GLOBAL

BUSINESS
ENVIRONMEN
DON B. BARTOLO,MRAP, Ph.D.

T
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 Key
Topics
• Introduction to
International Business
• Businesses & International
Business
• Countries & International
Business
• International Business in
2 the Philippines 2
 What is International
Business?

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 Differences
Domestic vs International
Business

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 Trad
e

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 Importance of
IBE

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 Importance of
IBE
Earning foreign exchange: International Business helps
in earning foreign exchange which may be used for
strategic imports.

Helps in Mutual Growth. Countries depend upon each

other for meeting their requirements. Philippines depends
on Taiwan for jigs and moulds for our own manufacturing
and assembly activities.

Investment in infrastructure: International business

necessitates proper development of infrastructure.

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 Problems in International
Business

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 Problems in International
Business

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 Need for International
Business

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 Trends in International
Business

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 Developing Countries’
Trade

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 Air Cargo; Express
Cargo

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 Intra-firm
Trade

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 E-
commerce

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 Globalization in 3 Distinct
Periods

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 Previous Forms of
Globalization

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 Previous Forms of
Globalization

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 Why is modern
Globalization different?

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 Theory of
Mercantilism

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 Theory of
Mercantilism

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 Theory of Absolute Cost
Advantage

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 Theory of Absolute Cost
Advantage

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 Theory of Comparative Cost
Advantage

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 Theory of Comparative Cost
Advantage

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 Theory of Comparative Cost
Advantage

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 GLOBALIZATION :
Is it changing the world for the better?

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 GLOBALIZATION - unmasked

According to OHMAE (The Borderless World: Power and Strategy in the Interlinked Economy by Kenichi Ohmae,
(Harper Business, New York, 1990), )

Globalization process is confined to the developed world of the fashionable

TRIAD, the USA, EUROPE and JAPAN. Joined by aggressive economies of
TAIWAN, SINGAPORE and HONGKONG.

There is a little mention of the rest of the world, LATIN AMERICA and
AFRICA they are not growing but contracting, although they are interlinked
with transnational capital which they are heavily in debt.

No mention in the UN documentaries of the vastly increased inequalities

between and within nations in the last three decades of globalization.
 Globalization in different ways
Concept of Multinationals
MNCs now account for over 33% of world output and
66% of world trade

Capitalist approach
Privatization+ Deregulation + Globalization
+= Turbo Capitalism = Prosperity

Homogeneity
Price, Product, Quality, Interest Rates, Etc.

Spread and Connectedness of production,

communication and technologies.

Branding : Coca-cola, Nike, Sony, LG, Intel, Microsoft,

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 Main Drivers of Globalization

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 Stages of Globalization

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 Essential Conditions for Globalization

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 Factors Favouring Globalization

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 Video Presentation

Globalizati
on
In Simple Terms 5 Min. Video Presentation

Impact of
Globalization I
In Simple Terms 5 Min. Video Presentation

Impact of
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Globalization II 34

In Simple Terms 5 Min. Video Presentation

 Introducti
on
Internation
al
Business
 International business is….

…conducting one or more of the

functions of business internationally.

It can include international trade,

imports/exports, licensing in other
countries, outsourcing work across
borders, and foreign investment.

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 Levels of International Business
• Boundary conditions such as agreements,
Supra-societal international monetary systems, etc.
• Organizations such as WTO, EU, UN, etc.
• Boundary conditions such as national
Nation/state policies and laws
• National politics and economic situations
• Conditions that industries create such as
Industry
competition, technology, specialization,
lobbying/political pressure, efficiency, etc.
• Conditions that individual firms create, such
Firm
as employment, policies, economic impact,
etc.

Group • Conditions on groups within firms include

changes to working conditions, learning,
change, impacts on employment, etc.

Individual • Individual conditions such as motivation,

talents, expertise, work/life balance,
Source: Brian Toyne & Douglas etc.
Nigh, “A More Expansive View of Internation 36
36 Busines
al
 Globalization: What Is It?
• “the increased mobility of goods,
services, labor, technology and
capital throughout the world.
Although globalization is not a new
development, its pace has increased
with the advent of new
technologies, especially in the area
of telecommunications.”
• This definition illustrates that
globalization is a key factor in the
growth of international business.
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 Globalization: What’s the Dispute?

Economic Growth
Prosperity = Peace
Jobs
Wealth disparity
Economic growth
Homogenized culture
Anti-democratic
Environmental threats

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 1 Working in Teams:
Understanding the Arguments

• Many people are for globalization, while

many others are against it. The degree to
which globalization is accepted impacts
how international business activities will
develop.
• In groups of 3, create a MATRIX and
present your arguments for and against
globalization.
• After reviewing the arguments, write
down your personal conclusion about
globalization which states your position 39
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on the issue. Back up your position with
Businesses &
International Business
 International business as an integrated part of an
organization…

“Overseas operations used to be thought of as

appendages or subsidiaries to help increase
sales; now, they’re part of a network for
accessing knowledge and human capital
around the world.”

Christopher Bartlett, “Global Myth Manager” in

Fast Company, Issue 8, p. 134.

