Introduction to International Business

1. Introduction to International Business Name: Enya Ameza-Xemalordzo (PhD, LLM, MBA, MSc, Gdip, BSc) Department: Marketing & Corporate Strategy Faculty & College: Business School

2. OVERVIEW • Module 1 – Globalization • Module 2 – Country Differences in Political Economy • Module 3 – The Cultural Environment • Module 4 – Ethics in International Business • Module 5 – International Trade Theories • Module 6 – The Political Economy of International Trade • Module 7 – Regional Economic Integration • Module 8 – Foreign Direct Investment • Module 9 – The Foreign Exchange Market Enya Ameza-Xemalordzo

3. OVERVIEW • Module 10 – The Global Monetary System • Module 11 – Global Strategy • Module 12 – Entering Foreign Markets • Module 13 – Exporting, Importing, and Countertrade • Module 14 – Global Human Resource Management • Module 15 – Global Marketing and R&D • Module 16 – Global Production, Outsourcing, and Logistics Enya Ameza-Xemalordzo

4. MODULE 1 What is Globalization?

5. What is Globalization? • Globalization • Trend away from distinct national economic units and toward one huge global market • Globalization of Markets • Moving away from an economic system in which national markets are distinct entities isolated by trade barriers and barriers of distance, time, and culture, and toward a system in which national markets are merging into one global market • Globalization of Production • Trend by individual firms to disperse parts of their productive processes to different locations around the globe to take advantage of differences in cost and quality of factors of production • General Agreement of Tariffs and Trade (GATT) • International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO Enya Ameza-Xemalordzo

6. World Trade Organization (WTO) • The organization that succeeded the General Agreement on Tariffs and Trade (GATT) as a result of the successful completion of the Uruguay Round of GATT negotiations • International Monetary Fund (IMF) • International institution set up to maintain order in the international monetary system • World Bank • International institution set up to promote general economic development in the world’s poorer nations • United Nations • An international organization made up of 192 countries headquartered in New York City, formed in 1945 to promote peace, security, and cooperation Enya Ameza-Xemalordzo

7. Drivers of Globalization • The decline in barriers to the free flow of goods, services, and capital that has occurred since the end of WWII • Technological change, particularly the dramatic developments in recent years in communication, information processing, and transportation technologies • Declining Trade and Investment Barriers • International Trade • Occurs when a firm exports good or services to consumers in another country • Foreign Direct Investment (FDI) • Direct investment in business operations in a foreign country Enya Ameza-Xemalordzo

8. Barriers to international trade took the form of high tariffs on imports of manufactured goods • Typical aim of such tariffs was to protect domestic industries from foreign competition • One consequence, was “beggar thy neighbour” retaliatory trade policies with countries progressively raising trade barriers against each other • West committed themselves to removing carriers to the free flow of goods, services, and capital between nations • Role of Technological Change • Microprocessors and Telecommunications • Single most important innovation has been development of the microprocessor, which enabled the explosive growth of high-power, low-cost computing, vastly increasing the amount of information that can be processed by individuals and firms Enya Ameza-Xemalordzo

9. Cost of microprocessors continues to fall, while power increases o Moore’s Law: Power of microprocessor technology doubles and its costs of production fall by half every 18 months • Costs of global communications plummet, lowers cost of coordinating and controlling a global organization • Internet and World Wide Web • Growth of internet and World Wide Web is the latest expression of this development • Internet changed they way people communicate • E-commerce is also experiencing similar growth patterns • Develop into the information backbone of tomorrow’s global economy Enya Ameza-Xemalordzo

10. Transportation Technology • Development of commercial jet aircraft and super freighters and the introduction of containerization, which simplifies transhipment from one mode of transport to another • Commercial jet travel has reduced the time needed to get from one location to another = shrunk the globe • Toronto now closer to Tokyo than it was to Montreal in Colonial days • Containerization has revolutionized the transportation business – lowering costs of shipping goods over long distances • Globalization of Production • Transportation costs associated with the globalization of production declined • Costs of information processing and communication have fallen dramatically • Worldwide communication network has become essential for many international businesses • Developing new products, individuals use web conferencing and videoconferencing to “meet” on weekly basis (webcasting, telephone, electronic mail, and fax) Enya Ameza-Xemalordzo

11. Globalization of Markets • Low-cost transportation has made it more economical to ship products around the world – create global markets • Low-cost networks (World Wide Web) help create electronic global marketplaces • Global communication networks and global media are creating a worldwide culture • Modern communication and transportation technologies are ushering in the “global village”, very significant national differences remain in culture, consumer preferences, and business practices Enya Ameza-Xemalordzo

12. CHANGING DEMOGRAHICS OF GLOBAL ECONOMY • Changing World Output and World Trade Picture • Changing Foreign Direct Investment Picture • As the barriers to the free flow of goods, services, and capital fell, and as other countries increased their shares of world output… firms increasingly began to invest across national borders • Firms began to shift labour-intensive manufacturing operations from their home markets to developing nations where labour costs were lower • Stock of Foreign Direct Investment • Total accumulated value of foreign-owned assets at a given time Changing Nature of The Multinational Enterprise -Multinational Enterprise (MNE) • A firm that owns business operations in more than one country • Changing World Order Enya Ameza-Xemalordzo

13. GLOBALIZATION DEBATE • Many influential economists, politicians, and business leaders seem to think a more integrated and interdependent global economy is a good thing • Falling barriers to international trade and investment are the twin engines driving the global economy toward greater prosperity • Increased international trade and cross-border investment will result in lower prices for goods and services • Globalization stimulates economic growth, raises the incomes of consumers, and helps to create jobs in all participating countries • -Anti globalization Protests • -Globalization, Jobs, and Incomes (Outsourcing) • -Globalization, Labour Policies, and the Environment • -Globalization and national Sovereignty • -Globalization and the World’s Poor Enya Ameza-Xemalordzo

14. MANAGING IN THE GLOBAL MARKETPLACE • International Business • Any firm that engages in international trade or investment Enya Ameza-Xemalordzo