International Business Management - Chapter 1

Instructor: Dr. Thao Kim Nguyen

Globalization Trend away from distinct economic units and toward one huge
global market.

Facets (factors) of 1. The globalization of markets

globalization 2. The globalization of production

Globalization of Merging separate national markets into one huge global

markets marketplace.

It has been proven that the tastes and preferences of consumers

from all over the world are starting to unite into a social norm. For
example, Starbucks coffee is enjoyed by people from all over the
world.

Which product 1. Markets for commodities (oil, aluminium)

markets tend to be the 2. Industrial products
most global 3. Computer software
4. Financial assets

Globalization of When firms disperse their productive processes to different parts of

production the world in order to lower costs and improve quality of factors of
production and compete more efficiently

Factors of production inputs that are used (labor, land, energy, capital...)

Modes/ How to make 1. Exporting/importing, 2. Licensing, 3. Franchising, 4. turnkey

an international projects, 5. FDI (merger, acquisition, greenfield)
business

Low barriers help 1. See the world as a single market

companies 2. Disperse production activities all over the world

Global institutions and 1. GATT 2. WTO 3. IMF 4. WORLD BANK 5.UN;

their purpose PURPOSE
1. Manage, regulate, and police global marketplace. 
2. Promote establishment of multinational treaties to govern global
business.

Purpose of UN 1. Maintain global peace

2. Develop friendly relations among nations 
3. Respecting human rights 
4. Harmonize the actions of nations

Drivers of globalization 1. Declining trade and investment barriers

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 2. Technological change

International trade When a firm exports goods or services to a different country

Foreign direct When a firm invests resources in Business activities outside home
investment country

Microprocessor effects Lowered the cost of global communication and the cost of
coordinating and controlling a global business.

What are the 1. Lower transportation costs which makes it cheaper to perform
implications of globalization of production 
technological change 2. Allows firm to respond better to custumer demand due to real
for the globalization of time feedback.
production?

What are the 1. Lower transportation costs has made is easier to ship products
implications of around the world
technological change 2. Helps create electronic global marketplace
for the globalization of
markets?

The changing 1. Changing world output and world trade picture 

demographics of the 2. Changing of FDI 
global economy 3. The changing nature of multinational enterprise 
4. Changing world order

The changing world In the early 1960's, the united states was in control of the economy.
output and world trade By 2010, The United States world output declined to only 23.1% of
picture world economy. On the other hand, China became a powerful
economy and was the #1 exporter.

The changing FDI The share of world output generated by developing countries has
been steadily rising since the 1960's. However, The FDI in developed
countries is declining.

The changing nature of 1. Rise of non-U.S. multinationals 

the multinational 2. Growth of mini-multinationals
enterprises

The changing world Economic development in China and collapse of communism in

order eastern Europe

The globalization Is the shift toward a more integrated and interdependent global
debate economy a good thing

With globalization 1. More products 

2. More customers 
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 3. Lower costs
4. More job opportunities

Against globalization 1. losing jobs 

2. environment degradation 
3. less income 
4. more competition 
5. less control

National sovereignty Critics worry that economic power is shifting from the national
government and towards organizations such as the
WTO.... Supporters argue that the power of these organizations is
limited to what everyone agrees upon.

How does managing an 1. Countries are different 

international business 2. Different currency's
differ from managing a 3. Government intervention in the international trade and
domestic business? investment system 
4. More problems for the manager and the problems themselves
are more complex