Popular in Introduction to Business
Popular in Business, management
This 6 page Class Notes was uploaded by Samantha jose on Saturday February 6, 2016. The Class Notes belongs to 101 at Washington State University taught by Maggie Reed in Spring 2016. Since its upload, it has received 17 views. For similar materials see Introduction to Business in Business, management at Washington State University.
Reviews for Globalization.pdf
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 02/06/16
Globalization 2/6/16 12:47 PM What is international business? • It consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations. Globalization • Economies, markets and people in different countries are becoming more interconnected everyday • Globalization has the potential of raising the standard of living, but can also challenge long-held cultural values about the role of business in society • Because of globalization, for the first time in history, the availability of international goods and services can be accessed by many individuals in many countries, and from diverse economic backgrounds Factors in Increase Globalization • Increase in and expansion of technology • Liberalization of cross-border trade and resource movement • Development of services that support international business • Growing consumer pressures • Increased global competition • Changing political situations • Expanded cross-national cooperation Multinational Enterprises (MNEs) AKA Multination Corporations (MNCs) • MNEs/MNCs are firms that operate in an integrated fashion in a number of countries • They buy and sell goods across national borders and make direct investments in fully integrated operations in other countries • They are involved in the traditional aspects of international commerce (sourcing inputs and selling goods & much more) Comparative & Absolute Advantage • Comparative Advantage o One of the oldest theories in economics, usually ascribed to David Ricardo (1772-1823) o The theory underpins the economic case for free trade but it often misunderstood or misrepresented by opponents of free trade o Comparative Advantage states that a country should produce and sell to other countries those goods or products which it produces most efficiently and buy from other countries those things that they produce more efficiently • Absolute Advantage o When a country can produce the same amount of output with less input relative to other countries • EXAMPLE: o Two countries: US & Egypt Both produce two crops: Wheat & Cotton Assume that in the US the acreage for wheat is the same as the acreage for cotton and it is the same in Egypt § With No Trade Wheat Cotton Total US $100 $80 180m Egypt $40 $60 100m Combined rev: $280 § This indicates that the US is more efficient at producing wheat than cotton and Egypt is more efficient at producing cotton than wheat Reasons for Going International Proactive Motivations Reactive Motivations • Profit Advantage • Competitive pressure • Unique products • Overproduction • Technological Advantage • Declining domestic sales • Exclusive information • Excess capacity • Tax benefit • Saturated domestic markets • Economies of scale • Proximity to customers & ports • Opportunity for Revenue Growth o There may be market saturation at home and/or potential for additional sale in foreign markets • Can Compete More Effectively Abroad o Reduced consumer resistance and/or Government regulations • Greater Control of Resources Abroad o Typically for extractive or agricultural activities • Forestall Foreign Competition o Attack foreign competitors in their home markets • Portfolio Balancing o Balancing activities across mature and growth markets • Financial Imperfections o Cheaper loans, government grants, exchange rate opportunities International Entry Strategies • Importing/Exporting • Licensing • Franchising • Inter-firm cooperation • Foreign Direct Investment (FDI) Licensing • Under a licensing agreement, one firm permits another to use its intellectual property for compensation designated as royalty. • The property licensed may include: o Patents o Trademarks o Copyrights o Technology o Technical know-how o Specific business skills • Benefits: o It requires neither capital investment nor detailed involvement with foreign customers o It capitalizes on research and development already conducted o It helps avoid host country regulations applicable to equity ventures • Cons: o Franchising • Franchising is the granted of the right by a parent company to another independent entity to do business in a prescribed manner Inter-firm Cooperation • Main Types o Strategic Alliances: § An arrangement between two or more companies with a common business objective while remaining independent organizations § Strategic alliances may be with suppliers, customers, competitors, and companies in other industries to achieve goals o Joint Ventures: § Involves the participation of two or more companies in an enterprise in which each party contributes assets, has come equity, and shares risk § It can include a controlling ownership in a business enterprise in one country by an entity based in another country Exchange Rates • The price of one nations currency in terms of another nations currency • Usually specified as the amount of one currency that can be traded per unit of another • This is often called the foreign exchange rate in that it is the price determined in the foreign exchange market when people buy and sell foreign exchange (i.e. supply & demand) Hard and Soft Currencies • Hard currencies o Historically, money that is in the form of precious metals, especially gold. o In modern times, any national currency that is expected to retain its value (and even appreciate in value), and is readily acceptable for most international transactions o U.S. dollar, the British pound, and the Euro tend to be near the top of the list of hard currencies (aka hard money) • Soft currencies o Those currencies which are regarded as volatile and not expected ti retain their value and for which there is consequently little demand on the currency markets § Example: the Nigerian naira Strong and Weak Currencies • The terms strong, weak, strengthening, and weakening can be used to refer to any currency o Example: if the US dollar has fallen in value compared to the other country, it means the US dollar buys less of the other currency • It also means that the other currency can buy more dollars Dealing with Other Cultures • Value & Attitudes o Toward: § Time § Achievement § Work § Wealth § Change • Language o Spoken Language o Written Language o Official Language o Language hierarchy o Linguistic pluralism • Social Organization o Kinship o Authority structures o Stratification o Interest groups o Social mobility • Religion o belief & norms o rituals o sacred objects o prayer o holidays • Education o System: § Primary § Secondary § Higher o Literacy Level o Who has access? • Technology & Material Culture o Energy system o Transportation o Communication o Urbanization o Level of technology & science • Politics o Ideologies o Nationalism o Sovereignty o Imperialism o Political risk • Law o Common/code law o Regulation o Antitrust policy o Toward foreigners o Penalties o Employment • Economic Environment o Developed/developing company? o Newly industrialized country? o Protection vs. Free trade o International trade agreement o Trading blocks
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'