the Chapter Questions)

Week 9 (Fri – May 1st) Case study discussion: Subprime Meltdown, Global Recession Homework # 13 due: answers to the case study questions Group discussion report # 6 due

Week 10 (Wed – May 6th) Chapter 9: Formulation of National Trade Policies Homework # 14 due: Chapter 9 summary (Answers to the Chapter Questions)

Week 10 (Fri – May 8th) Case study discussion: Green Energy and Free Trade Homework # 15 due: answers to the case study questions Group discussion report # 7 due

Course Outline


Week 11 (Wed – May 13th) Chapter 10: International Cooperation Among Nations Homework # 16 due: Chapter 10 summary (Answers to the Chapter Questions)

Week 11 (Fri – May 15th) Case study discussion: The New Conquistador Homework # 14 due: answers to the case study questions Group discussion report # 8 due

Week 12 (Wed – May 20th) Chapter 11: International Strategic Management Homework # 15 due: Chapter 11 summary (Answers to the Chapter Questions)

Week 12 (Fri –May 22nd) Case study discussion: The Global Success of SM Entertainment Homework # 16 due: answers to the case study questions Group discussion report # 9 due

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Course Outline


Week 13 (Wed – May 26th) Chapter 15: Leadership and Employee Behaviour in International Business Homework # 17 due: Chapter 15 summary (Answers to the Chapter Questions)

Week 13 (Fri – May 28th) Case study discussion: IKEA’s Transformational Leader Homework # 18 due: answers to the case study questions Group discussion report # 10 due

Week 14 (Wed – June 3rd) Chapter 16: International Marketing Homework # 20 due: Chapter 16 summary (Answers to the Chapter Questions)

Week 14 (Fri – June 5th) Final Exam Review

Week 15 (Wed – June 10th) Final Exam

This schedule is subject to change

Tips for the Effective Reading Skills


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How to do the readings?


Read (or write down) the title & sub-headings Make notes as you read You may write notes on the book or make separate notes

If you don’t have time, Read the sub-headings Read the first paragraphs under each subheadings Read summary Find the key words & key sentences

Mostly definitions – what it means

Highlight or write notes

Examples

Chapter reading


Understand the important points Start with writing down the main questions The main questions are provided in every reading Look at the learning objectives

You may read the chapter summary first Use titles & sub headings to understand the theme and the topic Make notes as you read If you are stuck, just move on Try and understand the big picture, first.

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Case Study Readings


You need to do case study readings for Friday classes Understand the situation Read once – quickly

This will give you the general background

Read again - carefully This will identify the major issues

Think while you read “What is the issue?”

Read again This will start to give you the details

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Selected Readings in International Business

Su Jin Victoria Yeon


The Era of Globalization


} Globalization} “The inexorable integration of markets, nation-states, and technologies … in a way that is

enabling individuals, corporations and nation-states to reach around the world farther, faster, deeper, and cheaper than ever before.”

} The shift toward a more integrated and interdependent world economy} Declining barriers to cross-border trade and investment} Shrinking perceived distance resulting from advances in transportation and communications

technology} National economies are merging into an interdependent, integrated economic system

} Globalization of } Markets} Products} Institutions (Governmental) – IGOs, NGOs

} Intra-Governmental Organizations, Non-Governmental Organizations

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Globalization


} Rapid growth in international trade in services (Invisible Trade)} Development of the internet & technologies} Globalization of labor market

} Labor outsourcing ¨ Not only with unskilled labor - production and factories¨ Service industries e.g. legal services, accounting, customer service center (call-center) in India¨ Health tourism

} Growing importance of FDI} Investments made by citizens of one country to operate and control assets in another

World Exports of goods and services as % of GDP


0

5

10

15

20

25

30

35

World Exports of goods and services (% of GDP)

Source: World Bank (2015), Retrieved from: http://data.worldbank.org/indicator

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World Foreign direct investment, net inflows as % of GDP


0

0.5

1

1.5

2

2.5

3

3.5

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4.5

World Foreign direct investment, net inflows (% of GDP)

Source: World Bank (2015), Retrieved from: http://data.worldbank.org/indicator

World Foreign direct investment, net outflows as % of GDP


0

1

2

3

4

5

6

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

World WLD Foreign direct investment, net outflows (% of GDP)

0

1

2

3

4

5

6

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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The Contemporary Causes of Globalization


