Global Dimensions of Business

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Global Dimensions of Business
International Business 10e Daniels/Radebaugh/Sulli
van

• Business 187
• Prof. Robert Chapman WOOD

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Today A basic understanding of international
business nature

• Definition of international business (repeat)
• Why its growing (more detail)
• Ways (modes) of doing international business
• The nature of the multinational enterprise
• How companies internationalize over time
• The most basic strategic choice
• What is national competitiveness?
• How can we think of ethics in international
  business

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What is International Business?

• All commercial transactions between two (or more)
  countries
• Commercial transactions the buying and
  selling of goods and services
• Private (between companies)
• Public (involving a government)

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Why Engage in International Business?

• Expand sales
• Volkswagen (Germany)
• Ericsson (Sweden)
• IBM (United States)
• Acquire resources
• Better components, services, products
• Foreign capital
• Technologies
• Information
• Minimize risk (doesnt always work)
• Take advantage of the business cycle for
  products/services
• Diversify among international markets

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Why International Business is Growing

• Liberal government policies on trade
• Rapid improvement of technology
• Transportation is quicker while costs are lower
• Communication enables control from afar

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• New institutions to support trade Examples
• Global banking ?Federal Express
• Consumer demand
• Companies learning from each other

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Modes of International Business

• Most common Importing and exporting of
  merchandise
• merchandisesomething tangible
• Service exports and imports
• Tourism and transportation
• Construction
• Management contracts (e.g., hotels)
• Use of assets Licensing, franchising

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Two kinds of international investment

• Portfolio investment
• The foreigner purchases securities (stocks,
  bonds) that have been issued on the open market
• Direct investment
• gives the foreigner control of a business
• The foreigner purchases a company or part of it
  directly

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The multinational enterprise

• A multinational enterprise is a business that
  takes a global approach to markets and production
• General Motors
• IBM
• Mirabilis (Israeli firm pioneered real-time
  Internet chat)
• Some firms do international business but are not
  multinational enterprises
• Driscoll Strawberries
• Shimaya Co. (Japanese fish stock)

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Patterns of Internationalization
Figure 1.7
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Basic approaches to strategy in the
multinational enterprise.

• Two ways
• The globally integrated company
• Dell
• Toyota
• The multidomestic company or locally responsive
  company
• Frito-Lay
• General Motors
• The two approaches can be mixed

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Globally integrated or multidomestic (locally
responsive)?

• Global standardization has important advantages
• Reduced costs in development and manufacturing
• Economies of scale since fixed costs are spread
  over more units of production

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• Advantages of responding to national preferences
• Design, marketing, operations can better match
  specific national preferences
• Multinational enterprises have to choose
• Can choose on an issue-by-issue basis
• Can be global in manufacturing but locally
  responsive in selling (Nike)

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Trends favor globally integrated strategy

• Competition requires lower costs
• Faster technological change favors a globally
  integrated product line
• More communication reduces international
  differences
• But international differences are still enormous

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How important is National competitiveness?

• Companies compete across borders, but
• Countries also compete
• Clearest examples are U.S. vs. other developed
  countries (Japan, France, Canada)
• These countries produce similar things
• If computer-making goes from US to Japan, thats
  bad for US
• Key competitive factors
• Education
• Entrepreneurship of the population
• Government policies and regulation

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• Today each country must think about its
  competitiveness
• It may be separate from competitiveness of the
  firms based there
• The U.S. has to think about competing with Japan

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• What does it mean to think about the US
  competing
• with Mexico?
• with China?
• Is it bad for the average citizen of a country
  when a local firm contracts abroad?
• We dont know

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Were going to think about

• basic ways of doing business
• how to make a company succeed
• how to make the community that is a country
  succeed

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Ethics What do you think?

• International business raises many ethical issues
• Many without simple answers

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• Normativism There are universal standards of
  behavior that everyone in business (and all
  cultures) should follow
• Not intervening in other cultures may be
  unethical
• Relativism Ethical principles must vary from
  group to group
• Intervening may wrongly judge others

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• Should we let rich people in other countries
  bribe our multinational companys local
  employees?

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Think carefully before you declare yourself a
relativist

• International business behavior can have
  radically good or bad effects
• Korea going from poor to rich nation
• Toxic pollutants for U.S. market being dumped in
  China

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Try to develop clear principles if you think you
are a normativist

• Sometimes your principles will be challenged
  suddenly
• You need to know what you believe

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Learn international business to figure out our
roles in the world

• Think about how we can make better ways of
  living for everyone
• (My normative principle)

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The packet is available at Maple Press

• 481 East San Carlos St.
• in the block east of 10th St.
• Just tell them you want the packet for Business
  187, Prof. Wood

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Recommended supplementary reading

• The New York Times
• Fortune
• The Economist
• The Financial Times (of London)

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Influences on International Business
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Exciting times

• Both bad and good things are happening
• Bad pollution, layoffs, lying executives, war
• Good growth, new opportunities, people emerging
  from poverty
• I hope this semester provides tools that help you
  create more of the good and get rid of some of
  the bad