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 The 5 Functions of Business in an International Context

Management Production

Management is The factors of

production are: land,
the function that
capital, labour,
plans & organizes
technology, and
all business entrepreneurship.
activities.
Many international
International
businesses conduct
business FUNCTIONS
functions in other
managers seek countries. For example,
out opportunities some North American
in other countries businesses manufacture
to fulfil business goods in other

Marketing
countries where labour
functions, and to
and capital are less
coordinate them. expensive and
accessible. This is
Marketing especially common in
software development.
International businesses apply one or more of the 4 P’s (product, place
promotion, and price) in other countries, selling products or services
in different countries.
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42 Continued…
 The 5 Functions of Business in an International Context

Finance Human Resources

A company may Human resources
engage in deals with hiring,
international firing, benefits, wage
business through payments, record-
international keeping, health and
finance: either FUNCTIONS
safety, and all other
funds in other
investing their with employees.
activities that deal
countries, or by In North America,
engaging outsourcing the
investors from human resource
other countries to function to
infuse capital. developing countries
where labour is
considerably less
expensive is
becoming
increasingly
common. 43
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 What is a Multinational Company (MNC)?

An enterprise that
conducts business in
several different
countries

* TRANSNATIONAL COMPANIES

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 More About Multinationals

• Account for over 33% of world output,

and 66% of world trade
• Approximately 25% of world trade
takes place among multinationals

Source: J. Gray. False Dawn: The Delusions of Global Capitalism.

London: Granta, 1999
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 Successful Multinational Characteristics

• A “global mindset”
• The ability to work with people
from diverse backgrounds
• A long-range perspective
• The ability to manage change and
transition
• The ability to create systems for
employee learning
Source: John B. Cullen, Multinational Management: A Strategic
Approach. Cincinnati: South-Western College Publishing,
1999.
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 Factors Affecting Growth of Multinationals

• Trade agreements and policies that

make international flow of goods &
services easier
• Fast and affordable means to move
products and services across the
world
• Technology opens doors to rapid
exchange of information and financial
transactions
• Varied costs of labour and other
47 resources makes international 47

production attractive in some countries

 2 Activity: Getting to Know a Multinational
• Choose and discuss : One
multinational company and come up
with a presentation:
• What products/services it
produces (including subsidiary
companies)
Which countries it does business in,
and what business it does in those
countries
• Its recent annual earnings
• Any other interesting information
you uncover 48
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Countries
and
Internation
al
Business
 Trade Among Nations: Interdependence

International business causes greater

interdependence among nations in a variety of ways:
• Links financial markets and
economies
• Impacts currency
• Can result in challenges to
legislation through trade wars and
consumer issues such as:
• Pressure to change labour/human
rights laws
• Pressure to change taxation and
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trade policies 51

• Pressure to alter political structures

 Factors Affecting International Trade

• Technology
• Currency
• International agreements
• Policies
• Non-governmental
Organizations (NGOs)

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 Technology

• Information can flow from one part of

the world to another instantaneously
• Borderless finance – international
investments, online transactions,
etc.
• Low cost and widespread availability
of technology makes it affordable
for small and large businesses

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 Currency

• The level of currency can either

promote or hinder international
trade
• Weak currency makes goods and
services cheaper for other
nations to purchase, while strong
currency has the opposite effect

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 International Trade Agreements

• Contemporary trade agreements

promote “free trade” in which nations
agree to support mutual economic
growth by allowing certain types of
goods and services to be traded with
reduced or 0 tariffs or other barriers
• Trade agreements, therefore,
contribute to international trade
among those nations included in them
• Examples include: NAFTA, FTAA, EU,
APEC 55
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 Policies
Types of policies that affect international trade :
• Industry protection (e.g., Export and
Import Permits)
• Tariffs (duties and taxes on imports)
• Non-tariff barriers (e.g.,
embargos, restrictions, etc.)
• Visa, passport, and immigration policies
(restrictions to the flow of people, which
can deter international travel and
movement of workers)
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 NGOs

• A variety of non-governmental organizations

actively promote international trade through
lobbying, bringing together influential
individuals and groups, and compelling
research and reports
• Examples include:
• World Trade Organization (WTO)
• Organization for Economic Cooperation
and Development (OECD)
• The World Bank
• International Monetary Fund (IMF)
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56 • Some are considered to be controversial and
 “Fair Trade:” An Emerging Issue

• Fair trade refers to international trade that

respects all parties involved
• The concept has gained prominence from
“unfair” practices that have been exposed.
For example:
• Some large buyers of goods are able to push prices down, to
the point where small producers internationally, particularly in
agriculture, can barely survive. An example of such practice
has occurred in the coffee industry.
• Some retailers contract factories in developing countries where
wages are low and few labor laws exist (e.g., child labor and
serfdom occur) in order to be able to purchase and sell
consumer goods at a low price.
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•
 Principles for Fair Trade
• Distributional fairness – paying a fair wage
• Non-discrimination fairness – different groups of
individuals judged to be equals
• “Golden rule” fairness – not causing harm to others
and respecting agreements
• Reciprocity – countries negotiating agreements each
make equal concessions or rescind policies equally
• Respecting sovereignty – when negotiating
agreements, countries should respect the the laws
and policies that are in existence
• Maximum benefit fairness – the trade should
maximize the benefits for all nations involved
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 3 PRESENTATION :
Impacts on Us