} Strategic Imperatives } To leverage core competencies} To acquire resources & supplies} To seek new markets} To better compete with rivals

} The Environmental Causes of Globalization} Changes in the political environment} Technological changes

Strategic Imperatives


} The opportunity to leverage core competencies} Core competency: a distinctive strength or advantage that is central to a firm’s

operation} E.g. Nokia’s cutting-edge cellular phone technology (before the appearance of smartphones),

Singapore Airlines’ award-winning standards of customer satisfaction

} To acquire resources and supplies} Resources: land, labor, capital, technology

} Scarcity of Resources in home country} E.g. Oil from the Middle East and Africa, North American ß coffee and bananas from South

America

} To enhance efficiency of business} E.g. US ad agencies shooting in Cape Town because production crews and equipment costs 40%

less than LA

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Strategic Imperatives


} To seek new markets} Penetration of local market} Benefit of having new markets

} Economies of scale } Diversification of a firm’s revenue stream

¨ The firm becomes less dependent on its sales in one country; can protect itself in case of economic downturn of a country

} To better compete with rivals} E.g. Coca-Cola vs. Pepsi cola; Boeing vs. Airbus

The Contemporary Causes of Globalization


} The Environmental Causes of Globalization} Changes in the political environment

} Dramatic changes in the 20th Century} After WWI: Mercantilism – countries tried to protect their local market; extremely high barriers to

trade} 1930 Great Depression} After WWII: major countries set up meetings and agreements to open up their market and lower

barriers to trade ¨ E.g. GATT (General Agreement on Tariffs and Trade), WTO (World Trade Organization), Regional Trade

Agreements } Technological Advances

} Improvements in Transportation system¨ Easier travel to business people; increase in international tourism

} Development of Computers¨ Better and easier information sharing

} Changes in communication technology¨ E-mail, smart phones, tablet computers etc.

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Globalization and Emerging Markets


} Political Change around the world} The collapse of European Communism} The Ideological and policy changes by China and India à Reduction of trade barriers

} Emerging Markets} Countries whose recent growth or prospects for future growth exceed that of traditional

markets} Many firms are finding much of their sales and profits from emerging markets

¨ E.g. L’Oreal’s sales in Asia 23% growth & 33% in Latin America; 13% in North America and 2.6% in Western Europe

} No universally accepted definition of the countries to be included in the emerging markets category} The BRICs – Brazil, Russia, India and China} Big Ten – Argentina, Brazil, China, India, Indonesia, Mexico, Poland, South Africa, South Korea and

Turkey} Non-high in come countries: Africa, Asia, Eastern Europe and Latin America

Homework #1 – due next Monday


} Review Chapter 1 and Read Chapter 2 of the text book } Answer following questions

1. What is international business? How does it differ from domestic business?2. What are the basic forms of international business activity?3. Briefly describe the US role in the world economy.4. How do differences in income levels and income distribution among countries affect

international businesses?5. What role did MITI (Ministry of International Trade and Industry) serve in the Japanese

economy? 6. What is keiretsu and what is chaebol?7. Who are the Four Tigers? Why are they important to international businesses?8. Discuss the role of natural resources and agriculture in Africa’s economy9. How did important substitution policies affect the economies of Brazil and Argentina?10. Which continent (or part of the world), do you think, will become a major marketplace and

business center in the world economy in the future? And Why?

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Homework #1 – due next Monday


} Do not spend more than 2 pages (Type your answers)} Try and keep your answers brief} Due date: Wednesday, 11th of March by10 a.m.

Homework #2 – due next Friday


} Read the case, “China’s Quest for Natural Resources” from page 75~76 } Answer the four case discussion questions in page 75} Do not spend more than 2 pages answering the questions} You may use bullet points} Keep your answers brief but think!} Type your answers

} Due date: Friday, 13th of March by 11 a.m.

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Group discussion Report #1 (due next Friday)


} With your group members discuss;} About second week reading} About the first case } And discuss based on case discussion questions

} Discuss the following issueSouth Korea is prominently featured in many lists of “emerging markets.” Is South Korea an emerging market? Defend your answer. How would you define an “emerging market”?

} Report due date: 13th of March by 11 a.m.} Group report / Individual Report (sheets are downloadable from the website

http://ecampus.cbnu.ac.kr)

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