Contact Details. Lecturer: Mr. Shane KartabilEmail: [email protected] Overview of Course. Text: Mahoney, D., Trigg, M., Griffin, R.
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1. International Business
2. Contact Details Lecturer: Mr. Shane Kartabil
Email: [email protected]
3. Overview of Course Text:
Mahoney, D., Trigg, M., Griffin, R. & Pustay, M. 2001, International Business: A Managerial Perspective, 2nd edn, Pearson Education, Australia.
Materials will be:
predominantly from your text
examples from my own experience
other materials when cited
we will discuss a hot topic in international business (discussion board)
you will given a case to have a look at (mostly from the text) and this will also be used for discussion
4. Brief Outline of Course Introduction to International Business
Legal & Political Forces
The Role of Culture
5. Brief Outline of Course (cont) International Strategic Management
Analyzing & Entering Foreign Markets
International Strategic Alliances
Organizational Design for International Business
Managing Behavior and Interpersonal Relations
Controlling the International Business & Course Review
6. Course Aim & Objectives Aim: To put you in the “shoes” of the International Manager
A manager facing the changes and vagaries of the rapidly e-Globalizing international marketplace
introduce a conceptual framework to critically analyse issues re international business and globalisation.
investigate differences in political, technological, economic, social, and cultural environment
develop skills for critically appraising and analysing on-line data sources.
look at strategies and structures of contemporary international businesses
develop your ability on a theoretical and practical level for international business
7. Introduction to International Business (Ch1 & Ch2) After studying chapters 1 & 2 students should be able to:
Discuss the meaning and importance of international business.
Identify and describe the basic forms of international business.
Discuss the evolution of international business.
Describe the value of economic geography to international business people.
Appreciate the uses of national income data in making business decisions.
Have a more sophisticated understanding of the following potential business destinations:
North America, Western Europe, Eastern and Central Europe, Asia, Australia, New Zealand and the Pacific, North and South Africa, The Middle East and South America.
8. A few questions for you to ponder before beginning 1. What is the relative impact of international business on your daily lives?
2. If you had to combine a list of the ten most common products you use, how many would relate to IB?
Best to think also in Brand names
Your decisions will most likely change as we progress through this subject
9. What is International Business? International business involves any business transaction between parties from more than one country.
It includes such activities as:
buying and selling raw materials,
taking finished products across borders,
operating plants in other countries to take advantage of local resources,
and borrowing money in one country to finance operations in a second country.
International business is different from domestic business in that it necessarily involves transactions that cross national borders while domestic business does not.
10. Why study international business? This question is posed to you…
For you to stay competitive in this marketplace you need to be aware of the IB game
A student of business is naturally (in this global village) a student of IB
Most students will almost certainly work for a company that is:
either foreign owned;
domestically owned, but has some foreign operations,
or domestically owned, but is affected by the global economy.
It is important for you as future managers to have a cultural business literacy
11. International Business Activity Five key forms of IB activity
Most common form of IB activity is:
Exporting & Importing
Exporting involves the selling of goods or services made in one's own country for use in other countries.
Importing is the buying of goods or services made in other countries for use in one's own country.
Goods refers to trade in goods (visible trade) while services refers to trade in intangible products (invisible trade).
Why export or import?
the risk involved is minimal
opportunity often “knocks” particularly in the third industrial revolution (knowledge economy)
12. Figure 1.3 The growth of export of goods since 1969 Source: International Monetary Fund, International Financial Statistics Yearbook 1999, p. 7.
13. Figure 1.2 Export of goods as a percentage of GDP for selected countries Source: Economist Intelligence Unit, Fact Sheet—Global Economy, EIU Country.
14. IB Activity (cont) International investments -residents of one country supply capital to those of a second country
Foreign direct investments (FDI)
investments in property, assets, or companies located in foreign host countries
purchases of foreign financial assets such as shares & bonds (not for a takeover)
Licensing agreements - allows a firm in one country to use all or some of the intellectual property of a firm in a second country
Franchising - use the brand names, logos, and operating techniques of a firm in a second country
Management contracts - an agreement in which a firm in one country agrees to operate a business for a fee in another
15. Words of caution Texts are notorious for favoring the “Big End of Town” (this one is an exception)
Big is not always beautiful
Most Australian business is based around SMEs
SMEs are the largest employers in Australia
SMEs or TVEs are growing rapidly in China
Text also often ignores the role of services (eg consulting, communications, transportation, and tourism)
Services largest portion of our GDP
23.0 per cent of all Australian exports
16. The extent of internationalization There are several ways to describe the extent of a firm's international orientation
The international business is the broadest
an organization involved in commercial transactions with individuals, private firms, or public sector organisations across borders.
