Kwame Nkrumah University of

Science & Technology, Kumasi, Ghana

Introduction to International Business

Name: Enya Ameza-Xemalordzo

(PhD, LLM, MBA, MSc, Gdip, BSc)Department: Marketing & Corporate Strategy

Faculty & College: Business School

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OVERVIEW

• Module 1 – Globalization • Module 2 – Country Differences in Political Economy• Module 3 – The Cultural Environment• Module 4 – Ethics in International Business• Module 5 – International Trade Theories• Module 6 – The Political Economy of International Trade• Module 7 – Regional Economic Integration • Module 8 – Foreign Direct Investment• Module 9 – The Foreign Exchange Market

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OVERVIEW• Module 10 – The Global Monetary System • Module 11 – Global Strategy• Module 12 – Entering Foreign Markets • Module 13 – Exporting, Importing, and Countertrade• Module 14 – Global Human Resource Management• Module 15 – Global Marketing and R&D• Module 16 – Global Production, Outsourcing, and

Logistics

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Kwame Nkrumah University of

Science & Technology, Kumasi, Ghana

MODULE 1

What is Globalization?

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What is Globalization?

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Globalization • Trend away from distinct national economic units and toward one huge global market

Globalization of Markets • Moving away from an economic system in which national markets are distinct entities

isolated by trade barriers and barriers of distance, time, and culture, and toward a system in which national markets are merging into one global market

Globalization of Production • Trend by individual firms to disperse parts of their productive processes to different

locations around the globe to take advantage of differences in cost and quality of factors of production

General Agreement of Tariffs and Trade (GATT) • International treaty that committed signatories to lowering barriers to the free flow of

goods across national borders and led to the WTO

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World Trade Organization (WTO) • The organization that succeeded the General Agreement on Tariffs and Trade (GATT)

as a result of the successful completion of the Uruguay Round of GATT negotiations

International Monetary Fund (IMF) • International institution set up to maintain order in the international monetary

system

World Bank • International institution set up to promote general economic development in the

world’s poorer nations

United Nations • An international organization made up of 192 countries headquartered in New York

City, formed in 1945 to promote peace, security, and cooperation

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Drivers of Globalization

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1) The decline in barriers to the free flow of goods, services, and capital that has occurred since the end of WWII

2) Technological change, particularly the dramatic developments in recent years in communication, information processing, and transportation technologies

Declining Trade and Investment Barriers

International Trade • Occurs when a firm exports good or services to consumers in another country

Foreign Direct Investment (FDI) • Direct investment in business operations in a foreign country

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Barriers to international trade took the form of high tariffs on imports of manufactured goods

• Typical aim of such tariffs was to protect domestic industries from foreign competition

• One consequence, was “beggar thy neighbour” retaliatory trade policies with countries progressively raising trade barriers against each other

• West committed themselves to removing carriers to the free flow of goods, services, and capital between nations

Role of Technological Change

Microprocessors and Telecommunications • Single most important innovation has been development of the microprocessor,

which enabled the explosive growth of high-power, low-cost computing, vastly increasing the amount of information that can be processed by individuals and firms

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• Cost of microprocessors continues to fall, while power increases o Moore’s Law: Power of microprocessor technology doubles and its costs of production fall by half every 18 months

• Costs of global communications plummet, lowers cost of coordinating and controlling a global organization

Internet and World Wide Web • Growth of internet and World Wide Web is the latest expression of this

development • Internet changed they way people communicate • E-commerce is also experiencing similar growth patterns • Develop into the information backbone of tomorrow’s global economy

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Transportation Technology • Development of commercial jet aircraft and super freighters and the

introduction of containerization, which simplifies transhipment from one mode of transport to another

• Commercial jet travel has reduced the time needed to get from one location to another = shrunk the globe

• Toronto now closer to Tokyo than it was to Montreal in Colonial days • Containerization has revolutionized the transportation business – lowering

costs of shipping goods over long distances

Globalization of Production • Transportation costs associated with the globalization of production declined • Costs of information processing and communication have fallen dramatically • Worldwide communication network has become essential for many

international businesses • Developing new products, individuals use web conferencing and

videoconferencing to “meet” on weekly basis (webcasting, telephone, electronic mail, and fax)

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Globalization of Markets • Low-cost transportation has made it more economical to ship products around

the world – create global markets • Low-cost networks (World Wide Web) help create electronic global

marketplaces • Global communication networks and global media are creating a worldwide

culture • Modern communication and transportation technologies are ushering in the

“global village”, very significant national differences remain in culture, consumer preferences, and business practices

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CHANGING DEMOGRAHICS OF GLOBAL ECONOMY

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Changing World Output and World Trade Picture

Changing Foreign Direct Investment Picture • As the barriers to the free flow of goods, services, and capital fell, and as other

countries increased their shares of world output… firms increasingly began to invest across national borders

• Firms began to shift labour-intensive manufacturing operations from their home markets to developing nations where labour costs were lower

• Stock of Foreign Direct Investment • Total accumulated value of foreign-owned assets at a given time Changing Nature

of The Multinational Enterprise -Multinational Enterprise (MNE) • A firm that owns business operations in more than one country

Changing World Order

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GLOBALIZATION DEBATE

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• Many influential economists, politicians, and business leaders seem to think a more integrated and interdependent global economy is a good thing

• Falling barriers to international trade and investment are the twin engines driving the global economy toward greater prosperity

• Increased international trade and cross-border investment will result in lower prices for goods and services

• Globalization stimulates economic growth, raises the incomes of consumers, and helps to create jobs in all participating countries

-Anti globalization Protests -Globalization, Jobs, and Incomes (Outsourcing) -Globalization, Labour Policies, and the Environment -Globalization and national Sovereignty -Globalization and the World’s Poor

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MANAGING IN THE GLOBAL MARKETPLACE

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International Business • Any firm that engages in international trade or investment