INTERNATIONAL BUSINESS

International Business is not bordered

The most waste is do nothing
Business have to pay but do not waste
“Germany proverb”

Associated Professor. PhD TA LOI

Manager of International business department
School of Trade and International economics - NEU
taloiktqd@gmail.com Cell Phone: 0983696032
 Think Don’t joint
international
global business but
when do international
product still
business competes with
your product in
domestic
market
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 Why you need International
business experience

1. Fortune 500 firms require ( ex: Gary Ellis

case.)
2. 2. 30% of 700 CEOs in American have IB
experiences to do
3. Today, almost firms hire the CEO have IB
experiences ( Mc Donald’s; Coke, Kellog,
Alcoa, Altria,….)
 Case study: Make money –
international business
Fed of USA notify the interest is
In 1992, Vietnam started about 2%/year. In Vietnam the
economics innovation with commercial bank agrees to pay
12%/year for deposit money.
named “Doi moi –
innovation”, After 25 years,
a few business man I have so
becomes rich man, much
money to
billionaire… Most of them built the
new factory
said they started business
without money or a tinny
capital.
What do you think ? 1-4

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DISCUSSION

1. Is it true for rich Thinking about:

man in our differences in
society? nation business
2. How did they do environment
to get these Money, money,
success? money….

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Get money from International business
L/C usance 5
years
Argribank Well
fargo

Epco N. export
Co.
$ 2 mill. x ( 9% -3%) x 5 years = $ 600.000
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 Why Is IB Different?

 In IB a firm operates in multiple environments

 Domestic environment - uncontrollable forces
 Has forces that surround and influence the firm’s
behavior in the home country
 These remain mostly the same regardless of
where in the country the firm operates

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 Why Is IB Different?

 In IB a firm operates in multiple environments

 Foreign environment country-by-country
uncontrollable forces influence the firm’s behavior
and are
 different from those of the domestic environment
 based on values that differ
 difficult to assess for the firm’s home managers
 interrelated

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 Why Is IB Different?

 The international environment is characterized by

interaction
 between domestic and foreign country
environmental forces
 among foreign country environmental forces
 Hence, decision making is more complex due to
 environment force differences and interactions
 culture differences that are difficult to learn
 the tendency of manager’s to rely on their own
culture’s reference points

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International business philosophy
Chinese
product will
be used by
Japanese each person
product will in the world
appear in
each family
in the world
Chinese thinking:
- focuson
manufacturing
We are Japanese
thinking: Mass
strongest production,
Japanese
type of national
business such trademark first
American
thinking: as: Integrated
Export,
production,
franchising, Keizen model,
Foreign JIT model…
Investment

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What is global supply chain?

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 Object, scope of IB course
Object:
all transactions in business move cross-border
(not frontier).
Scope:
- micro-economics
- Business only
- export goods and services, foreign
investment

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TEXT BOOK
- Ball D. A, Geringer J. M, Minor M.
S, McNett J. M, (2013), International
Business – The Challenge Of Global
Competition, McGraw-Hill/Irwin.

Ref.Book:
Wild, J. J, Kenneth L. Wild, J. C. Y.
Han (2000), International Business: An
Integrated Approach, Prentice Hall,
New Jersey 07458.
Structure of IB text book
International business
management

National
environment

Foreign
environment

International
environment

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 Group requirement
1. Each group is 3 or 5 only
2. Chief of group is based on volunteer spirit. The
chief need to train leading skill by judging
member of team.
3. Member of group need to train the working team
skills. If don’t make a fit group, you can set up a
new team or move other group but not later than
10th week
4. Individual grade will not be the same for each
member, base on your effort
5. Presentation time is 10 min, Q&A is 10 min only 1-15

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Leaning method and assignment

1. Appear in class (at least 80% course time)

– 10%
2. Participate in discussion, practices, quick
test … 20%
3. Presentation: 20%
4. Final exam: 50%

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Make up individual grade

1. Appear in class regularly

2. Active in discuss with teacher and others
3. Give question for presenting group (max 5
Questions) score of each question is from 0-
1 (10 scores).
4. Final exam (4 parts: part 1 is theory
understand; part 2 is true analysis; part 3:
Multi-choices question with explanations;
Part 4 is case study analysis)
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 Chapter One

The Challeging world of

International Business

McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
 Learning Objectives

1. Understand What IB is and why it is important

2. Comprehend why international business differs from
domestic business
3. Appreciate IB have long history and world’s
development nowadays.
4. Appreciate the dramatic internationalization of markets
5. Understand drivers that lead firms to internationalize
6. Recognize key urguments in globalization
7. Explain reasons for entering foreign markets
8. Recognize 7 dimensions involving in IB.
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International Business Terminology

International business terms

 Foreign business
 Multidomestic company (MDC)
 Global company (GC)
 International company (IC)

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International Business Terminology
 International Business
 A business whose activities are carried out across
national borders
(It is economics border, sometime it is legal border)
 Foreign Business
 The operations of a company outside its home or
domestic market
 Multidomestic Company
 An organization with affiliates in many countries
 Each formulates its own business strategy
 Strategy based on perceived differences in
markets
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International Business Terminology

