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7 views4 pages

Hoib 7

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tusbeeha.fatima
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International Business Management (MGT 520) VU

Lecture 7
International Business: Globalization

Learning Objectives

Introduce the student to the contemporary issues in international business that illustrate the
unique challenges of international business.

2. Point out the macro-economic and political changes that have taken place in the last 30
years, and suggest the implications of these changes for international business

3. Illustrate the importance of information technology and technological changes in


driving the globalization of products and markets.

4. Explore the changing nature of firms that do business outside their national borders -
many small firms in remote locations can now market their products and services world
wide through the internet.

5. Highlight some of the concerns raised by critics of globalization, and the adverse
effects globalization can have on some firms and individuals.

6. Explore the challenges that globalization holds for managers within an international
business.

Lecture Overview
THE GLOBAL GROCER
INTRODUCTION
WHAT IS GLOBALIZATION?
The Globalization of Markets
The Globalization of Production
DRIVERS OF GLOBALIZATION
Declining Trade and Investment Barriers
The Role of Technological Change
THE CHANGING DEMOGRAPHICS OF THE GLOBAL ECONOMY
The Changing World Output and World Trade Picture
The Changing Foreign Direct Investment Picture
The Changing Nature of the Multinational Enterprise
The Changing World Order
The Global Economy of the 21st Century
THE GLOBALIZATION DEBATE: PROSPERITY OR IMPOVERISHMENT?
Antiglobalization Protests,
Globalization, Jobs, and Incomes
Globalization, Labor Policies, and the Environment
Globalization and National Sovereignty
Globalization and the World’s Poor

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International Business Management (MGT 520) VU

COUNTERVAILING FORCES
Countervailing forces influence the conditions in which companies operate and their options
for operating internationally. Rivalries among countries, cross-national treaties and agreements
and ethical dilemmas can inhibit a firm’s quest for maximum global profits.

A. Globally Standardized versus Nationally Responsive Practices


Trends that influence the worldwide growth in international business often favor the
use of a global strategy, i.e., standardization, thus capturing gains from economies of
scale. On the other hand, a firm may choose to use a multidomestic strategy, i.e., to
be nationally responsive, thus increasing its effectiveness by adjusting to the different
conditions it encounters in the various countries in which it operates.

B. Country versus Company Competitiveness


At one time the performance of a country and that of its domestic companies were
considered to be mutually dependent and beneficial. However, many companies now
choose to compete by seeking maximum production efficiency on a global scale, even if
it means moving production activities abroad. If as a result high-value activities
increase sufficiently in the home country, it will realize an economic gain; if not, the
country’s economic position will deteriorate. Countries continue to entice both
domestic and foreign firms to locate activities within their borders through regulations,
on the one hand, and incentives on the other.

C. Sovereign versus Cross-National Relationships

Although governments act in their own self-interest, they may choose to cooperate with
one another and even cede limited sovereignty through treaties and other agreements.
1. Countries enter into a variety of bilateral and multilateral treaties and
agreements with other countries regarding commercial activities in order
to gain reciprocal advantages for themselves and their domestic firms.
2. Countries enact treaties and agreements to coordinate activities along
their shared borders and deal with problems that a single country acting
alone cannot solve.
3. Countries enact treaties and agreements to deal with areas of concern
that lie outside the territory of all countries, i.e., the non-coastal areas of
the oceans, outer space and Antarctica.

ETHICAL DILEMMAS AND SOCIAL RESPONSIBILITY:


Sorting through the World of Right and Wrong in International Business:
Firms take many actions that elicit almost universal agreement about what is right or wrong. In
the international arena, however, religious beliefs, social attitudes, laws, regulations and policies
may vary significantly. No set of workable corporate guidelines is universally accepted and
observed. An MNE may find it has either more or less latitude in making decisions in the
foreign countries in which it operates. Cultural relativism holds that ethical truths depend
upon the groups holding them; thus intervention in local traditions is seen as unethical. On the
other hand, normativism holds that there are universal standards of behavior everyone should
follow, thus making non-intervention unethical. From a business standpoint, two possible
objectives are to (a) proactively create competitive advantages though socially responsible
behavior that leads to trust and commitment and (b) avoid being perceived as irresponsible.

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International Business Management (MGT 520) VU

LOOKING TO THE FUTURE:


Seizing That Window of International Business Opportunity:
At this time there is much confusion about the future growth of international business.
Nonetheless, a firm that wants to capitalize on international opportunities must not wait too
long. By envisioning different ways in which the future may evolve, a company can be better
prepared to develop the facilities and people needed to succeed in an uncertain environment.

ADVANTAGES AND CHALLENGES OF GLOBALIZATION

A. Productivity

Productivity is improved by producing in countries where production is


most efficient. However, this often means workers in one country lose jobs
as their work moves to more efficient locations.

B. Consumers

Consumers benefit from a wider array of competitively priced goods.


However, they have less control over supplies coming from abroad than
over goods produced domestically.

C. Employment

Employment may increase as economic growth and specialization take hold.


However, domestic employment fluctuates according to foreign conditions
(such as economic crises elsewhere that reduce demand for domestically
produced goods).

D. The Environment

As global consumption increases due to globalization, more natural


resources deplete. Differing environmental standards across countries
create opportunities for businesses to exploit resources in countries with the
least amount of environmental protection regulation.

E. Monetary and Fiscal Conditions

As money moves more freely, it is better able to seek out the best
investment opportunities on a global scale. However, governments have
less control over the inflow and outflow of funds. Furthermore, capital
seems to be flowing more freely to countries with lower tax rates and less
regulatory restrictions, putting additional pressures on national fiscal and
monetary policies.

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International Business Management (MGT 520) VU

F. Sovereignty

Globalization may undermine national sovereignty in two ways: First,


contact with other countries creates more cultural borrowing and may dilute
a country's cultural uniqueness. Second, countries are concerned that
important decisions may be made abroad by foreign owners of domestically
located firms.

IV. WHAT MAKES INTERNATIONAL BUSINESS


DIFFERENT?
A. Different National Environments
1. Legal-Political Environment

Companies that do business internationally are subject to the laws and


political systems of each country in which they operate. When laws
differ greatly from those at home, firms may encounter substantial
operating problems (Blockbuster in Germany is used as an example).

2. Economic Environment

Countries differ significantly in terms of their GDP per capita. Poor


countries have smaller markets, less disposable income, higher illiteracy
rates, and lower life expectancy rates. All these factors and others
require attention and adaptation on the part of international firms.

3. Cultural Environment

Country norms, based on attitudes, values, beliefs, and information


processing frameworks, differ from country to country. Many of these
cultural issues, such as attitude toward work and leadership styles, have
a direct impact on whether a foreign firm will succeed or fail in a
particular cultural setting.

B. Mobility

Countries place substantial restrictions on the international movement of


goods. Some countries also restrict the conversion of their currency to
other currencies. Immigration laws may restrict the transfer of personnel.
Mobility restrictions help make international business very different from
business in a domestic setting.

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