International Mangement Ch. 1 And 2

Front 1

Performance of trade and investment activities by firms across natinal borders

Back 1

International Business

Front 2

Ongoing economic integration and growing interdependance of countries worldwide

Back 2

Globalization of Markets

Front 3

Exchange of products and services across national borders: typically through exporting and importing

Back 3

International Trade

Front 4

Sale of products or services to customers located abroad, from a base in the home country or a third country

Back 4

Exporting

Front 5

Procurement of products or services from suppliers located abroad for consumption in the home country or a third country

Back 5

Importing or Global sourcing

Front 6

The transfer of assets to another country or the aquistion of assets in that country

Back 6

International investment

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Passive ownership of foriegn securities such as stocks and bonds for the purpose of financial returns

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International Portfolio Investment

Front 8

An internatinoalization strategy in wich a firm establishes a physical presence abroud through acquisition of productive assets such as capital technology, labor, land, plant, and equipment

Back 8

Foreign Direct Investment (FDI)

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NOTE: Rapid integration of world economies is fuled by such factors as...
1) information and transportation technologies, 2)the decline of trade barriers,
3)liberalization of markets, and
4)the remarkable economic growth of emerging market countries.

Back 9

NOTE: Rapid integration of world economies is fuled by such factors as...
1) information and transportation technologies, 2)the decline of trade barriers,
3)liberalization of markets, and
4)the remarkable economic growth of emerging market countries.

Front 10

A situation or event where a cultural miscommunication puts some human value at stake

Back 10

Cross-cultural risk

Front 11

Potentially adverse effects on company operations and profitablity caused by developments in the political,legal, and economic environment in a foreign country

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Country risk

Front 12

Risk of adverse fluctuations in exchange rates

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Currency risk

Front 13

Firm's potential loss or failure from poorly developed or executed business strategies, tactics or procedures

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Commercial risk

Front 14

THE FOUR RISKS IN INTERNATIONALIZATION:

1) Commercial Risk
- Weak partner
- operational problems
- Timing of entry
- Competitive intensity
- Poor execution of strategy

2) Currency (Financial) Risk
- Currency exposure
- Asset valuation
- Foreign taxation
- Inflationary and transfer pricing

3)Country Risk
- Government intervention, protectionism, and barriers to trade and investment
- Bureaucracy, red tape, administrative delays, and corruption
- Lack of legal safeguards for intellectual property rights
- Legislation unfavorable to foreign firms
- Economic failures and mismanagment
- Social and political unrest and instability

4)Cross-Cultural Risk
- Cultural differences
- Negotiation patterns
- Decision-making styles
- Ethical practices

Back 14

THE FOUR RISKS IN INTERNATIONALIZATION:

1) Commercial Risk
- Weak partner
- operational problems
- Timing of entry
- Competitive intensity
- Poor execution of strategy

2) Currency (Financial) Risk
- Currency exposure
- Asset valuation
- Foreign taxation
- Inflationary and transfer pricing

3)Country Risk
- Government intervention, protectionism, and barriers to trade and investment
- Bureaucracy, red tape, administrative delays, and corruption
- Lack of legal safeguards for intellectual property rights
- Legislation unfavorable to foreign firms
- Economic failures and mismanagment
- Social and political unrest and instability


4)Cross-Cultural Risk
- Cultural differences
- Negotiation patterns
- Decision-making styles
- Ethical practices

Front 15

A large company with substancial resources that performs various business activities through a network of subsidiaries and affiliates located in multiple countries

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Multinational Enterprise (MNE)

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A comany with 500 or fewer employees in the United States, although this number may need to be adjusted downward for other countries

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Small and Medium-sized enterprise (SME)

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A young entrepreneurial company that initiates international business activity very early in its evolution, moving rapidly into foreign markets

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Born Global Firm or International New Venture

Front 18

WHY DO FIRMS PURSUE INTERNATINALIZATION STRATEGIES?

1) To seek opertunities for growth through market diversification

2) Earn higher margins and profits (foreign markets may be underserved and lest competitive than in mature econmoic markets making foreign markets more appealing for higher profit margins).

3)Gain new ideas about products, services, and business methods.

4)Better serve key customers that have relocated abroad.

5) Be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products.

6)Gain access to lower-cost or better-value factors of production.

7) Develop economies of scale, production, marketing, and R&D. (Economies of scale refer to the reduction of the per-unit cost of manufacturing and marketing due to operating at high volume).

8) Confront international competitiors more effectively or thwart the growth of competition in the home market.

