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International Business

Instructor: Tural Mammadov

Course requirements
Learning experiences needed in this course are as follows:
Analytcal skills
Multicultural and diversity understanding
Understanding of ethical and legal responsibilities in
organizations and societies
Understanding of domestic and global economic environments
for organizations
Main mandatory textbook is: Hill, Charles W.L., International
Business 6th (7th, 8th) Edition, Irwin-McGraw-Charles W.L.
Hill.
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Course goals and objetcives


Upon completing this course, you should be able to:
Analyze the effects that different social, cultural, economic, political, legal and
technological environments have on business practices throughout the world;
Be familiar with the impact that international institutions and regional economic
integration initiatives have on firms operating internationally;
Enhance your decision making and problem-solving skills within an
international business context;
Demonstrate an understanding of the ethical and social responsibilites of
companies within a global context, etc.

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Course content

Introduction
Globalization
National differences in Political economy
National differences in culture and ethics in International Business
International Trade Theory
Political economy of International Trade
Foreign direct investments
Regional Economic Integration
Foreign Exchange Market
Review classes and exams
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Instruction and evaluation


methods
Instruction methods:
Lectures
Case analyses
Quizzes
Class discussions

Evaluation methods and percentage:


10% - class participation (video and case discussions) + attendance
25% - midterm exam
5% - case analysis
20% - Quizzes
40% - final exam
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chapter

Globalization

Chapter Topics
Definition of Globalization
Emergence of Global Institutions
Drivers of Globalization
Changing Demographics of the Global Economy
Globalization Debate

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What Characterizes the


World Economy Today?
A shift away from self-contained national economies
with high barriers to cross-border trade and investment
A move toward a more integrated global economic
system with lower barriers to trade and investment
The establishment of global institutions

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What is Globalization?
Hills Definition:
The shift towards a more integrated and
interdependent world economy
Are there other definitions?
Modern view about Globalization (video)
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Are There Other


Definitions of Globalization?
As we discuss this chapter and other chapters in the
textbook, keep in mind that:
Hills definition of globalization focuses on economic
processes
Scholars from other disciplines may define
globalization from other perspectives, such as
political, cultural, or ideological
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Globalization of Markets
Historically distinct and separate national markets are
merging into a global marketplace in which the tastes
and preferences of consumers in different nations are
beginning to converge upon some global norm
Examples:
Sony Playstation
Coca-Cola

McDonald's hamburgers

Howeversignificant differences do exist among

countries!
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Globalization of Production
Tendency among firms to source goods and services
from different locations around the globe in an
attempt to take advantage of national differences in
the cost and quality of factors of production (e.g.,
land, labor, capital, and energy), allowing them to
compete more effectively against their rivals.
Examples:
Boeing

Apple

Nike

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Emergence of Global Institutions


Global institutions:
Help manage, regulate, and police the global market
place
Promote the establishment of multinational treaties to
govern the global business system

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Global Institutions
World Trade Organization (WTO): responsible for
policing the world trading system and ensuring that
nations adhere to the rules established in WTO treaties
- In 2008, 151 nations accounting for 97% of world trade
were members of the WTO
International Monetary Fund (IMF): maintains

order in the international monetary system

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Global Institutions
World Bank: promotes economic development
United Nations (UN): maintains international peace
and security, develops friendly relations among
nations, cooperates in solving international problems
and promotes respect for human rights, and is a center
for harmonizing the actions of nations

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Drivers of Globalization
Two macro factors underlie the trend toward
greater globalization:
Declining trade and investment barriers

Role of technological change

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Declining Trade and


Investment Barriers
After WWII, the industrialized countries of the West

began the process of removing barriers to the free flow


of goods, services, and capital between nations
Under GATT (the precursor to WTO), over 100

nations have negotiated further decreases in tariffs and


made significant progress on a number of non-tariff
issues
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Declining Trade and


Investment Barriers

Removal of barriers to trade has contributed to


increased
- international trade
- foreign direct investment (FDI)

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Role of Technological Change


Microprocessors and Telecommunications
- Major advances have lowered the cost of global communication
and therefore the cost of coordinating and controlling a global
organization

Internet and the World Wide Web


- Online shopping and social networks
Transportation Technology
- Development of commercial jet aircraft and super freighters
- Introduction of containerization

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Implications of Globalization
for Business
Improvements in transportation technology have
enabled firms to better respond to international
customer demands
Managers today operate in an environment that offers
more opportunities, but is also more complex and
competitive than that of a generation ago

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Changing Picture of
Global Economy
In the 1960s:
U.S. dominated the world economy and the world

trade picture
U.S. multinationals dominated the international
business scene
About half the world-- the centrally planned
economies of the communist world-- was off limits to
Western international business
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Changing World Output and


World Trade Picture
Forecasts predict a rapid rise in the share of world
output accounted for by developing nations such as
China, India, Indonesia, Thailand, and South Korea,
and
A decline in the share by industrialized countries
such as Britain, Japan, and the United States, thus
Companies from industrialized countries are finding
new markets but also new competitors in the
developing regions of the world
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Changing Nature of
Multinational Enterprises
Rise

of non-U.S. multinational enterprises (MNEs)

- Growth of new multinational enterprises from the world's


developing nations
- Examples: Samsung of Korea;

Increase

in the number of mini-multinationals (small


and medium-sized companies)

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Globalization Debate

Is the shift toward a more integrated


and interdependent global economy
a good thing?

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Jobs and Incomes

Critics of globalization worry that jobs are being lost

to low-wage nations
Supporters of globalization argue that free trade will result in
countries specializing in the production of those goods and services that
they can produce most efficiently, while importing goods and services
that they cannot produce as efficiently specialization brings high paid
jobs

Supporters also argue about new job openings by


investing companies
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Labor Policies and


the Environment
Critics of globalization argue that that free trade

encourages firms from advanced nations to move


manufacturing facilities offshore to less developed
countries with lax environmental and labor regulations
Supporters of globalization point out that tougher

environmental regulation and stricter labor standards go


hand in hand with economic progress and that foreign
investment often helps a country to raise its standards

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National Sovereignty
Critics: of globalization worry that economic power is

shifting away from national governments and toward


global institutions such as the World Trade Organization
(WTO), the European Union (EU), and the United
Nations
FDI creates dependence on country of origin
Supporters of globalization maintain that the power of
global institutions is limited to what countries
collectively agree to grant
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Worlds Poor
Critics of globalization argue that the gap between rich

and poor has gotten wider and that the benefits of


globalization have not been shared equally
Supporters of globalization suggest that the actions of

governments have made limited economic improvement


in many countries. Globalization will stimulate that
stopped improvement

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Managing an
International Business
Managing an international business (any firm that
engages in international trade or investment) is different
from managing a domestic business because:
- Countries and cultures differ

- Managers face a greater and more complex range of


problems
- International companies must work within the limits
imposed by governments and the global trading system
- International transactions require converting funds and
being susceptible to exchange rate changes
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