The World

is NOT Enough

Business on an
International Playfield

Dr. Sheelan Misra

Professor
New Horizon College of Engineering ,Bangalore
Moving away from a world
of…..
• National economies were self contained
entities
• Isolated from each other
• Barriers to cross trade investment
• By distance
• By time zone
• By Language
• By national differences in government
regulations, culture & business system
A Fundamental shift is
occurring in the
world economy
The Shrinking Globe
MADE IN CHINA
(in billions of dollars) (source:
www.wto.org)

1000

900

800

700

600

500

400

300

200

100

0
Germany U.S. China Japan France
 Leading exporters in world
commercial services trade, 2005
(in billions of dollars) (source: www.wto.org)

400

350

300

250

200

150

100

50

0
U.S. U.K. Germany France Japan
 (in billions of dollars) (source:
www.wto.org)

2000

1800

1600

1400

1200

1000

800

600

400

200

0
U.S. Germany China Japan U.K.
Leading importers in world commercial
services trade, 2005
(in billions of dollars) (source: www.wto.org)
300
250
200
150
100
50
0
U.S. Germany U.K. Japan France
(in billions of dollars) (source:
www.wto.org)
12000
10000
8000
6000 Exports
4000 Imports

2000
0
1948 1953 1963 1973 1983 1993 2003 2005
Expansion of International
Trade
• In the past 30 years, the volume of
international trade has expanded from
$200 billion to over $7.5 trillion.

• The sales of foreign affiliates of

multinational corporations are now
twice as high as global exports.
The Composition of Trade

• Between the 1960’s and the 1990’s

the importance of manufactured
goods increased while the role of
primary commodities (i.e. rubber or
mining) had decreased.
• More recently, there has been a shift
of manufacturing to countries with
emerging economies.
• There has been an increase in the
area of services trade in recent years.
The Scenario……..
• Japan is the biggest customer for
Boeing

• Japan is also a dominant market

(in dollar value) from which
Boeing buys major assemblies,
products and services.
McDonalds Corporation

• McDonalds does business in

120 countries
• 65% of total revenue is
derived outside the U.S.
Volkswagen Group
• One of the world’s leading
automobile manufacturers and the
largest car producer in Europe
• 44 production plants in eleven
european countries, and seven
countries in the America, Asia and
Africa
• Sells in more than 150 countries
Coca Cola
• Corporate headquarters in Canada
with local operations in over 200
countries around the world

• More than 70% income comes

outside the US
Example of Globalized Production
Of the $20,000 sticker price of a
General Motors Automobile LeMans:
• $6,000 goes to South Korea,
where the car was assembled
• $3,000 goes to Japan for
sophisticated high-tech parts
(engines, transaxles, electronics)
• $800 goes to Taiwan, Singapore,
and Japan for small parts
• $500 goes to Great Britain for
advertising and marketing
services
• $1,000 goes to Ireland for data
processing
• $7,600 goes to GM and its
external professional firms in the
United States
 International Business
Questions
• How will an idea, good, or service fit
into the international market?
• Should trade or investment be used
to enter a foreign market?
• Should supplies be obtained
domestically or abroad?
• What product adjustments are
necessary to be responsive to local
conditions?
• What are the threats from global
competitors, and how can these
threats be counteracted?
All this is part of…….

International
Business
THE ARAB ASSIGNMENT
International Business

• All business transactions

• Private or Governmental
• That involves
• Two or more countries
 The Changing Pattern of
International Business
The U.S. no longer dominates the world
economy
Large U.S. multinationals no longer
dominate international business
The centrally planned communist
economies that made up roughly half the
world suddenly become accessible to
Western businesses
The global economy has become more
knowledge-intensive
 The Changing Pattern of
International Business (continued)
• Lowered trade barriers
General Agreement on Tariffs and Trade
(GATT)
World Trade Organization (WTO)
• North American Free Trade Act
The European Union (EU)
The Assciation of Southeast Asian Nations
(ASEAN)
 The Asia Pacific Economic Cooperation
(APEC)
 The Changing Pattern of International Business
(continued)

• Global consumer
preferences
Tastes and preferences are
converging
Presence of mass media,
exposure to goods from
various countries, and
standardized products
Globalized production
Cost efficiency
 The Changing Pattern of International
Business (continued)

• Technological innovations
Advances in communications,
information processing, and
transportation technology
Fiber optics, wireless
technology, the Internet and
World Wide Web, and
satellite technology
• Management across cultures
Adaptation to business strategies,
structures, operational policies, and
human resource programs
 WALMART CASE
• Largest retailer in the world
• Established in 1962
• 1991 – opened first store in Mexico
• 1995 - learned from its mistakes &
adapted its Mexican operations to match
the local environment
• 2002 – the company had more than 1200
stores outside the united states in
countries like Canada, Britain, Germany,
Japan & South Korea
• These differences require
customized marketing strategies,
product features and operating
practices to best match conditions
in a country
• The most global markets are still
not markets for consumer
products but for industrial goods
and materials that serve a
universal need the worldover
• In many global markets , same
firms confront each other as
competitors in nation after nation
Coca Cola x Pepsi
Ford x Toyota
Boeing x Airbus
Caterpillar x Kamatsu
Nintendo x Sega
more…….
Question???
• 1. What is International Business?
• 2. What are the drivers of
Globalization?

• Answers: Please refer HILL & JAIN

Chapter1: Globalization