9)Invest in a potentially rewarding relationship with a foreign partner

Back 18

WHY DO FIRMS PURSUE INTERNATINALIZATION STRATEGIES?

1) To seek opertunities for growth through market diversification

2) Earn higher margins and profits (foreign markets may be underserved and lest competitive than in mature econmoic markets making foreign markets more appealing for higher profit margins).

3)Gain new ideas about products, services, and business methods.

4)Better serve key customers that have relocated abroad.

5) Be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products.

6)Gain access to lower-cost or better-value factors of production.

7) Develop economies of scale, production, marketing, and R&D. (Economies of scale refer to the reduction of the per-unit cost of manufacturing and marketing due to operating at high volume).

8) Confront international competitiors more effectively or thwart the growth of competition in the home market.

9)Invest in a potentially rewarding relationship with a foreign partner

Front 19

WHY SHOULD YOU STUDY INTERNATIONAL BUSINESS?

1)International business is a facilitator for the Global Economy helping everyone involved be interconnected.

2)International business contributes to economic prosperity and standards of lving, also helping countries use their resources more efficiently. It also helps reduce poor economic conditions in developing economies.

3) It can give your business a competitive advantage over other businesses. In addition firms can maximize the effiency of their operations through international business

4) As firms increasingly venture into international markets, they need to learn how to become global corporate citizens

5) It is a competitive advantage for you. International businesses effects all of us everyday and without it we not be able to perform the daily tasks that we all take granted for.

Back 19

WHY SHOULD YOU STUDY INTERNATIONAL BUSINESS?

1)International business is a facilitator for the Global Economy helping everyone involved be interconnected.

2)International business contributes to economic prosperity and standards of lving, also helping countries use their resources more efficiently. It also helps reduce poor economic conditions in developing economies.

3) It can give your business a competitive advantage over other businesses. In addition firms can maximize the effiency of their operations through international business

4) As firms increasingly venture into international markets, they need to learn how to become global corporate citizens

5) It is a competitive advantage for you. International businesses effects all of us everyday and without it we not be able to perform the daily tasks that we all take granted for.

Front 20

PHASES OF GLOBALIZATION

1)The first phase of globalization began in about 1830 and peaked around 1880. International business became widespread during this period due to the growth of railroads, efficient ocean transport, and the rise of large manufacturing and trading companies

2) The second phase of globalization began around 1900 and was associated with thre rise of electricity and steek production.

3)The third phase of globalization began after World Warr II. At war's end, in 1945, substantial pent-up demand existed for consumer products, as well as for input goods to rebuild Europe and Japan. (from this came came GATT which served as a global negotiating forum for liberalizing trade barriers). The GATT eventually transformed into the World Trade Organization. a multinational governing body empowered to regulate interational trade and investment.

4) The forth and current phase of globalization began in the early 1980s The current phase was triggered by key trends, including the commercialization of personal computers, the development of the Internet and the Web browser, advances in communcation and transportation technologies, the collapse of the Soviet Union and ensuing market liberalization in central and Eastern Europe, and the industrialization and modernization efforts of East Asian economies, including China.

Back 20

PHASES OF GLOBALIZATION

1)The first phase of globalization began in about 1830 and peaked around 1880. International business became widespread during this period due to the growth of railroads, efficient ocean transport, and the rise of large manufacturing and trading companies

2) The second phase of globalization began around 1900 and was associated with thre rise of electricity and steek production.

3)The third phase of globalization began after World Warr II. At war's end, in 1945, substantial pent-up demand existed for consumer products, as well as for input goods to rebuild Europe and Japan. (from this came came GATT which served as a global negotiating forum for liberalizing trade barriers). The GATT eventually transformed into the World Trade Organization. a multinational governing body empowered to regulate interational trade and investment.

4) The forth and current phase of globalization began in the early 1980s The current phase was triggered by key trends, including the commercialization of personal computers, the development of the Internet and the Web browser, advances in communcation and transportation technologies, the collapse of the Soviet Union and ensuing market liberalization in central and Eastern Europe, and the industrialization and modernization efforts of East Asian economies, including China.

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a multinational governing body empowered to regulate interational trade and investment

Back 21

World Trade Organization

Front 22

The sequence of value-adding activities performed by the firm in the process of developing producing, marketing, and servicing a product

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Value Chain

Front 23

DEMENSIONS OF MARKET GLOBALIZATION.

