International Business

Globalization and
International Business
www.showbie.com
Lecturer:
Lamhot Henry Pasaribu Sign in with gmail account
Email:
lamhothp1969@gmail.com
Phone/WA:
+62811993120
With the permission from
Atau TU69L
Filda Rahmiati, MBA
(filda.rahmiati@president.ac.id)
 Learning Objectives

* To define globalization and international

business
* To understand why companies engage in
international business
* To identify major participants in international
business
* To appreciate who you should study
international business
 International Business Defined
* International business: all commercial
transactions between parties in two or more
countries – cross-border business
International
Trade

Globalization of International
markets Investment

Elements of
International
Business

Foreign market International

entry strategies Business Risk

Participants:
firms,
intermediaries,
facilitators,
governments
 International trade
* Exchange of products and services across national borders,
typically through exporting and importing
* Forms: export and import (global sourcing)
* Entrepôt economies : Singapore, Hongkong, and the Netherland
International Investment
* Two types: portfolio investment and
foreign direct investment (FDI)
* FDI is the foreign entry strategy
practiced by the most internationally
active firms.
* Long term, retain partial or complete
ownership of the assets acquire.
* Established a new legal business
entity in the host countries
(regulation of host government)
 Reasons that Firms Engage in
*
International Business
Seek opportunities for growth through market diversification
* Earn higher margins and profits
* Gain new ideas about products, services, and business method
* Serve key customers better that have relocated abroad
* Be closer to supply sources, benefit from global sourcing
advantages, or gain flexibility in product sourcing

ü Gain access to lower cost or better value factor of production

ü Develop economies of scale in sourcing, production, marketing, and R&D
ü Confront international competitors more effectively
ü Invest in a potentially rewarding relationship with a foreign partner
 Globalization Defined

* Globalization: the ongoing social, economic, and

political process that deepends and broadens the
relationships and inter-dependencies amongst
nations-their people, their firms, their organizations,
and their governments.
* Globalization enables us to get more variety, better
quality, or lower prices.
* International business facilitates globalization
process.
 Globalization-KIA Sorento
CD Player

Make the Send to

Final
optical- Thailand for
assembly in
pickup units mechanical
Mexico
in China structure

Shipped from U.S. Port

to Kia’s South Korean
factory
 Factors in Increased Globalization
* Increase in and expansion of technology
* Population is involved in developing new products
* The Internet – companies can reach global customers and
suppliers

* Liberalization of Cross-Border Trade and Resource Movements

* Citizen want greater variety of goods and services at lower prices
* Competition spurs domestic producers to become more efficient
* Encourage other countries to lower their barriers in turn
Factors in Increased Globalization
* Development of Services That Support International
Business
* Bank Credit Agreements, clearing arrangements, and
insurance.
* International package-service companies: UPS, TNT, etc.

* Growing Consumer Pressures

* Consumers today want more, newer, and better
product.
* Consumers are more proficient at scouring the globe
for better deals – cheaper products
 Factors in Increased Globalization
* Increased Global Competition
* Competitors are already gaining sales
* Seek supplies where competitors are getting cheaper
* Merged with foreign firms to gain operating efficiencies

* Changing Political Situations

* Transformation of political and economic policies
* Government willing to support programs favorable to
international trade
Factors in Increased Globalization

* Expanded Cross-National Cooperation

* International cooperation: treaties, agreements, and
consultation
* To attack problems jointly that one country acting alone
cannot solve
* To deal with areas of concern that lie outside the
territory of any nation
The Criticisms of Globalization

* Country lose sovereignty

* Negative costs of economic growth
* Increasing income inequality
The Criticisms of Globalization
* Country lose sovereignty
* Countries seek to fulfill their own citizens by
setting rules that reflect to collective national
priority.
* If regulations are stringent, company can simply
move production where less rigorous rules – face
unemployment and tax loss
* Country should protect private property, enforce
the law, banks should regulated appropriately.
 The Criticisms of Globalization

* The resultant growth hurts the environment

* It consumes more nonrenewable natural resources
* Increases environmental damage
* Pesticide runoffs into rivers and oceans
* Air pollution from factory and vehicle emissions
* Deforestation affect weather and climate
 The Criticisms of Globalization
* Offshoring
* Offshoring causes those in lower-level jobs to lose
more in relation to their bosses
* The stress imposed on the people who are losers in
income-equality competition
* Increased insecurity about job and social status also
increased in crime activity
* Effect on the poor
* Paying low wages
* Exploiting workers
* Employing child labor
 Conclusions

vManaging an international business differs

from managing a domestic business
because:
-countries and cultures are different
-international business operations
are more complex than domestic
operations
[continued]
 Conclusions

vA company’s own competitive strategy

influences how and where it can best
operate.
vFrom one country to another, a company’s
relative competitiveness will vary because of
the differences in the local and foreign
competitors that are present.
International Business and Local
Business
International Business Local Business
 Take home assignment

* Debating the Good and Harm of Globalization

* Source: Cavusgil, S.T., Knight, G, and Riesenberger, J. (2017),
“International Business” 4th Edition, Pearson Education Limited, Pg 78-
79.