Module 1

Foundations of International Business

in the Asia-Pacific Region

International Business Division

School of International Business and Marketing
UEH University
Learning objectives

1. Understand the global business environment

2. Understand major development trends in the Asia–Pacific region

today

3. Recognise the global risks when companies trade internationally

1. World trade and investment today

• International business comprises of all transactions devised and

impliemented within and across multiple countries to satisfy the
objectives of individuals and companies
• Key concerns for international business activities
• How will our ideas transfer into an international market?
• What, if any, product adjustments are required to suit local tastes or
conditions?
• Which market-entry method is best to achieve the desired goals?
• Should materials be sourced domestically or abroad?
• What threats do our global competitors pose? How can these be defused?
 Figure 2: Merchandise exports and imports by region, 2019Q1-2023Q4

Volume index 2019 = 100 Source: WTO and UNCTAD.

Table 1: Merchandise trade volume and real GDP, 2018-2023a
1. World trade and investment today

• Historic trade region: Western Europe, North America, and Japan

• 10 big emerging markets (BEMs) provide great international trade
opportunities in the near futures
• BEMs: Argentina, Brazil, China, India, Indonesia, Mexico, Poland, South Africa,
South Korea, and Turkey
• A reduction in barriers to trade and investment
• Policies gear towards liberalization, promotion, and facilitation of investment
• Asia has been the most active in the liberalization of investment
• Globalization: a shift towards a more integrated and interdependent
world economy
1. World trade and investment today
Figure 3: World trade in merchandise
andservice

Unit: trillion US dollars

Source: WTO Stats
Diverse Asia: Geo-economic and geo-political clusters

• Home to 50 countries and 4,462.7 millions of

estimated population, or nearly 60% of total
population of the world.
• Geographic divisions:
• Eurasia: The continent that stretches from Atlantic
Ocean to its West and the Pacific Ocean to its East
• Central Asia: Located along Europe’s eastern borders
and in the middle of the Eurasia continent
• Eastern Asia: Refers to Asia’s Northeast region,
which is bordered by Central Asia in the West
Diverse Asia: Geo-economic and geo-political clusters

• Southern and South-eastern Asia: Regions

that include south of Eastern and of Central
Asia
• Northern Asia: Mainly consists of Russia,
located at North of Mongolia and East of the
Ural Mountains
• Western Asia: Located in the westernmost
region of Asia and across the Red Sea,
overlooking Northern Africa

12
2. Asia and Pacific: major trends

1. Increase in economic integration

• Most Asian countries adopt the export-oriented policy and commited to trade
liberalization
• China joins WTO in 2001, the largest trading partner of every Asian economy
• 11 Asian countries concluded the Comprehensive and Progressive Agreement for Trans-
Pacific Partnership in 2018
• Impact: increase of intra-region trade to 60%
• Asia-Pacific Trade Agreement (APTA)
• ASEAN Free Trade Area (AFTA)
• Pacific Islands Countries Trade Agreement (PICTA)
• South Asian Free Trade Area (SAFTA)
• The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
2. Asia and Pacific: major trends

2. Impact of Financial crisis on the region

• Many Asian economies were hit hard
• Hong Kong, Taiwan, Thailand, Malaysia, South Korea
• Further strengthens intraregional trade, especially with China
2. Asia and Pacific: major trends

3. International environment
• De-globalization trend in the West
• Populist and nationalism emerged in the early 2000s
• Rivalry between China and the US, leads to the ‘re-shoring’ trend of supply chain
• Increasingly suspicious of regional domination and control of the South China Sea by China
• regional insecurity due to political conflicts
• The Korean Peninsula
• Mainland China and Taiwan
• Ownership of the Spratly Islands in the South China Sea
• Conflicts due to great variation across the region lead to economic, social, and political
security needs
• Environmental degradation, population growth, ethnic of religious conficts, human rights violations,
income inequalities, gender issues and migration
2. Asia and Pacific: major trends

Disputes (selected) Involved parties Main challenges

Korean Peninsula North Korea and South Korea Division of the Korean pinnisula
since 1950
South China Sea China, Taiwan, Malaysia, Indonesia, Island and maritime
the Phillippines, Vietnam, Brunei
Senkaku Islands Japan, China, and Taiwan Island and maritime (East China Sea
area)
Himalayas China and India Territorial issue
Jammu & Kashmire India and Pakistan Territorial issue
2. Asia and Pacific: major trends

4. Technological Competition
• Economic transformation around the world
• From a traditional, production-based to knowledge-based
• “Techno-nationalism” Technology and innovation becomes new drivers of international business
• New products are developed by latest innovation in technology across the world
• Online shopping and e-commerce, replacing traditional domestic retail
• In Asia
• Region’s technological leaders
• R&D investment: Japan 4.6%, South Korea 3.5%, Taiwan, 3.4%
• China: 5G, AI, electric vehicles, surveillance technology
• Intense rivalry leads to significant investment in research and techonology by both China and US
• US has blacklisted many Chinese firms, Americans firms are prohibited to do business with Chinese
• Many Asian firms are fear of offending either economic gian
2. Asia and Pacific: major trends

5. World aging population: 2.3 births per woman

• In Asia, fertility rate has dropped
• Philippines, Laos, Cambodia range from 2.5 - 2.7 births per woman
• Across Asia-Pacific, 2.1
• Japan: 1.4 fertility rate and high life expectancy becomes a superaged society.
• below 1.2 in the four Asian Tigers, expected to be superaged societies over
coming decades
• Serious consequences for labor costs and patterns of consumption
2. Asia and Pacific: major trends

5. Pandemic
• Paralyzed world economy
• Impact has been mixed
• Booming demand for technologies equipment to move
business and social lives into virtual space
• Worldwide shortage and rising prices of
semiconductor chips
• ¾ demands served by Taiwan, South Korea, and China
• Global supply chain: highly dependent on China
• Pharmaceurticals and personal protective equipment
• Needs to rethink this model
• Much future uncertainty in the region Fig. Share of global manufacturing output in 2018
Souce: World Bank
3. The international business imperative

• Formation of a network of international linkdages that connect

nations, organizations and people.
• Improvements and facilitation for trade and investment leads to the
proliferation of MNEs
• Assess both international macro-environment and micro-environment
becomes critical in international business planning and strategic
development for business expansion
• Role of MNEs to national economies:
• Potential sources to access advances in technology, expertise and best
practice