1. Globalization
Understanding The Global Context of Business

2. Globalization
Process by which the world economy is
becoming a single interdependent system
 Exports: Domestically produced products sold
in foreign markets
 Imports: Foreign products sold in domestic
markets

3. World Marketplaces
 Wealth – based on annual per-capita income
 High-income countries: greater than $11,115
 US,Canada, EU, Israel, Australia, UAE, Kuwait,
Singapore, Taiwan
 Upper middle-income countries: $3,595 - $11,115
 Thailand, China, Maldives, Brazil, Jordan
 Lower-middle-income countries: $905- $3,595
 Greece, Turkey, Malaysia, India, Pakistan, Philippines
 Low-income countries: less than $905
 Kenya, Nepal, Afghanistan, Uganda

4. Geographic
 Trading Blocs
 European Union (EU)
 North American Free Trade Agreement (NAFTA)
 Association of South East Asian Nations (ASEAN)
 South Asia Free Trade Agreement (SAFTA)
 Mercosur

5. Import-Export Balances
 Balance of Trade: country’s total economic value
or exports (-) the economic value of imports
 Trade surplus: a positive balance of trade- country
exports more than it imports
 Trade deficit: a negative balance of trade- country
imports more than it exports
 Exchange Rate: the rate at which the currency of
one nation can be exchanged for that of another

6. Forms of Competitive
Advantage
 Absolute advantage: when a country can
produce something that is cheaper, of higher
quality, or is a scarce resource. (Ex. OIL)
 Highest Quality of Oil KSA
 Most reserves of Oil Russia
 Highest Quality of Timber Canada
 Highest Quality Coffee Beans Brazil
 Highest Quality Cotton Egypt, Sea
Island
 Highest Quality Silk China

7. Forms of Competitive
Advantage
 Comparative advantage: when a country can produce
goods more efficiently or better than other countries
can produce the same goods
 Best Mobile Phone Company Nokia, Finland
 Best Rail Engines France, Japan
 Best in Garments Thailand,
Bangladesh
 Best in Shipping lines USA
 Most Powerful Army USA
 Best Chocolates Switzerland

8. Forms of Competitive
Advantage
 National Competitive Advantage: international
competitive advantage stemming from a
combination of-
 Factor conditions: labor, capital, entrepreneurs,
physical resources, and information resources
 Demand conditions: strong demand for innovative
products
 Related/supporting industries: strong
suppliers/industrial customers
 Strategies, structures, rivalries: domestic firms and
industries that stress cost reduction, product quality,
higher productivity, and innovative products

9. International Business
Management
 Going International – Considerations:
 Gauging International Demand: may be greater
than, the same as, or weaker than domestic
demand
 Adapting to Customer Needs: Adapt products to
meet the special demands of foreign customers
 Outsourcing: paying suppliers and distributors to
perform certain business processes or to provide
needed materials or services
 Off shoring: outsourcing to foreign countries

10. Levels of Involvement
 Exporters and Importers
 International Firms
 Multinational Firms

11. International Organizational
Structures
 Independent Agents
 Licensing Arrangements
 Branch Offices
 Strategic Alliances
 Foreign Direct Investment (FDI)

12. Independent Agents
 Free agents work independently for
oneself rather for a single employer.
 Agrees to represent an exporter’s interest.
 Levi Strauss uses agents to market
clothing products in Asian ,African and
American countries.

13. Licensing Agreements:
Franchise
 Firms choose Foreign organizations to
manufacture or market their products in
another country.

14. Branch Office
 Foreign office set up by an International firm.
 More direct control
 Visible public presence
 Potential customers feel more secure.

15. Strategic Alliance or JV
 Arrangements in which a company finds a
foreign partner to contribute resources needed
to establish a new business in a partner’s
country.
 Ex. Disney's theme park near Hong Kong

16. Foreign Direct Investment (FDI)
 Arrangement in which a firm buys or
establishes tangible assets in another country.
 Dell computers building an assembly plant in
Europe.

17. Barriers to International Trade
 Social and cultural differences
 Economic differences
 Legal and political differences

18. Legal and Political Differences
 Quota: restricts the number of a certain type that can
be imported, thereby raising the prices of those
imports
 Embargo: Ban on import/export of a certain product
from a particular country.
 Tariffs: taxes on imported products
 Revenue tariff: Strictly to raise money for government
 Protectionist tariff: Discourages the import of particular
product
 Subsidy: government payment to help a domestic

19. Legal and Political Differences
 Protectionism: protecting domestic business at the
expense of free market competition
 Local content laws: products partly made in country
 Business Practice Laws: control over in country
business practices
 Cartels: associations of producers that control supply
and prices
 Dumping: selling abroad for less than the cost of
production at home