INTERNATIONAL BUSINESS, TACTICS AND STRATEGY

DR. KIP BECKERBOSTON UNIVERSITY

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The History of the Silk Road

Silkroad

the Silk Road

Arab trading

Galley trade And the Phoenicians BC

TO GROW NATION’s MASSED WEALTH AT @ EXPENSE OF OTHERS

GOLD - STATIC IMPLICATIONS

MERCANTILISM

SALEM PORT (3rd largest US port, EAST INDIA TRADE

INDUSTRIAL REVOLUTIONWhy? S≠D chinahistory

PRODUCTION CREATING WEALTH S≥D1850 -1914 = 3 FOLD INCREASE IN TRADE

                                                                                                             

By August 15, 1914 the Panama Canal was officially opened by the passing of the SS Ancon. At the time, no single effort in American history had exacted such a price in dollars or in human life. The American expenditures from 1904 to 1914 totaled $352,000,000, far more than the cost of anything built by the United States Government up to that time. Together the French and American expenditures totaled $639,000,000. It took 34 years from the initial effort in 1880 to actually open the Canal in 1914. It is estimated that over 80,000 persons took part in the construction and that over 30,000 lives were lost in both French and American efforts.

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1980 1982 1984 1986 1988 1990 1992 1994

World Trade and Output

TRADE

OUTPUT

trade_-output

In 1990 trade surpassed $4 trillion In 2001trade reached $7.6 trillionOne-fourth of everything grown or produced in

the world is now exported

• Not all trade is counted.• non-monitored trade is probably around

10% of officially counted statistics on world trade Major export of several nations are drugs(e.g. Columbia and Afghanistan)

• high export value enormous profits of hardy and easy to harvest indigenous plant heroin makes the Afghanistan poppy trade difficulty to replace

WHAT CONSTITUES INTERNATIONAL BUSINESS?

• CONSCIOUSLY SEEKING TO RESPOND TO STAKEHOLDER INTERESTS WHEVER IT OPERATES AND SEEKING TO MAXIMIZE GOALS WITHOUT REGARD TO NATIONAL OR GEOGRAPHIC BOUNDRIES– SOME CITIES MORE SIMULAR

• DISPERSION OF ALL OF ITS ACTIVITIES

ORIENTATIONS

• ETHNOCENTRIC – home country

• POLYCENTRIC – products/marketing etc changed to meet local needs

• REGIOCENTRIC – standardization in region

• GEOCENTRIC – combination of two, world is single market

•intbusiness_environ

Economic Globalization The international integration of goods, technology, labor, and capital

Refers to the implementation of global strategies which link and coordinate a firm's international activities on a worldwide basis

International or Multidomestic Business A business whose activities are carried out across national borders Includes international trade, foreign manufacturing, transportation, tourism, advertising, construction, retailing, wholesaling, and mass communication Foreign Business Denotes domestic operations within a foreign country. Often profit center mentality – lacks global strategy Often consider as a Multidomestic Company Has multicountry affiliates, each of which formulates its own business strategy based on perceived market differences

A Global Company Attempts to standardize and integrate operations worldwide when

appropriate. Most important is the concept of Global Strategy

Air bus striving for acceptance worldwide

•intbusiness_environ

• Considering the adventure and excitement of early international business it is easy to appreciate why you might ask:

• What is the value of including somewhat dry economic trade theory in a business text?            or

• What is the point of knowing theories to real operations?

Why learn trade theory ?

Mercantilism convent_ectheory

• An economic philosophy based on the belief that

1. a nation’s wealth depends on accumulated treasure, usually gold, and

2. to increase wealth, government policies should promote exports and discourage imports. In balance-of-payment accounting

– an export that brings dollars into a country is called “positive,” but

– imports that cause dollar outflow are labeled “negative.”

Theory of Absolute Advantage• Absolute Advantage

– The capability of one nation to produce more of a good with the same amount of input than another country

• Adam Smith claimed that market forces, not government controls, should determine the direction, volume, and composition of international trade.

WHAT ARE COMPETITIVE ADVANTAGES?

• Low cost labor• Favorable debt financing• Domestic subsidies• Protected home markets• Superior tax systems• Labor relationships• Education• Positive industry infrastructures• Positive Gov relationships• “Contrived VS Acutal”

HOW DO THEY DIFFER FROM ABSLOUTE ADVANTAGES ??

Theory of Comparative Advantage

• Comparative Advantage

–A nation has a comparative advantage in producing the good in which its absolute disadvantage is less.

–Theory of comparative advantage was demonstrated by Ricardo in 1817.

Heckscher-Ohlin Theory of Factor Endowment

• Factor Endowment– Heckscher-Ohlin theory indicates that

1. countries export products requiring large amounts of their abundant production factors

2. import products requiring large amounts of their scarce production factors– China should export labor intensive goods.– Netherlands, with relatively more capital than

labor should specialize in capital intensive products.

International Product Life Cycle (IPLC)

• IPLC is a theory explaining why a product that begins as a nation’s export eventually becomes its import.– Four stages of the IPLC in the United

States1) U.S. exports2) Foreign production begins3) Foreign competition in export markets4) Import competition in the U.S.

THE END !!