You are on page 1of 18

The

Emergin
g Global
 Barriers to trade are coming dow
 Allowing free flow of goods,
services & capital
 The volume of cross country trad
is increasing
 Making the economies more
interdependent
 More countries are joining the
ranks of developed world
List of developed countries

  Andorra•   FaroeIslands•   Ireland•   Monaco•   
Spain•   Australia•   Finland•   Israel•   Netherlands
•   Sweden•   Austria•   France•   Italy•   
New Zealand•   Switzerland•   Belgium•   Germany
•  Japan•   Norway•   Turkey•   Bermuda  Greece•  
 Liechtenstein•   Portugal•   United Kingdom•   
Canada•   HolySee•   Luxembourg•  SanMarino•   
UnitedStates•   Denmark•  Iceland•   Malta•   
South Africa
High income      
Upper-middle income      
Lower-middle income      
Low income 
Strengthening of Global
Economy
 Adoption of liberal economic
policies
 State-owned business privatized
 Deregulation adopted
 Markets opened to more
competition
 Commitment increased to
removing barriers to cross-border
trade and investment
Powerful Market-oriented
economies
 Czech republic
 Poland
 Brazil
 India
 China
 South Africa
INDICATION

Favorable world for the
practice of International
business
Other side of the coin…..

 Countries may pull back from the
current liberal economic ideology if
their experiences do not match
their expectations

 LESSON TO LEARN FROM THE
ASIAN CRISIS OF 1997-98
Asian financial Crisis

 Trigger for the Asian crisis – 2nd July
1997
 Started with the Thai govt.
announcement
 Reached to Philippines and
Malaysian Govt.
 Soon other economies become
involved – Taiwan, Hong Kong,
Singapore
 Oct 1997 – crisis roll all over the
world
 1998 – Russia and Brazil
 Also threatened the economies of
developed world including US
 Risks associated with global
financial contagion are also greater
Modes of IB

 Merchandise Exports & Imports
 Service Exports & Imports
 Tourism & Transportation

 Performance of services banking,

insurance)
 Use of assets (trademarks, patents,

copyrights, licensing agreements)
 Franchising

 Investments
 Direct Investment

 Portfolio Investment
Entry Modes

 Which Markets to enter
 When to enter
 What scale
 How ??
Entry Modes

 Exporting
 Licensing
 Franchising
 Joint-ventures
 Wholly-owned subsidiary
 Turnkey Projects
Exporting

 Advantages
 Ability to realize location and
experience curve economies

 Disadvantages
 High Transport costs
 Trade barriers
 Problems with local marketing agents
Licensing

 Advantages
 Low development costs and risks

 Disadvantages
 Lack of control over technology
 Inability to realize location and
experience curve economies
 Inability to engage in global strategic
coordination
Franchising

 Advantages
 Low development costs and risks

 Disadvantages
 Lack of control over quality
 Inability to engage in global strategic
coordination
Joint ventures

 Advantages
 Access to local partner’s knowledge
 Sharing development costs and risks
 Politically acceptable
 Disadvantages
 Lack of control over technology
 Inability to engage in global strategic
coordination
 Inability to realize location and
experience economies
Wholly owned subsidiaries

 Advantages
 Protection of technology
 Ability to engage in global strategic
coordination
 Ability to realize location and
experience economies
 Disadvantages
 High costs and risks