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Overview of International Business

Rezwana Huq June 9, 2011

International Business
All commercial transactions that take place

between two or more countries

Globalization
The integration of world economies through the

reduction of barriers to the movement of trade, capital, technology, and people Made in labels dont give the full picture of a products origins
A pair of jeans

Globalization results from the activities of

international business

Why Study International Business?


Study of international business is important

because it constitutes a large and growing portion of the worlds total business Large and small companies are affected Not limited to exports and imports The local grocery store competes against Meena Bazar, Nandan and Agora, a business model adapted from foreign countries

Factors in Increased Globalization


Increase in and expansion of technology Advances in science, communications and transportation Demand for the iphone Liberalization of cross-border trade and resource

movements
Consumers demand more variety at cheaper prices US consumers buying cheaper prescription drugs online

from Canada

Development of services that support

international business
Changes in banking and insurance makes it easier to

buy, sell and transport goods to and from abroad

Rise in income levels Companies are looking to expand sales by selling to the

Factors in Increased Globalization


Increased global competition Companies are constantly looking for cheaper sources of raw materials and new markets which will help them increase sales Changing political situations A world-wide movement towards a free-market economy Expanded cross-national cooperation Governments realize that treaties and agreements are mutually beneficial and increase overall trade

Reasons for International Business


Governments: profit or political reasons
Fareast countries and the Cold War

Private companies: profit


Expanding sales
The possibility of being able to sell to more people Nestle (Switzerland) and Sony (Japan) get more than half their

sales from international markets


Acquiring resources
Most automobile manufacturers hire Italian automobile design

companies from Northern Italy to help with styling


Minimizing risk
Hedge against slowing sales in one market Buying parts from different countries to reduce the effect of

changing prices In the early 2000s Nestle experienced slow growth in Western Europe and the US but made up for it with higher growth in Asia, Eastern Europe and Latin America

Criticisms of Globalization
Threat to national sovereignty Countries might become dependent on imports Foreign companies could learn valuable state secrets. This is especially true for the defense industry
Most US military contracts go to Boeing

The resultant growth hurts the environment Growth requires the use of non-renewable natural resources Increases environmental damage through pollution and deforestation

Criticisms of Globalization
Growing income inequality
Income falls for the unskilled, whose jobs are

transferred abroad
Leads to exploitation of labor
The basic principle of globalization is the shift

towards cheaper raw material. Companies will always look to move to the country with the lowest labor cost and leave behind any location with rising labor costs

MNC
An MNC (multi-national corporation) is a company

that has a worldwide approach to markets and production or one with operations in more than one country

The End