INTERNATIONAL BUSINESS

IMPERATIVE &
GLOBALIZATION
Spring 2019
 We hear a lot about globalization these days. Have a look at what Lady
Di had to do with globalization.
Question: What is the height of globalization?
Answer: Princess Diana’s death.
Question: How come?
Answer: An English Princess with an Egyptian boyfriend, crashes in a French
tunnel, driving a German car with a Dutch engine, driven by a Belgian who was
high on Scottish whiskey, followed closely by Italian Paparazzi, on Japanese
motorcycles, treated by an American doctor, using Brazilian medicines!
 And this is sent to you by an Indian, using Bill Gates technology which he stole
from the Japanese.
 And you are probably reading this on one of the IBM clones that use Taiwanese-
made chips, and Korean made monitors, assembled by Bangladeshi workers in a
Singapore plant, transported by lorries driven by Pakistanis, hijacked by
indonesians and finally sold to you by the Chinese!
 Here you have it:…Globalization!
DEFINITIONS OF GLOBALIZATION
1. Joseph Nye and John Donahue: “Globalism is a state of the
world involving networks of interdependence at
multicontinental distances.”

2. World Bank: Globalization is the growing integration of

economies and societies around the world.

“Worldwide competition between businesses”

COMPONENTS OF GLOBALIZATION?
 Economic globalization
 Political globalization
 Cultural globalization
Globalization?
Good or Bad!
Two Views….
GLOBALIZATION
Like it or not, globalization is here…to stay.
 Most large companies have some kind of business
relations with customers, companies, employees or
various stake-holders in other countries…and cultures.
(Global corporations)
 Many employees and managers deal with people from
other cultures on a constant basis
 Most of us have a close experience with only one or
two cultures…=>

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 GLOBALIZATION

 We do not understand people from other cultures as

readily and intuitively as people from our own culture
=>
 Cross cultural management helps organization
members to gain better understanding of other
cultures, of their culture and of the consequences of
people from different cultures working together

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 Globalists: Yes and No.
Proponents of globalization…
maintain that because of free trade, local and national cultures are
allowed to extend beyond geographic and political boundaries
therefore increases the variety of products and cultures available in
all nations.

1. Decline of nationalism.
2. Growing universal language: English
3. Universal Market of popular culture: entertainment,
the Internet, food, etc.
4. Globalization does not destroy local cultures, though
it may influence them.
 Skeptics: No.
Critics point to the rapid loss of local languages, art, and music as
direct consequence of globalization; local and national cultures have
been ‘crowded out’ by western popular culture as depicted in music and
movies.

1. Nationalism and ethnic nationalism are alive and well in many parts
of the world.
2. Globalization = Americanization, a “McWorld” led by the U.S. Vast
majority of products originate from the U.S.
3. Globalization undermines and destroys local cultures e.g. Guatemala
and Mayan culture.
4. Globalization engenders a backlash and resistance.
FOR EXAMPLE,

When it becomes easier to trade with China, or to

travel to and from China, people around the world
are able to purchase and enjoy Chinese art, which
allows Chinese artists to prosper and reach new
audiences.
WHAT IS OUTSOURCING?
Client hires vendor to perform task(s) for client
 Example: Unilever hires another company (e.g., IBEX)
to perform telephone related services for Unilever.
 Unilever – Client
 IBEX - Vendor
EXAMPLES OF ACTIVITIES OUTSOURCED
 Cafeterias, janitorial services, copy centers, trucking,
building maintenance, security, payroll, legal services
 Small banks outsource check processing function to larger
banks.
 Auto/Manufacturing

One day 50 employees needed, next day only 10 are needed.

EXAMPLES OF ACTIVITIES OUTSOURCED
 IT Outsourcing
 Examples:IT application management, IT application development,
data center operations, quality assurance etc.

 Business Process Outsourcing

 Examples: Outsource HR, Accounting, Financials etc.
 NEED FOR INTERNATIONAL BUSINESS
 More and more firms around the world are going global,
including:
 Manufacturing firms
 Service companies (i.e. banks, insurance, consulting firms)
 Art, film, and music companies

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 NEED FOR INTERNATIONAL BUSINESS
 International business:
 causes the flow of ideas, services, and capital across the
world
 offers consumers new choices
 permits the acquisition of a wider variety of products
 facilitates the mobility of labor, capital, and
technology
 provides challenging employment opportunities
 reallocates resources, makes preferential choices, and
shifts activities to a global level

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 WHAT IS INTERNATIONAL BUSINESS?
International business consists of transactions that are devised
and carried out across national borders to satisfy the objectives
of individuals, companies, and organizations.

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TYPES OF INTERNATIONAL BUSINESS
Export-import trade
Foreign direct
investment

Licensing

Franchising

Management contracts

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 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?

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 RECENT CHANGES IN INTERNATIONAL
BUSINESS
 Total world trade declined dramatically after 2000, but is
again on the rise.
 The rate of globalization is accelerating.
 Regionalization is taking place, resulting in trading blocs.
 The participation of countries in world trade is shifting.

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 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.

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 THE CURRENT U.S. INTERNATIONAL TRADE
POSITION
Exports and Imports of Goods and Services per Capita
for Selected Countries

Country Exports per Capita Imports per Capita

Australia $4,296 $4,525
Brazil 379 428
China 222 199
Japan 4,165 3,622
Kenya 91 125
United Kingdom 4,767 5,500
United States 3,472 4,962
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THE IMPACT OF INTERNATIONAL BUSINESS ON
THE UNITED STATES
 U.S. international business outflows are important on the
macroeconomic level in terms of balancing the trade
account.
 On the microeconomic level, participation in international
business can help firms achieve economies of scale that
cannot be achieved in domestic markets.

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 AVERAGE PLANT SALARY AND WAGES (PER
WORKER, DOLLARS PER HOUR)
30

25
$ per hour

20

15

10

0
All Plants Small Plants Large Plants

Non-Exporters Exporters
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 GLOBALIZATION
 Because of globalization, for the first time in history, the
availability of international products and services can be accessed
by individuals in many countries, from diverse economic
backgrounds.

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