ADMN 417 International Business Management Final Exam Study Notes

ADMN 417 International Business Management Final Exam Study Notes 1. Define international business and discuss its scope - International business is any commercial transaction that crosses the border of two or more nations - You don’t have to set foot outside a small town to find evidence of international business. No matter where you live, you’ll be surrounded by imports—goods and services purchased abroad and brought into a country - Your counterparts around the world will undoubtedly spend some part of their day using your nation’s exports—goods and services sold abroad and sent out of a country - Every year, all nations of the world export goods and services worth nearly $15 trillion 2. Define the term globalization - Globalization is the trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies - Trend characterized by denationalization (national boundaries becoming less relevant) and is different from internationalization (entities cooperating across national boundaries) - The greater interdependence that globalization is causing means an increasingly freer flow of goods, services, money, people, and ideas across national borders 3. Describe the process of globalization and how it affects markets and production - Globalization is the trend toward economic, cultural, political, and technological interdependence among national institutions and economies - Its marked by “denationalization” in which national borders are becoming somewhat less relevant - The globalization of markets helps a company to (1) reduce costs by standardizing marketing activities, (2) explore international markets if the home market is small or saturated, and (3) level income streams, especially for makers of seasonal products - The globalization of production helps a company to (1) access low-cost labour and become more price-competitive and (2) access technical know-how or natural resources nonexistent or too expensive at home 4. Discuss economic and non-economic motivations for companies’ international business activities - Recent growth of international business can be attributed to a wide array of motivating factors, both economic and non-economic - While it’s true that many firms internationalize for economic reasons (to increase sales, acquire resources, and minimize risk), many firms are motivated by non-economic factors as well. For example, some firms internationalize because of the ambitions of their founders—Starbucks and A have gone global because of their founders’ “strategic intent”. Another example is the Swedish furniture retailer IKEA, whose successful business model and philosophies of its founders motivated its global growth - Competitive pressures and a fear of being “left behind” have spurred the internationalization efforts of many other firms - It’s important, then, to recognize that non-economic factors are as important as economic factors when considering the drivers of the recent spurt in international business 5. Identify the key drivers of globalization Two main forces driving globalization: 1. Falling barriers to trade (less obstacles to hold companies back from investing globally) 2. Investment and technological innovation - These two features are increasing competition among nations by leveling the global business playing field. Greater competition is simultaneously driving companies worldwide into more direct confrontation and cooperation - Local industries once isolated by time and distance are increasingly accessible to large international companies based many thousands of miles away - Some small and medium-sized local firms are compelled to cooperate with one another or with larger international firms to remain cooperative - Other local businesses revitalize themselves in a bold attempt to survive the competitive onslaught - Trade barriers: have been drastically reduced through institutions such as the General Agreement on Tariffs and Trade: a treaty designed to promote free trade by reducing both tariffs and nontariff barriers to international trade. and the World Trade Organization: intnl organization that enforces the rules of international trade, three goals of WTO are to help free flow of trade, help negotiate further opening of markets, and settle trade disputes among its members - Groups of several or more nations are reducing trade barriers by creating regional trade agreements - Technological innovation: second main force driving globalization - Companies can manage global business activities with the use of email, video conferencing, intranets and extranets - Technology increases the speed and ease with which companies can manage far-flung operations - Innovations in transportation technologies are making the shipment of goods between nations more efficient and dependable 6. Discuss principal reasons for the recent growth of international business - International business has grown as a result of traditional factors like technological advances, but other contemporary factors, such as the collapse and rise of nation-states in Eastern Europe and evolution of introvert political and economic ideologies, have also driven this growth