Chapter 1

GLOBALIZATION AND INTERNATIONAL BUSINESS

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Learning Objectives
  

To explain the concept of globalization To elucidate factors influencing globalization To discuss global business expansion strategy for emerging market companies To explicate the concept of international business To delineate motives for international business expansion To expound the strategy for managing business in the globalization era
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Globalization of Business: A Historical Perspective

In the initial years of human history, there were hardly any formal barriers, such as tariffs or non-tariff restrictions, for the movement of goods or visa requirements for the people. nation-state. The concept of globalization can be traced back to the phenomenon of a

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Concept of Globalization
The process of integration and convergence of economic, financial, cultural and political systems across the world. world.

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Globalization: A Holistic Approach



Economic Globalization

The increasing integration of national economic systems through growth in international trade, investment and capital flows.


Financial Globalization

The liberalization of capital movements and deregulations, especially of financial services that led to a spurt in cross-border crosscapital flows. flows.
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Cultural Globalization
Convergence of cultures across the world.

Political Globalization
Convergence of political systems and processes around the world. world.

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Dimensions of Economic Globalization

Globalization of production Globalization of markets Globalization of competition Globalization of technology Globalization of corporations and industries

    

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Factors Influencing Globalization

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Movers of Globalization
        

Economic liberalization Technological breakthrough Multilateral institutions International economic integrations Move towards free marketing systems Rising research & development costs Global expansion of business operations Advents in logistics management Emergence of the global customer segment
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Factors Restraining Globalization



Regulatory controls Emerging trade barriers Cultural factors Nationalism War and civil disturbances Management myopia
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Measuring Globalization


Trade Openness KOF Index of Globalization A.T. Kearney/ Foreign Policy Globalization Index

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Reasons for Support of Globalization



Maximization of Economic Efficiencies Enhancing Trade Increased Cross-border Capital Movement CrossImproves Efficiency of Local Firms Increases Consumer Welfare

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Criticism of Globalization


Developed versus Developing Countries: Unequal Players in Globalization: Widening Gap between the Rich and the Poor Wipes out Domestic Industry Leads to Unemployment and Mass Lay-offs LayBrings in Balance of Payments Problems Increased instability of Markets Diminishing Power of Nation States Loss of Cultural Identity Shift of Power to Multinationals
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Response Strategies to Globalization Forces for Emerging Market Companies

   

Defender Extender Dodger Contender

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Concept of International Business



International Trade: Exports of goods and services by a firm Trade: to a foreign-based buyer (importer) foreignInternational Marketing: It focuses on the firm-level Marketing: firmmarketing practices across the border, including market identification and targeting, entry mode selection, and marketing mix and strategic decisions to compete in international markets. markets.
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International

Investments: Investments:

CrossCross-border

transfer

of

resources to carry out business activities. activities.

International Management: Application of management Management: concepts and techniques in a cross-country environment and crossadaptation to different social-cultural, economic, legal, socialpolitical and technological environments. environments.

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International Business: All those business activities which Business: involves cross border transactions of goods, services, and resources between two or more nations

Global Business: Conduct of business activities in several Business: countries using a highly co-ordinated and single strategy coacross the world. world.

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Reasons for International Business Expansion



MarketMarket-Seeking Motives
Marketing opportunities due to life cycles Uniqueness of product or service

Economic Motives
Profitability Achieving economies of scale Spreading R&D costs

Strategic Motives
Growth Risk spread
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Differences Between Domestic and International Business

      

Economic Environment SocioSocio-Cultural Environment Legal Environment Political Environment Competition Infrastructure Technology
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Managing Business in the Globalization Era

Global strategies adopted by business enterprises may include:
Global conception of markets Multi-regional integration strategy Changes in external organisation of multinational firms Changes in internal organisation

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