 Global Company
 Attempts to standardize and integrate operations
worldwide in most or all functional areas
 International Company
 Denotes a global or multidomestic company

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Global Company or export Company

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 History of
International Business
 Early traders
 before and early BC Mesopotamian, Phoenician and
Greek merchants
 China stimulated the emergence of an internationally
integrated trading system
 “all roads lead to China”
 Ottoman Empire before 1300
 17th Century mercantilism/colonialism, China was
manufacturing country about 1800 years & replaced by
Britain in 1840.
 British East India Company Dutch East India Company
 Portugal and France
 Singer sweing Machine built factory in Scotland 1st of FDI1-24
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 Globalization

 The world economic globalization process

 Theodore Levitt’s (1983) view--now seen as
simplistic:
 Tech advances altered communication,
transportation, travel to create a global
consumer who prefers standardized products
 The entire world [or major regions of it] is now a
single entity; an organization can sell the same
things in the same way everywhere
 Today’s view
 International integration of goods, technology,
information, labor, and capital
 The process of making this integration happen
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Globalization’s Outcome: Globality

 Globality: describes economic globalization’s

unavoidable outcome
 Nothing that happens on our planet is only a
limited local event
 All inventions, victories, and catastrophes
affect the whole world

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 GDP growth rate in the world
2020f
Citeria 2015 2016 2017 2018e 2019f

Real GDP1
World 2.8 2.4 3.0 3.1 3.0 2.9
Advanced Economies 2.2 1.6 2.3 2.2 1.9 1.7
United States 2.9 1.5 2.3 2.5 2.2 2.0
Euro Area 2.1 1.8 2.4 2.1 1.7 1.5
Japan 1.4 0.9 1.7 1.3 0.8 0.5
Emerging Market and
3.6 3.7 4.3 4.5 4.7 4.7
Developing Economies (EMDE)
Other EMDE excluding
5.2 4.9 5.1 4.8 5.1 5.1
China
China 6.9 6.7 6.8 6.4 6.3 6.2
East Asia and Pacific 6.5 6.3 6.4 6.2 6.1 6.0
Europe and Central Asia 1.0 1.7 3.8 2.9 3.0 3.0
Latin America and the
-0.6 -1.5 0.9 2.0 2.6 2.7
Caribbean
Source: World Bank. Notes: PPP = purchasing power parity; e = estimate; f = forecast. 1-27

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The world’s GDP
Total GDP: $ 77.269 Bill. In 2013
No. Nation GDP No. Nation GDP

1 USA 17,348 54 New zealand 197,5

2 China 10,356 55 Vietnam 186

3 Japan 4.602 56 Banglades 184

4 Germany 3.874 57 Kuwait 173

5 UK 2.950 58 Hungary 137

6 France 2.833 59 Uraina 131

7 Brasil 2.346 60 Angola 129

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Hoạt động KD và quản trị 2

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Globalization’s Outcome: Globality

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 Globalization Forces
Globalization is a result of
 Political forces that
 reduce barriers to trade and foreign investment
by governments
 induce privatization of industries of former
communist nations
 Technological forces that
 lead to advances in computers and
communications technology
 allow low cost network computing and ubiquitous
Internet collaboration across borders

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 Globalization Forces
Globalization is a result of
 Market forces
 lead to globalizing companies’ need for their suppliers to
globalize too
 allow easier revenue seeking activity abroad due to home
market saturation
 Cost forces
 demand economies of scale -- product line and manufacturing
-- to reduce unit costs
 lower cost production factor seeking efforts in other countries
 Competitive forces
 more intense due to explosive growth internationally of small
and new businesses
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Fobe 500 in 2005, 2008, 2011 and 2013
No. No. of firms
Nation
2005 2008 2011 2013
1. Mỹ 176 153 133 128
2. Nhật 81 64 68 57
3 Pháp 39 39 35 31
4 Đức 37 37 34 28
5 Anh 37 34 30 26
6 Trung Quốc 16 29 61 95
7 Hàn Quốc 11 15 - 17
8 Thụy Sỹ 11 14 - 13
9 Hà Lan 14 13 - 13
10 Canada 13 14 - 10

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Globalization Forces

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Globalization Forces

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 Comparation of GDP and turrnover of
MNC’s in 2013
Nước/ Công ty GDP/ Doanh số(Triệu USD)
25.Na Uy 512.580
(1)Royal Dutch Shell 481.700
26.Bỉ 508.116
(2)Walmart Stores 476.294
27.Venezuela.RB 438.284
(3)Exxon Mobil 449.886
28. Áo 415.672
(4)Sinopec Group 428.167
29.Thái Lan 387.252
(5)China National Petroleum 408.630
30. Các tiểu Vương quốc ArậpThống nhất (United 383.799
Arab Emirates)
(6) BP 388.285
31.Columbia 378.148
32. Iran. Islamic rep 368.904
33.Nam Phi 350.630
(7)State Grid 333.386
34.Đan Mạch 330.614
35.Malaysia 312.435
36.Singapore 297.941
37.Israel 291.357
38.Chi Lê 277.199
39.Hongkong SAR. Trung Quốc 274.013 1-35
(8)Toyota Motor 265.702
(9)Wolkswagen 247.613 1-35
What is International Business?
 International Business (IB): any business transaction across
national borders
 Trade in goods
 Cross-border services
 consulting, advertising, legal, financial, accounting
 tourism, banking, communications/media, construction
management, etc.
 Company activity inputs may involve IB activity even if outputs
do not
 Firm’s revenues may come entirely from the home country
 Key raw materials, knowledge, processes may come
partially or entirely from other countries
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 Ways A Company
May Be Internationalized
 A company can become internationalized when
 its top managers come from different countries
 it operates abroad through subsidiaries, joint
ventures, or strategic alliances
 it generates revenues, owns assets, or employs
people in many countries
 it raises capital in financial markets abroad
 it has major shareholders from many countries