1) Integration and interdependence of national economies. (First, government graudally lower barriers to internatial trade and investment. Second, they increasingly harmonize their monetary and fiscal policies within regional econmoic blocs. Third, they devise and supervise supranational insitutuions such as the World Bank, International Monetary Fund, and thw World Trade Organization

2) Rise of regional economic blocs. (Examples, NAFTA, Asia Pacific Economic Cooperation zone (APEC), AND Mercosur in Latin America.

3) Growth of global investment and financial flows. (In the process of conducting international transactions, firms and governments buy and sell large volumes of national currencies).

4) Convergence of consumer lifestyles and preferences. (around the world, many consumers are increasingly similar in how they spend their money and time).

5) Globalization of production. (intense global competition is forcing firms to reduce the cost of production and marketing. Companies strive to drive down economies of scale and by standarizing what they sell.

Back 23

DEMENSIONS OF MARKET GLOBALIZATION.

1) Integration and interdependence of national economies. (First, government graudally lower barriers to internatial trade and investment. Second, they increasingly harmonize their monetary and fiscal policies within regional econmoic blocs. Third, they devise and supervise supranational insitutuions such as the World Bank, International Monetary Fund, and thw World Trade Organization

2) Rise of regional economic blocs. (Examples, NAFTA, Asia Pacific Economic Cooperation zone (APEC), AND Mercosur in Latin America.

3) Growth of global investment and financial flows. (In the process of conducting international transactions, firms and governments buy and sell large volumes of national currencies).

4) Convergence of consumer lifestyles and preferences. (around the world, many consumers are increasingly similar in how they spend their money and time).

5) Globalization of production. (intense global competition is forcing firms to reduce the cost of production and marketing. Companies strive to drive down economies of scale and by standarizing what they sell.

Front 24

DRIVERS OF MARKET GLOBALIZATION

1)Worldwide reduction of barriers to trade and investment

2)Market liberalization and adoption of free markets

3) Industrialization, economic development, and modernization.

4)Integration of world financial markets

5)Advances in Technology

Back 24

DRIVERS OF MARKET GLOBALIZATION

1)Worldwide reduction of barriers to trade and investment

2)Market liberalization and adoption of free markets

3) Industrialization, economic development, and modernization.

4)Integration of world financial markets

5)Advances in Technology

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TECHNOLOGICAL ADVANCES AS A DRIVER OF MARKET GLOBALIZATION

1)information technology

2)communication

3)manufacturing

4)transportation

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TECHNOLOGICAL ADVANCES AS A DRIVER OF MARKET GLOBALIZATION

1)information technology

2)communication

3)manufacturing

4)transportation

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SOCIETAL CONSEQUENCES OF MARKET GLOBALIZATION

1) Loss of national sovereignty

2) Offshoring and the Flight of Jobs

3) Effect on the Poor

4) Effect on the Natural Enviornment

5) Effect on National Culture

Back 26

SOCIETAL CONSEQUENCES OF MARKET GLOBALIZATION

1) Loss of national sovereignty

2) Offshoring and the Flight of Jobs

3) Effect on the Poor

4) Effect on the Natural Enviornment

5) Effect on National Culture

Front 27

FIRM LEVEL CONSEQUENCES OF MARKET GLOBALIZATION: iNTERNATIONALIZATION OF THE FIRMS VALUE CHAIN.

-Managers must increasinlgy adopt a worldwide orientation rather than a local focs.
-Market globalization forces proactive firms to seek a simultanious presence in all major trading regions, especially Asia, Europe, and North America.
-Using a global value chain lets firms do various activies across many nations. For example R&D is most likely conducted in the home country but marketing and aftersales support is often done abroad).
-The practice of internationalzing the value chain is often referred to as offshoring, where the firm relocates a major value-chain activity by establishing a factory or other subisiidary abroad. A related trend is global sourcing, in wich the firm delegates performance of the value-adding activity to an external supplier or contractor located abroad.

Back 27

FIRM LEVEL CONSEQUENCES OF MARKET GLOBALIZATION: iNTERNATIONALIZATION OF THE FIRMS VALUE CHAIN.

-Managers must increasinlgy adopt a worldwide orientation rather than a local focs.
-Market globalization forces proactive firms to seek a simultanious presence in all major trading regions, especially Asia, Europe, and North America.
-Using a global value chain lets firms do various activies across many nations. For example R&D is most likely conducted in the home country but marketing and aftersales support is often done abroad).
-The practice of internationalzing the value chain is often referred to as offshoring, where the firm relocates a major value-chain activity by establishing a factory or other subisiidary abroad. A related trend is global sourcing, in wich the firm delegates performance of the value-adding activity to an external supplier or contractor located abroad.