vsfs session 1
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ags, category) makes it easier for others to find your content. The score increases as youTRANSCRIPT
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International BusinessInternational BusinessSession 1
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What is International What is International
Business?Business?
Business transactions between parties from more than one country
Sourcing, Manufacturing, Selling, Developing
Parties may include◦ Private individuals
◦ Individual companies
◦ Groups of companies
◦ Governmental agencies
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Why Study International Why Study International
Business?Business?
Today’s business environment is global.
Conducting international business presents
unique risks, challenges and opportunities.
ASK YOURSELF: is your company
maximizing the opportunities of global
business across the value chain?
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Key ObjectivesKey Objectives
Learn to:
1. Understand the global business environment and how it is different from the national environment.
2. Select between the different modes of international business
3. Analyze and react to different cultural contexts
4. Research and evaluate global markets.
5. Assess how countries can shape global business through policy and integration
6. Understand the EU’s role in the global marketplace
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International vs. DomesticInternational vs. Domestic
OPPORTUNITIESOPPORTUNITIES1.Seek opportunities for growth through
market diversification
2.Gain new ideas about products,
services, and business methods
3.Better serve key customers that have
relocated abroad
4.Be closer to supply sources, benefit
from global sourcing advantages, or
gain flexibility in the sourcing of
products
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International vs. Domestic
OPPORTUNITIES
5. Gain access to lower-cost or better-
value factors of production
6. Develop economies of scale in
sourcing, production, marketing, and
R&D
7. Confront international competitors
more effectively or thwart the growth
of competition in the home market
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International vs. DomesticInternational vs. Domestic
RISKSRISKS1. Cross-cultural risk: a situation or
event where a cultural miscommunication puts some human value at stake
2. Country risk: potentially adverse effects on company operations and profitability holes by developments in the political, legal, and economic environment in a foreign country
3. Currency risk: risk of adverse unexpected fluctuations in exchange rates
4. Commercial risk: firms potential loss or failure from poorly developed or executed business strategies, tactics, or procedures
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Basic Indicators of International Basic Indicators of International
BusinessBusiness Balance of Payments
◦ http://www.cnb.cz/en/statistics/bop_stat/b
op_q/bop_usd_en.htm
Indices
◦ Demographic
◦ Economic
◦ Business
◦ Social and Technological
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Balance of Payments (BOP) Balance of Payments (BOP)
Accounting SystemAccounting System
Measures and records all economic transactions between residents of one country and residents of all other countries during specified time period
Provides understanding of performance of each country’s economy in international markets
Signals fundamental changes in country competitiveness
Assists policy makers in designing appropriate public policies
7-11Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
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Major Components of the BOP Major Components of the BOP
Accounting SystemAccounting System
7-12
Current Account
Capital Account
Official Reserves
Errors and Omissions
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
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Table 7.6. U.S. Balance of Payments in 2007Table 7.6. U.S. Balance of Payments in 2007
7-13Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
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Population vs. GDPPopulation vs. GDPas percentage of world totalas percentage of world total
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World Population 2010World Population 2010
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DemographicsDemographics
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Population PyramidsPopulation Pyramids
China India
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Purchasing Power Parity Purchasing Power Parity
(PPP)(PPP)
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World GDP 2008World GDP 2008
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Per Capita GDPPer Capita GDP
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Doing BusinessDoing Business
Produced by World Bank
Evaluates business regulations and
enforcement
180+ countries
10 categories of data
www.doingbusiness.org
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National Business National Business
EnvironmentEnvironment1. Starting a Business Tracks the procedures,
time, and costs for a limited liability company to legally start operation.
2. Dealing with Licenses Tracks the procedures, time and costs to build a warehouse, including obtaining necessary licenses and permits, completing required notifications and inspections and obtaining utility connections.
3. Hiring & Firing Workers Measures the flexibility of regulations for hiring and firing workers and the costs of hiring and firing.
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National Business National Business
EnvironmentEnvironment4. Registering Property Tracks the steps, time, and
cost involved in registering property.
5. Getting Credit Explores the role of creditor rights and credit information registries in expanding access to credit.
6. Protecting Investors Measures the strength of minority shareholder protections against directors’ misuse of corporate assets for personal gain.
7. Paying Taxes Records the tax that a medium-size company must pay or withhold in a given year, as well as measures of the administrative burden in paying taxes.
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National Business National Business
EnvironmentEnvironment8. Trading Across Borders Details the costs and
procedures involved in importing and exporting a standardized shipment of goods.
9. Enforcing Contracts Evaluates the efficiency of contract enforcement by following the evolution of a payment dispute and tracking the time, cost, and number of procedures involved from the moment the plaintiff files the lawsuit until actual payment.
10. Closing a Business Measures the time and cost of bankruptcy procedures, and develops indices of procedural bottlenecks in bankruptcy law
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Web ResourcesWeb ResourcesCountry Financial and Demographic info
◦ http://www.worldbank.org
◦ https://www.cia.gov/library/publications/the-world-factbook/index.html
◦ http://globaledge.msu.edu/
◦ http://www.oecd.org
Economic and Political Freedom
◦ http://www.freedomhouse.org/template.cfm?page=1
◦ http://www.heritage.org/index/
National Business Environment
◦ http://www.doingbusiness.org
Human Development
◦ http://www.undp.org
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Why do nations trade?Why do nations trade?