• In a group of three or four students, brainstorm

the advantages and disadvantages of
international trade and international business
on:
1. Jobs
2. The environment
3. The economy

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International
in the
Business
Philippines
 Philippines as a Global Player

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 Philippines as a Global Player

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 Philippines as a Global Player

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 Global Trade Policies

• Corporate taxation levels

• Tariffs on the import of certain goods
and/or goods from countries who do not
have trade agreements with the
Philippines
• Intergovernmental contacts and
participation in trade agreements (e.g.,
ASEAN)
• Government trade missions take place
regularly where Philippine Trade officials
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 Gainers

• International export of “manpower

services” (e.g., services to businesses
such as consulting, architecture,
engineering, communications, etc.) has
surged recently. This is good news for
high tech and professional services
industries.
• Cathodes, copper, coconut, gold
parts accounts for the largest
proportion of Philippines exported
66 products 67
 Advantages of International Trade

• Creates jobs
• Attracts investment
• Attracts technology
• Makes more consumer goods
available
• Overall, these factors can improve
the economy

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 Disadvantages of International Trade

• Creates wealth disparity

• Can hinder unique Philippine culture
when “imported” cultural goods become
prevalent
• Jeopardizes environment though
increased manufacturing; sale of natural
resources, etc.
• Political alliances and NGO
pressure can reduce government
sovereignty
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• Potential loss of jobs from outsourcing
 Growing International Market

• The service sector (e.g.,

education, software
development, engineering,
consulting, etc.) plays a
prominent role in our “knowledge
economy” and is considered a
growth market

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 4 Individual: Your Crystal
• Come up with a presentation to be
Ball on your forecast/prediction on
submitted
how increases in global business will affect
the strength of businesses, industries, and
sectors in Philippine economy in the next
decade.
• Prepare your findings either on chart paper
or in a slideshow to be submitted (No More
than 5 slides)

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 Thank you

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 EXAMINATI
ON
I. 10 Points Each.

Identify which of the following statements

is most correct and explain why it is the
most correct statement.

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 EXAMINATI
1.
ON
It is important to consider international business environment (IBE) when
planning to expand operations in any of the countries in the ASEAN region
because:

a. Doing business there would help us realize mutual growth objectives,

help us contain our raw material cost, avail of fiscal incentive and
tax holidays;

b.The country where we intend to put up our factory has been reported to
have devalued their national currency, there has been significant
investment in infrastructure and it will open up new business opportunities
considering that products similar to ours is pricey and has high import
content.

c.The cost of doing business there is easy, substitute technology is

available and there are opportunities for product innovation on our
existing brand,.

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 EXAMINATI
1. ON
You were hired and appointed to lead the Business Development Division
of a Global Supply Chain Company dominating consumer electronic
retail products in the ASEAN region. The key tactical issues to be
resolved in penetrating the market was the high cost of distribution and
availability issue amongst customers in the densely populated part of the
cities. Which of the following strategies would you pursue and why:

a.Develop Glocal Strategy for the overseas exchange center/Hub with

strong logisitics capability of both parcel delivery by Uber and Grab
and express cargo and run the business ourselves.

b.Study and consider local partnership with logistics provider, use intra-
firm trade and use e-commerce platform to reach to customers in densely
populated cities.

c.Consider outsourcing e-commerce services and aggressively engage top

5 service logistics in the SEA country and establish a local service
company in that country to oversee global service network management.
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 EXAMINATI
1.
ON
You were appointed to join a team of business impact analysts to look into
the kind of international business mechanism suitable for the marketing
and sale of construction equipment and materials in one of the countries in
the ASEAN region. The value proposition reached by your Team was to
position our company with calculated risk and reasonable capital
investment if we were to come in, if at all we were to come in. Based on
your impact analysis, it is more practical to :

a. Essentially develop local dealers and distributors network to move into

the new market, abandon intra-firm trade option and use Glocal strategy..

b. Operate our own local company (intra-firm trade) and strengthen

shipping and supply chain capability and focus on high profile dealers.

c. Operate our accredited subsidiary in partnership with a reputable local

business investor to carry out our own manufacturing, marketing and
sales in the key foreign market and harness local available products.

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 EXAMINATI
II. 10 Points ON
Explain the following concepts and give at least three (3) examples. Discuss
why it is important to consider in international business
environment.
1. Why is it important to study carefully what are “unfair trade practices”
in a given industry and cite at least 3 instances why it is considered
as unfair trade practice.

2. Many people mistakenly confuse “international trade” and “international

business.” International trade is only one part of international
business. International business can occur within any one of the 5
functions of business. For example, finance and investments might be
the only “international” activity a business engages in. Can you give at
least 2 other examples?

3. Discuss at least one of the problems in international business and explain why
is it important for an ASEAN member country to come up with policies or
strategies that would address this problem.
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