Chapter One:

What is globalization ?
It is the widening and deepening of interdependent relationships among people from different
nations.

IB consists of all commercial transactions (Sales, investment, & transportation):

- IB goal of private business is to make profit
- Government IB may or may not be motivated by profit.

Why is the study of IB important?

1. Most companies are either international or compete with international companies
2. modes of operations may differ
3. helps managers decide where to find/sell resources
4. ways of conducting business may differ
5. better career decisions
6. helps understand what government policies to support.

What are the factors in increased globalization ?

1. Rise in and application of technology: the advancement of communication and
transportation (Mobile Phones, airplanes)
2. liberalization of cross-border trade and resource movements: Countries restrict the entry
and exit of goods, services, and resources (Workers, capital, tools) to protect their own
industries, but overtime restrictions have been reduced due to three primary reasons, 1.
Citizens want a greater variety of goods and services at a lower price, 2. Competition
encourages domestic producers to become more efficient, 3. They hope other countries
lower their barriers in return.
3. Services that support IB: such as bank credit agreements.
4. Growth in consumer pressures.
5. increase in global competition.
6. changes in political situations and government policies.
7. expansion of cross-national cooperation: three important needs 1. Gain reciprocal
advantages (example using each other’s commercial ships) , 2. Attach problems jointly
(or multinational problem solving,) , 3. Deal with areas of concern that lie outside the
territory of any nation.

Issue with IB & globalization:

1. Threats to national sovereignty (the freedom to act locally without restrictions)
2. environmental stress (stress around the economic growth it brings)
3. Growing income inequality and personal stress (comparing ourselves with others, to
make economic status satisfactory we should do better & keep up with others)

Why do companies engage in IB ?

1. Sales expansion
2. resource acquisition
 3. Risk reduction

What are the operation modes?

1. Merchandise exports (Goods sent out of a country)

2. Merchandise imports (goods brought into a country)
3. Services exports (provider and receiver of payment)
4. Service imports ( receipt and payer of payment, ex: tourism, transportation, licensing,
management contacts)
5. Investments ( FDI “foreign direct investment” taking control in a foreign company “joint
venture”, Portfolio investment Non controlling financial interest)
- collaborative arrangements: Joint ventures, Licensing arrangements, management
contacts, minority ownership, long-term contractual arrangements.
- Strategic alliance, companies that work together but agreement is critical to at-least one
partner (an agreement that doesn’t involve joint ownership)

types of international organizations

- MNEs / Multinational enterprises (have operations in more than one country or take a
global approach in makers and production) also referred to as
1. Multinational corporations (MNCs)
2. Multinational companies (MNCs)
3. Transnational companies (TNCs)

Q. Why is IB different?
. External environment affects a company’s international operations
. Managers must understand social science disciplines and how they affect functional business
fields.
. take into consideration the physical & social factors and competitive factors:
1. Physical & Social factors:
- Geographic influences ( natural conditions)
- political policies ( how and where business occurs )
- legal policies ( how a company operates )
- Behavioral factors (adaptation in local conditions)
- Economic forces (differences in costs, currency values & market size)
2. The competitive environment:
- strategy for products ( cost, differentiation, and focus strategy)
- Company resources and experience ( ex, market leaders could have more resources for
international operations)
- competitors faced in each market ( local or international)
basically a company’s competitive strategy influences where and how it can operate best, and
that the competitive situation may differ from country to country in terms of strength and which
competitors to face.