INTERNATIONAL BUSINESS BUS 305 COURSE OUTLINE The nature

INTERNATIONAL BUSINESS BUS 305

COURSE OUTLINE The nature of International Business The global business environment Global trade and Investments Strategy and Structure of International business operations International Management International Marketing

THE NATURE OF INT. BUSINESS International Business: I. B. consist of business transactions carried out across national boarders to satisfy the objectives of individuals, firms and the government.

THE NATURE OF INT. BUSINESS Business Transactions: -Exports - Imports -FDI -Foreign portfolio investments - Licensing - Franchising

THE NATURE OF INT. BUSINESS Parties Involved in International Business: 1. International, Multinational or Transnational company - a firm doing business in two or more countries -Multidomestic company -Global Company

THE NATURE OF INT. BUSINESS Small scale business Individuals Government

THE NATURE OF INT. BUSINESS Why do Companies Engage in IB - To expand sales (seek new markets) - To acquire resources - To minimize risk

THE NATURE OF INT. BUSINESS IB leads to: The globalisation of markets: -Markets are becoming more integrated or interdependent The globalisation of production: - Using factors of production such as labour, inputs, capital from all over the world to reduce production cost.

THE NATURE OF INT. BUSINESS Drivers of globalisation: - Declining barriers to trade and FDI (high tariffs) - Technological change (Skype meetings, emails, data processing etc)

THE NATURE OF INT. BUSINESS Other Reasons - New markets (home market is saturated) - Reduce Cost (disperse production activities) - Competition (follow rivals all over the world)

THE NATURE OF INT. BUSINESS MNE vrs Domestic businesses. 1. Countries differ in many ways. 2. More complex problems are encountered in IB -which markets to enter -which entry mode to use How best to control and coordinate globally dispersed production activities

THE NATURE OF INT. BUSINESS 3. IB must work within limits placed by governments 4. Converting money into different currencies

THE NATURE OF INT. BUSINESS The Globalisation Debate: Advantages - Helps in job creation - Free trade enhances economic growth & development - Leads to lower prices of goods and services - Countries specialize in the production of goods and services that they can produce most efficiently

THE NATURE OF INT. BUSINESS Disadvantages - Job destruction - Enter markets with weak: Environmental regulations (increase pollution) Labour regulations (abusing employees)

THE GLOBAL BUSINESS ENV. Environment: - All forces influencing the life and development of a firm. Forces: - Internal forces: controllable forces Management has direct control over such forces Eg: quantity to produce, how many people to employ etc.

THE GLOBAL BUSINESS ENV. - External forces: uncontrollable forces Management has no control over such forces Eg: Competitive: number of competitors in a market Economic: personal consumption expenditure Legal: laws governing how IB operate Political: political climate Cultural: attitudes, beliefs, etc

THE GLOBAL BUSINESS ENV. 3 types of environment: - Domestic environment All uncontrollable forces originating from a firm’s home country. These are forces that managers are most familiar with.

THE GLOBAL BUSINESS ENV. - Foreign Environment: All uncontrollable forces originating outside a firm’s home country - International Environment: The interactions between 1. the domestic environmental forces and the foreign environmental forces 2. the foreign environmental forces of two countries

THE GLOBAL BUSINESS ENV. Uncontrollable forces: - Political Systems - Economic Systems - Legal Systems - Cultural Practices

POLITICAL SYSTEM Political System: -the system of government in a country States could be classified as being: -Democratic -Totalitarian

POLITICAL SYSTEM Democratic: The government is by the people, exercised either directly or indirectly through elected representatives Representative democracy: Citizens periodically elect individuals to represent them. They form a government and make decisions on behalf of the electorates.

POLITICAL SYSTEM - An individual’s right to freedom of expression - A free media - Regular elections in which all citizens are allowed to vote - Limited terms for elected representatives - A fair court system that is independent of the political system

POLITICAL SYSTEM - A non political police force and armed forces - Relatively free access to state information

POLITICAL SYSTEM Totalitarian: One person or political party exercises absolute control over all spheres of human life - In a totalitarian country, all the constitutional guarantees on which representative democracies are built, are denied to citizens.

POLITICAL SYSTEM In most totalitarian states: - Free and fair elections are lacking - Media are heavily supressed - Basic civil rights are denied - Those who question the rights of the rulers to rule find themselves imprisoned

POLITICAL SYSTEM Political ideology: beliefs of a political party 2 main types exist: -Collectivism (Socialist and Communist) -Individualism (Capitalist):

POLITICAL SYSTEM Collectivism: Collective interest of the society/state is viewed as more important than individual interest (Government controls most Businesses) - An individual right to do something may be restricted on the grounds that it runs counter to the good of the society

POLITICAL SYSTEM Two types: - Social democrats: Commit themselves to achieving socialism through democratic means - Communist: Believes that socialism could only be achieved through violent revolutions.

POLITICAL SYSTEM Individualism: Interest of the individual takes precedence over the interest of the society (more privately owned businesses) - Private property is more highly productive than communal property

POLITICAL SYSTEM Implications for International Business: -Democratic states (capitalism): Generally creates a more favourable environment for international businesses to operate because: 1) Encourages more privately owned businesses 2) Individual freedom

ECONOMIC SYSTEM Economic system: systems of production and consumption activities in a country 3 main types exist; -Market economy -Command economy -Mixed economy

ECONOMIC SYSTEM Market Economy The goods and services that a country produces are not planned or controlled by anyone, but by supply and Demand -In such an economy, all productive activities are privately owned as opposed to being owned by the state.

ECONOMIC SYSTEM Command Economy The government plans the goods and services that a country produces -quantity to be produced -prices at which the are sold -In such an economy, all businesses are state owned

ECONOMIC SYSTEM Mixed economy Productive activities are partly owned by the government and partly owned by individuals.

ECONOMIC SYSTEM Implications for International business: -Market economy (IB) -Command economy -Mixed Economy (IB)