Protectionism Free Trade
◦ Mercantilism
◦ Jobs
◦ Defense
◦ Infant Industry
◦ Comparative
Advantage
◦ Competitive
Advantage
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Perspectives of the Nation and the FirmPerspectives of the Nation and the Firm
Comparative advantage
Is the concept that helps answer the question of all nations can gain and sustain national economic superiority
Competitive advantage
Is the concept that helps explain how individual firms can gain and sustain distinctive competence vis-à-vis competitors
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Examples of National Comparative AdvantageExamples of National Comparative Advantage
China is a low labor cost production
base
India’s Bangalore region offers a
critical mass of IT workers
Ireland’s repositioning enabled a
sophisticated service economy
Dubai, a previously obscure Emirate,
has been transformed into a
knowledge-based economy
National advantage can be created
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Examples of Firm Competitive AdvantageExamples of Firm Competitive Advantage
Dell’s prowess in global supply chain
management
Nokia’s design and technology
leadership in telecommunications
Samsung’s leadership in flat-panel TV
Herman Miller’s design leadership
in office furniture
(e.g., Aeron chairs)
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Limitations of Early Trade TheoriesLimitations of Early Trade Theories
Do not take into account the cost of international transportation
Tariffs and import restrictions can distort trade flows
Scale economies can bring about additional efficiencies
When governments selectively target certain industries for strategic investment, this may cause trade patterns contrary to theoretical explanations
Today, countries can access needed low-cost capital on global markets
Some services do not lend themselves to cross-border trade
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Michael Porter’s Diamond Model:Michael Porter’s Diamond Model:
Sources of National Competitive AdvantageSources of National Competitive Advantage
1. Firm strategy, structure, and rivalry – the presence of strong competitors at home serves as a national competitive advantage
2. Factor conditions – labor, natural resources, capital, technology, entrepreneurship, and know how
3. Demand conditions at home – the strengths and sophistication of customer demand
4. Related and supporting industries –availability of clusters of suppliers and complementary firms with distinctive competences
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Porter’s Diamond of Porter’s Diamond of
National Competitive AdvantageNational Competitive Advantage
Firm Strategy,
Structure,
and Rivalry
Related and
Supporting
Industries
Factor
Conditions
Demand
Conditions
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National Industrial PolicyNational Industrial Policy
Proactive economic development plan implemented by the public sector to nurture or support promising industry sectors with potential for regional or global dominance. Public sector initiatives can include:
Tax incentives
Monetary and fiscal policies
Rigorous educational systems
Investment in national infrastructure
Strong legal and regulatory systems
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“the growing interdependence of “the growing interdependence of countries worldcountries world--wide through the wide through the increasing volume and variety of increasing volume and variety of crosscross--border transactions in goods border transactions in goods and services and of international and services and of international capital flows, and also through the capital flows, and also through the more rapid and widespread diffusion more rapid and widespread diffusion of technology.”of technology.”–– IMFIMF
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Globalization
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Growth of relations between nations Growth of relations between nations and cultures or between institutions and cultures or between institutions situated in different nations or situated in different nations or cultures. cultures.
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Internationalization
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What’s the difference?What’s the difference?
Globalization Internationalization
Growing world systems
Transnational,
Subnational and
Supranational actors
Driven by free markets
and technology
Relations between
nations
Nation state is central
actor
Driven by national
interests
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Comparing the Growth Rates of World GDP Comparing the Growth Rates of World GDP
and World Exportsand World Exports
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Productivity levelsProductivity levels
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“The World is Flat” “The World is Flat”
Thomas FriedmanThomas Friedman
Triple Convergence:
1. 10 Flattening Forces Internet and IT integration
Outsourcing, Offshoring, Insourcing, Supply
Chain
Uploading, Informing at individual level
Technological speed and cost
2. Productivity Lag / Learning Curve
3. Opening of Countries (3 billion people) USSR, Central Europe, China, India, South
America
Market economies and integrated financial
system
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Top Global Brands (select Top Global Brands (select
industries)industries)
Cars
1 Toyota
2 BMW
3 Porsche
4 Mercedes
5 Honda
6 Nissan
7 Ford
8 Chevrolet
9 VW
10 Lexus
Mobile Operators
1 China Mobile
2 Vodafone
3 Verizon Wireless
4 NTT DoCoMo
5 Orange
6 AT&T
7 T-Mobile
8 Movistar
9 MTS
10 TIM
Beer
1 Budweiser
2 Bud Light
3 Heineken
4 Corona
5 Stella Artois
6 Guinness
7 Miller Light
8 Skol
9 Amstel
10 Beck’s
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Major Companies in NonMajor Companies in Non--Triad Triad
MarketsMarkets
Mahindra & Mahindra
Orascom
Lenovo
Infosys
Wipro
SABMiller
Embraer
Ranbaxy
Haier
Tata
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Major Companies in NonMajor Companies in Non--Triad Triad
MarketsMarkets
Mahindra &
Mahindra
Orascom
Lenovo
Infosys
Wipro
SABMiller
Embraer
Ranbaxy
Haier
Tata
India Automotive
Egypt Cellular
China Computers
India Software
India Tech Services
South Africa Brewing
Brazil Aircraft
India Pharmaceuticals
China Appliances
India Automotive
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Negative Consequences Negative Consequences
of Market Globalizationof Market Globalization
Loss of national sovereignty
Offshoring and the flight of jobs
Effect on the poor
Effect on health and safety
Effect on the natural environment
Effect on national culture
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How Globalized is the World?How Globalized is the World?
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Only Only semiglobalizedsemiglobalized??
http://www.ft.com/intl/businesseducati
on/iese