INTERNATIONAL BUSINESS
ENVIRONMENTS AND OPERATIONS
Dr. Agustinus Miranda Wijaya
Part One
Background For International Business
Chapter 1
1-3
Globalization
and International
Business
Chapter Objectives
1-4
To define globalization and international business and
show how they affect each other
To understand why companies engage in international
business and why international business growth has
accelerated
To discuss globalization’s future and the major criticisms of
globalization
To become familiar with different ways in which a
company can accomplish its global objectives
To apply social science disciplines to understanding the
differences between international and domestic business
Introduction
1-5
Globalization is the ongoing process that deepens and
broadens the relationships and interdependence among
countries.
International Business is a mechanism to bring about
globalization.
International Business
1-6
International business consists of all commercial
transactions—including sales, investments, and
transportation—that take place between two or
more countries
Increasingly foreign countries are a source of
both production and sales for domestic companies
Studying International Business is Important
1-7
Most companies are either international or compete with
international companies
Modes of operations may differ from those used
domestically
The best way of conducting business may differ by
country
An understanding helps you make better business
decisions
An understanding helps you decide what government
policies to support
1-7
International Business:
Operations and Influences
1-8
Measuring Globalization
1-9
A.T. Kearney/Foreign Policy Globalization Index
Economic
Technological
Personal Contact
Political
Factors Contributing to Rapid Growth of International
Business
1-10
1. Increase in and expansion of technology
2. Liberalization of cross-border trade and resource movements
3. Development of services that support international business
4. Growing consumer pressures
5. Increased global competition
6. Changing political situations
7. Expanded cross-national cooperation
What’s Wrong with Globalization
1-11
Threats to national sovereignty
Economic growth and environmental stress
Growing income inequality and personal stress
Offshoring – the transferring of production abroad –
is controversial in terms of who benefits when costs are
reduced and whether the process exchanges good
jobs for bad ones.
Companies Engage in International Business
1-12
To Expand Sales: pursuing international sales increases the
potential market and potential profits
To Acquire Resources: may give companies lower costs,
new and better products, additional operating knowledge
To Diversify or Reduce Risks: international operations may
reduce operating risk by smoothing sales and profits,
preventing competitors from gaining advantage
1
Modes of Operation in International Business
1-13
Merchandise exports and imports
Service exports and imports
Tourism and Transportation
Service Performance
Asset Use
Investments
Foreign Direct Investment (FDI)
Portfolio Investment
Multinational Enterprises
1-14
Multinational Enterprises (MNEs) take a global
approach to markets and production. Sometimes
they are referred to as multinational corporations or
companies (MNCs) or transnational companies
(TNCs).
Difference Between International and Domestic
Operations
1-15
When operating abroad companies may have to adjust their
usual methods of carrying out business.
Foreign conditions often dictate a more suitable method, and
the operating modes used for international business differ
from those used on a domestic level.
Physical and Social Factors Affecting International
Business Operations
1-16
To operate within a company’s external environment, its
managers must have knowledge of business operations
and a working knowledge of social sciences, and how
they affect all functional business fields.
Physical and Social Factors Affecting International
Business Operations
1-17
1-15
Competitive Factors Affecting International Business
1-18
A company’s competitive strategy influences how and
where it can best operate.
A company’s competitive situation may differ in terms
of its relative strength and which competitors it faces.
Competitive Factors Affecting International Business
1-19
Future of International Business and Globalization
1-20
Further globalization is inevitable.
International business will grow primarily along
regional rather than global lines.
Forces working against further globalization and
international business will slow down both trends.
