MBA/MBAA

Term VI
International Business

Session - 2

Prof. Abu Rehan Abbasi 1

Recap – Session 01

2
 Why International Business?

Increases Revenue To reduce the Risk Acquire new

Resources

• Opportunities in • Home country • Technology

foreign markets economy – • Talent
uptrends/downtren • Knowledge
• Stagnation in the ds • Natural resources
domestic market • Macroeconomic • advantage of
risks Arbitrage or of
• Spreads fixed costs • .. better Quality
• .. • .. • ..
• .. • ..
3
Globalization

The trend toward greater economic, cultural, political, and

technological interdependence among national institutions
and economies

How is it different from International Business?

• Commercial transaction that crosses the borders

of two or more nations

4
Two aspects of Globalization very relevant to IB

Globalization of Globalization of
markets production

Dispersal of production
Convergence in buyer
activities worldwide to
preferences in markets
minimize costs or
around the world
maximize quality

5
 Benefits of Globalization of Markets

▪ Reduces marketing costs

▪ Creates new market opportunities

▪ Levels uneven income streams

▪ Local buyers’ needs

▪ Global sustainability

6
 Benefits of Globalization of Production

▪ Access lower-cost workers

▪ Access technical expertise

▪ Access production inputs

7
 Factors driving Globalization
• General Agreement on Tariffs and
Trade (GATT)

• World Trade Organization (WTO)

• Other international organizations

• The World Bank
• The International Monetary Fund
(IMF)

• Regional trade agreements

• Trade and national output

8
 Factors driving Globalization

• E-business (E-commerce)

• E-mail and Videoconferencing

• Internet

• Company Intranets and Extranets

• Advancements in Transportation Technologies

9
 Globalization

…has enriched the world perpetuates inequality

scientifically and culturally, and throughout the world
benefitted many people
economically as well

Amartya Sen Joseph Stiglitz

10
 Debate Over Jobs and Wages
Against Globalization
• Eliminates jobs in
developed nations
• Lowers wages in
developed nations
• Exploits workers in
developing nations

For Globalization
• Increases wealth and efficiency in all nations
• Generates labor market flexibility in developed nations
• Advances the economies of developing nations
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Debate Over Income Inequality

Inequality • Wage gap between white-collar and

Within Nations blue-collar occupations in rich nations

Inequality • Widening the gap in average incomes

Between Nations between rich and poor nations

Global Inequality • Widening income inequality between

all people of the world

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Debate Over Culture, Sovereignty, and the
Environment

Allows us to Homogenizes
profit from our our world and
differing destroys our rich
circumstances diversity of
and skills cultures

13
Debate Over Culture, Sovereignty, and the
Environment

Guardian of Menace to
Democracy? democracy?
Globalization Empowers
spreads democracy supranational
worldwide institutions at the
expense of national
governments

14
Debate Over Culture, Sovereignty, and the
Environment

Most international “Race to the

firms today Bottom”
support
reasonable
environmental
laws

15
 A society’s unique set of
values, belief’s, rules, and
What Is Culture? institutions that govern how
people live and interact with
each other
 Major religions by country

17
Source: www.pewforum.org
 Business Implications of Culture

Germany-based Haribo

What were the challenges that it

faced?
Cultural Challenge and Blunders:

• Pork-based product: off-limits to

Muslims and Jews

• Not meeting the needs of a globally

dispersed subculture

• Potentially worth $2 billion annually

• Printing on packages: Backward, but

Hebrew is read from right to left 18
Business Implications of Culture

ABCL and the Miss World fiasco in 1996

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 What does Culture mean for business

Sensitivity can help companies

• access untapped opportunities

• avoid charges of cultural imperialism

• increase employee work satisfaction

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 Frameworks to differentiate between
cultures have been developed that can
help businesses
 Key terms of the Hofstede framework
• Power distance- the degree to which subordinates in an organization accept
that power is distributed unequally

• Individualism- the belief that the needs of the individual are more
important than the needs of society

• Collectivism- the belief that the needs of society are more important than
the needs of the individual

• Uncertainty avoidance- a business-related aspect of culture that measures

how persons deal with an unknown future

• Future orientation- the degree to which a culture chooses future rather

than immediate results

• Indulgence- the extent to which society allows free expression

e.g., comparing India with Germany & US on the
Hofstede dimensions

(https://www.hofstede-insights.com/country-comparison-tool)
 Managing cultural differences
Assessing Cultural Intelligence

• Cognitive CQ is our level of

Recognize understanding about how cultures
differences are similar and different.

• Knowing about someone else’s

culture doesn’t help much unless
you can adapt your behavior
Respect Reconcile accordingly. Behavioral CQ
differences differences measures your ability to do this

• Motivational CQ assesses your level

of interest, drive, and energy to
adapt cross-culturally; this can come
from both an innate (intrinsic) desire
as well as external (extrinsic) forces.
Copyright ©2018 John Wiley & Sons, Inc. 25
Thank You

Prof. Abu Rehan Abbasi 26

Principal References

Morris, Shad; Oldroyd, James (2022) International Business,

Wiley

Wild, John J; Wild, Kenneth L (2017) International Business: The

Challenges of Globalization, Pearson

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