International Business Management
(IBM)
Lecture 1: Globalization and
International Business

Unit Expectations - Attendance
• Exception – is extreme weather
• Lectures start on the hour
• Lectures finish at 10 mins to the hour
• Doors shut across all years at 15 mins past the
hour.
• Scanning – you come back at the end of the
session to be scanned in i.e. 10 mins to the
hour

My expectations
• Work together, mutual respect, mutual
responsibility
• Room etiquette – phones, food, arrival – maintaining a
good learning environment for your colleagues.
• Participation – Getting the best from us,
Preparation
• Review the lecture / seminar material on BREO
after the sessions
• Read the recommended readings
• Be alert to the issues in news and read

Today we will…
• Introduce the Unit Essential text
• And the Assessments!
• And start thinking about why we include the study of
international business management in your course
• Looking at Globalization and International Business Management (IBM)

ESSENTIAL
TEXT!
John Daniels et al,
(2015)
International
Business;
Environments and
Operations

Assessments
Assignment 1 (50%)
• Individual assignment, Max 2,000.
• You will be looking at doing business in other countries –
especially risks and entry modes
• Deadline in week commencing 9th of May
• Late submission accepted only with mitigation circumstances.
Otherwise…. Repeat the unit nextyear!
Assessment 2 – Exam (50%)
• 2 hour exam

International Business Management

Learning Objectives
• Todefine international business and globalization and show
how they affect each other
• Tounderstand why companies engage in international
business and why international business growth has
accelerated
• Todiscuss globalization’s future and the major criticisms of
globalization
• Tobecome familiar with different ways in which a company
can accomplish its global objectives

International business
1-9
• International business includes all
commercial transactions—including sales,
investments, and transportation—that take
place between two or more countries
– including private companies trading for profit
And national Governments undertaking transactions
for profit or other reasons

Why study international business?
1-10
• Because:
– Most companies are either international or compete
with international companies
– Modes (ways) of operations may differ from those
used domestically
– The best way of conducting business may differ by
country
– An understanding helps you make better career
decisions
– An understanding helps you decide what government
policies to support

Globalization
1-11
• Globalization is
– the ongoing process that deepens and broadens
the relationships and interdependence among
people from different parts of the world that
happens to be divided into nations
– the integration of world economies through the
reduction of barriers to the movement of trade,
capital, technology and people (Daniels et al.
2015, P.47).

Forces Driving Globalization
1-12
1. Increase in and application 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

Forces Driving Globalization (Cont..)
Increase in and Application of Technology : Vast
improvements in transportation and communications
technology including the development of the Internet
Liberalization of Cross-Border Trade and Resource
Movement: Over time most governments have lowered
restrictions on trade and foreign investment in response to
the expressed desires of their citizens and producers.

Forces Driving Globalization (Cont..)
Development of Services that Support International
Business: Services provided by government, banks,
transportation companies, and other businesses greatly
facilitate the conduct and reduce the risks of doing business
internationally.
Growing Consumer Pressures: Now consumers are well-
informed about and often able to access foreign products.
Thus competitors the world over have been forced to
respond to consumers’ demand for increasingly higher
quality, more cost-competitive offerings.

Increased Global Competition The pressures of increased
foreign competition persuade firms to expand
internationally to gain access to foreign opportunities and
to improve their competitiveness.
Changing Political Situations The transformation of the
political and economic policies of Eastern Europe,
Vietnam, and China has led to increases in trade between
those countries and the rest of the world
Forces Driving Globalization (Cont..)

Expanded Cross-National Cooperation: Governments
have increasingly entered into cross-national treaties and
agreements in order to gain reciprocal advantages for
their own firms, to jointly attack problems and to deal
with areas of concern that lie outside the territory of all
countries.
Forces Driving Globalization (Cont..)

Costs of Globalization
1-17
• Threats to national sovereignty
– lose freedom to “act locally”
• Economic growth and environmental stress
It has both positive and negative consequences, including
damage to society and the environment. While it can support
the sustenance of natural resources.
• Growing income inequality
It may speeds up the process of altering the relative economic
differences between the two countries involved.

Costs of Globalization
1-18
• Offshoring involves the transferring of
production abroad
– it can be beneficial because it reduces costs
– but, it also means that jobs move abroad
• Yet, offshoring may also create new, better
jobs at home
(see the debate on p56-58 good or bad)

Factors in International Business
Operations
1-29

Physical and Social Factors
1-20
• Geographic influences
– natural conditions influence production locations
• Political and legal policies
– determines where and how business occurs
• Cultural factors
– may require changes in operations
• Economic forces
– explain differences in costs, currency values, market size

The Competitive Environment
1-21
• Competitive strategy for products
– Cost strategy
– Differentiation strategy
– Focus strategy
• Company resources and experience
– market leaders have more resources for
international operations
• Competitors faced in each market
– local or international

Why Companies Engage in IB
1-30
• Toexpand sales
– pursuing international sales increases the potential market
and potential profits
• Toacquire resources
– may give companies lower costs, new and better products,
and additional operating knowledge
• Todiversify or reduce risks
– international operations may reduce operating risk by
smoothing sales and profits, preventing competitors from
gaining advantage
These three reasons guide all decisions about whether,
where, and how to engage in international business

Modes of Operations in IB
1-23
• Exports and imports of both goods and services
• Investments
– Foreign Direct Investment (FDI)
• investor takes a controlling interest in a foreign company
– joint venture
– Portfolio Investment
• a non-controlling financial interest in another entity
• Collaborative arrangements
– Joint ventures
– Licensing and franchising arrangements
– Management contracts
– Strategic alliance

Multinational Enterprises
1-38
• Multinational enterprises (MNEs)
– take a global approach to markets and production
or have operations in more than one country
• Sometimes they are referred to as
– multinational corporations (MNCs)
– multinational companies (MNCs)
– transnational companies (TNCs)

Looking to the Future
1-40
• Three major perspectives on the future of
international business and globalization
– 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

Further reading
• Daniels et al. (2015). Chapter 1.