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Ways A Company May Be Involved
in International Business

 A company is involved in international business by

 working with others who are abroad
 Managers of its own subsidiaries
 Customers, suppliers, agents
 Overseas service providers: bankers,
advertising executives, lawyers, auditors,
government officials, transportation managers
 Service providers from home country who work
with the company’s overseas operations
 traveling overseas for company business
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 Mercantile exchage

Spot exchange:

Forward exchange:

Hedging:
The famer will make decision by CME’s
information.

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CME activities
Spot 1/2014 Forward 4/2014
Where
410$/rice 400$/rice does
62$/cabbage risks
60$/cabbage go?
Why
Rice: 300$ x Price:
can
1.000tons up –pull (Bull)
Specul
Cabbage: 58$ Down – bear
x3.000tons ation
(bear)
I will choose guys
rice. get
money

Risks
Speculation
buyer or seller 1-40

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Practices requirement: business practice
in Chicago Merchant Exchange (CME)

1. Get in
http://www.cmegroup.com/trading/commoditie
s/grain-and-oilseed/corn.html
2. Condition:
- Each person get 40 $ million;
- Price swings: not over 10% of nominant price
- Over Amount of money will be cancelled
- Transaction fees is $ 3.000

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 Sample of CME transaction
Prior Hi /
Month Charts Last Change Open High Low Volume Updated
Settle Lo Limit
Mar 2010

999999'0 8:04:58 PM CST

375'0 -0'2 375'2 374'6 375'0 374'4 1,284
No Limit 2/24/2010
May 2010
416'2 8:07:14 PM CST
385'4 -0'6 386'2 385'6 386'0 385'2 2,838 2/24/2010
356'2
Jul 2010
426'6 8:01:46 PM CST
396'0 -0'6 396'6 396'0 396'2 395'6 1,477 2/24/2010
366'6
Sep 2010
433'4 7:50:00 PM CST
403'0 -0'4 403'4 402'0 403'0 402'0 152 2/24/2010
373'4
Dec 2010
439'4 8:04:12 PM CST
409'2 -0'2 409'4 408'6 409'2 408'4 953 2/24/2010
379'4

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 Rapid Growth of
International Business
 The rapid growth of international business is a result
of
 dramatic increases of foreign direct investment
(FDI) and exports
 FDI: A firm invests in equipment, structures,
and organizations in another country while
retaining significant management control
 Exports: Sale and transfer of any good or
service from the firm’s home country to another
country
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 Rapid Growth of
International Business

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 Globalization Debate
Supporting Free Trade
 Free trade
 enhances socioeconomic development
 promotes more and better jobs

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 Concerns With Globalization

 Produces uneven results across nations and

people
 Has deleterious effects on labor and labor
standards
 Contributes to the decline of environmental and
health conditions

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 Environment of
International Business

 Two sets of forces in the IB environment influence the

development and operations of a firm
 External Forces (Uncontrollable)
 Those that management cannot control
 Internal Forces (Controllable)
 Those that management can develop and use
to formulate and execute the firm’s strategy
given particular external forces

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 External Forces That Affect IB
Due To Cross-Border Differences
1. Competitive
 Competitor kinds, number, locations, activities
2. Distributive
 National and international agencies that
distribute goods and services
3. Economic
 Factors such as GNP, unit labor cost, and
personal consumption expenditures that matter
to business and vary among countries

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External Forces That Affect IB Due
To Cross-Border Differences
4. Socioeconomic
 Characteristics and distribution of human
population
5. Financial
 Interest rates, inflation rates, and taxation
6. Legal
 Foreign, domestic, and international laws
governing a firm’s IB operations
7. Physical
 Natural elements: natural resources (i.e.,
factors of production), topography, climate
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Difierences in Legal

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External Forces That Affect IB Due
To Cross-Border Differences
8. Political
 Government forms, international organizations
9. Sociocultural
 National culture similarities or differences that
affect international managers
10. Labor
 Composition, skills, attitudes of labor
11. Technological
 Technical skills and equipment that affect how
resources are converted to products
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Diffirences in Politics

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Internal Forces That Managers Can
Influence Across Borders

 Factors of production
 Capital, raw materials, people
 Activities of the organization
 Personnel management, finance,
production, marketing

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Workers in the world

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