International Business Globalisation Definitions Globalisation The broadening set

International Business Globalisation

Definitions � Globalisation: � The broadening set of interdependent relationships among people from different parts of the world that happens to be divided into nations � The integration of world economies through the reduction of barriers to the movement of trade, capital, technology and people Daniels J D et al (2009)

Examples � Kia 1. 2. 3. 4. 5. 6. Sorrento - Korean Car Japanese firm furnishes CD player in the car Optical pick-up units made in China Thailand adds electrical components Assembly in Mexico Transported from US port to Korea Installed in vehicle and transported around the world

International business Definition � All commercial transactions - including sales, investment and transportation that takes place – between two or more countries private companies undertake such transactions for profit; governments undertake them for either profit or political reasons

Forces Driving Globalisation � Economic – international trade and investment � Technological - internet connectivity, email and broadband � Personal contact – international travel and tourism, international telephone traffic and personal transfers of funds internationally � Political – participation in international organisations and government monetary transfers � Question : Which countries are the most globalised?

Factors in increased Globalisation 1. 2. 3. 4. 5. 6. 7. Increase in expansion of technology Liberalisation of cross-border trade and resource movements Development of services that support international business Growing consumer pressures Increased global competition Changing political situations Expanded cross-national cooperation

Why companies engage in international business � Expanding sales - higher sales create value, as long as costs of sales doesn’t increase disproportionately � Acquiring resources - lower costs, new or better products, additional operating knowledge � Minimising risk - smoothing sales and profits, preventing competitors from gaining advantage

Is Offshoring good Strategy? offshoring is the process of shifting production to a foreign country � If offshoring succeeds in reducing costs it’s good � Example: branded clothing companies offshore to have work done by cheaper sewing machine operators �

Modes of operation in international business � Merchandise exports and imports - are usually a country’s most common international transaction (Visible and tangible) � Service exports and imports – non product sales and purchases, travel, transportation, banking, insurance and the use of assets such as trademarks, patents and copyright � Investments – Foreign Direct Investment – takes a controlling interest in a foreign company, or if shared ownership it becomes a Joint Venture � Portfolio investment – non-controlling interest of a foreign operation – stock in a company or loans to a company (or country)