The multinational corporation (MNC)
engages in foreign direct investment and owns or controls value-adding activities in more than one country
buys resources, create goods and/or services, and then sell those goods and services in a variety of countries
most often coordinates from headquarters with subsidiaries making adjustments as necessary
17. Figure 2.1 Headquarters of the largest 500 corporations Source: Fortune, ‘Fortune Global 500’, 24 July 2000, pp. F1-F10.
18. The extent of internationalization Three main types of MNC:
A corporation with a collection of relatively independent operating subsidiaries, each of which is focused on a specific domestic market.
A corporation that views the world as a single marketplace and striving to create standardised goods and services
A corporation that seeks to combine the benefits of global-scale efficiencies with the benefits of local responsiveness.
A new corporation? The World company – transcends national boundaries and Nationless (Ohmae – eg Nestle)
Be careful as some texts vary in their interpretation of the above
19. The evolution of International Business Early origins in a snapshot
International business has origins as far back as 2000 B C
500 BC – Greek purple patch & Chinese silk road
Romans at the turn of AD
Italy had its moments in the Middle Ages
1400s saw the Spanish in good traveling spirit
British and the Dutch strong in the 1600-1900s
US has dominated the latter stages with 1945-60 a golden age
Marshall plan instituted post WW2 to aid Europe
Since the Second World War, international business has seen continued growth.
World exports have grown from about US$53 billion in 1950 to US$5.5 trillion by 1998.
Similarly, FDI has grown from US$105 billion in 1967 to over US$1.2 trillion in 1988.
20. The evolution of International Business 1960s – Strengthening of Europe and Japan
1970s – OPEC oil crisis & small car invasion from Japan
End of the 1970s, manufacturers began to copy the Japanese - Theory Z (the participative organisational practices), TQM , JIT
1980’s, Australian and New Zealand introduced
economic and labour market reforms, and enhanced deregulation and privatisation (positive ecomomic benefits)
1987 – stock market crash & property boom/bust
80-90s Emergence of the four Asian “tigers”
21. Modern IB & Globalisation Today’s market has increasingly gone global through transport, communication and the Net
Three important geographic marketplaces dominate the world economy (possibly four with China):
The United States, the European Union, and Japan.
A key concept you must understand is Globalisation
Has been called many things by many people but for our purposes:
Globalisation refers to the production and distribution of products and services of a homogeneous type and quality on a world wide basis to customers whose tastes and preferences are similar and converging.
The most stunning changes to international business during the 1990s were developments in electronic commerce.
Electronic commerce is the buying and selling of information, products and services via computer networks.
22. Remember the Game for us is now Global
23. Reasons for IB growth Several reasons international business growth has occurred and will continue.
The desire to increase returns for shareholders
Leads to market expansion as firms seek new markets
Firms seeking materials, unavailable in their own countries must go to foreign sources.
The presence of competitive forces also prompts foreign investment as firms struggle to keep pace with their rivals.
Changes in technology as discussed have also spurred the growth of international business
Firms have capitalised on computer technology and better transportation
Shift in tastes
Today's consumers are “globe-savvy” and aware of the products and services offered in other countries
Freer trade has been a major advantage for IB
24. How well do you know the IB territory Plenty of mistakes have been made in IB
The text on page 44-45 shows numerous blunders
Mercedes tried to roll off its “trash”
Energiser Bunny – you better make sure the wedding ring finger is right
25. Structure & characteristics of the world economy Various factors of economic geography affect international trade
similar income levels
and ownership of natural resources
see Jared Diamond (Guns, Germs & Steel)
Your assignment requires you to ponder the regions and make specific choices as to what region and what countries to select
Keep this in mind in this early chapter
For example a good article on classifying countries according to GDP, GNP, Purchase Power Parity (pp. 48-49)
26. Important Reading We cannot cover chapter 2 in detail in the lecture
NAFTA and The EU and other blocs will become increasingly important
You need an understanding of the circumstances of the following:
Mexico, Central America & The Caribbean
Central & Eastern Europe
Russia and the new States
Japan,Four Tigers, China
Malaysia, Indonesia, Thailand & Vietnam
India, Pakistan & Sri Lanka
Australia, NZ & The Pacific
Africa, The Middle East & South America
27. Traps for young IB players The closing case on page 85-86 is interesting
Focuses on the opportunities in China
Also the down side
Many have failed
Do you think you understand China
Need to snap your myth of a simple homogeneous population
See also India
Next week we will move on to chapter 3 & 4