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International Business

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The activity of doing businessabroad

Firms engaging in international(cross-border) economic activities

Peng and Meyer (2011)

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Figure 1.1 Changes in trade and capital flowsSources : World Bank, UNCTAD (various)

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Boundaries between domestic and internationalbecome increasingly blurred in realityIncrease in import/export

Increase in cross-border mergers/acquisitionsIncrease in fdi (foreign direct investment)View moving from US/Europe/Japan(incumbents) to RDEs (Rapidly Developing

Economies)

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High risk and high rewardLevels have decreased since the global creditcrunch but trend is still a strong increase

overall.

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...... Inflows as a percentage of GDP

Country 2007 2012

Brazil 3.3 3.4Russia 4.3 2.6

India 2.0 1.7 (2011)

China 4.5 3.1

WORLD 4.4 2.1

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Different groups have different perspectives Economists Business Leaders Political Scientists Sociologists International Relations Specialists

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the process of transformation of local phenomena

into global ones. It can be described as a process by

which the people of the world are unified into a singlesociety and function together. This process is a

combination of economic, technological, sociocultural

and political forces(Croucher, S. 2003)

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a widening, deepening and speeding up of

interconnectedness in all aspects of contemporary

social life from the cultural to the criminal, thefinancial to the spiritual

(Held et al. 1999)

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.increasing global interconnectedness, so

that events in one part of the world areaffected by, have to take account of, and alsoinfluence, other parts of the world. It alsorefers to an increasing sense of a singleglobal whole

(Tiplady, R. 2003)

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process by which the whole world becomes a

single market. This means that goods and

services, capital and labour are traded on aworldwide basis, and information and the results

of research flow readily between countries

(Black, J. 2002)

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reflects a business orientation based on the

belief that the world is becoming more

homogenous and that distinctions betweennational markets are not only fading but, for some

products, will eventually disappear

(Czinkota, M., Ronkainen, I., Moffat, M. 1999, p.454)

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More open global markets, leading to More globally dispersed value chainsGovernment encouragement via tools such as RTAs (Regional Trade Agreements) BITs (Bi-lateral Investment Treaties DTTs (Double Taxation Treaties)

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Shrinking spaceShrinking timeDisappearing bordersleading to . ..

new markets

new means of communicationnew actorsnew rules and norms

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Consider . . .Products (global markets, global brands)Services such as banking, insurance,transportFinancial markets: deregulated, globallylinked, working around the clock, with actionat a distance in real time, with new

instruments such as derivatives.Growth of mergers and acquisitions.

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Free Trade AreasWhere member countries reduce or abolishrestrictions on trade with each other whilemaintaining their individual protectionist measuresagainst non-members.

Customs UnionsWhere, as well as freeing trade amongmembers, a common external tariff isestablished to protect the group fromimports from any non-member.

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Common MarketWhere the customs union is extended to include thefree movement of factors of production as well asproducts within the designated area.

Economic UnionWhere national economic policies arealso harmonised among memberstates within the common market.

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1. Hyperglobalists... argue that increasing globalisation isfragmenting nation states and decreasing theirpower so that states are becoming decision-

takers rather than decision-makers.

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Loss of competence

Loss of autonomy

Loss of legitimacy

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2. Sceptics... argue that increasing globalisation is not newand the more recent increase of international andsocial activity has reinforced and enhanced state

powers.

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That globalisation encompasses conflictingtendencies

Universalisation versus ParticularisationHomogenisation versus DifferentiationIntegrations versus Fragmentation

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An activity largely conducted by a set ofMNCs based in the United States, Europe, and

Japan, known as incumbents .

Driven by the quest for low-cost productionand the desire to enter promising newmarkets in developing countries.

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We are now experiencing a completelydifferent phenomenon . . . .

. . . . mainly fueled by a set of businesscompetitors, based not in the developedworld but in the rapidly developingeconomies (RDEs), the global challengers

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During globalization, incumbents competedprimarily with other incumbents in marketsaround the worldIn the new era of globality, incumbentssuddenly find themselves competing witheveryone from everywhere for everything Global challengers are nimble, ambitious,

and efficient, emerging from many countriesto battle the incumbents at home and abroad

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E V E R Y W H E R E !

not only from the high-profile BRIC countries(Brazil, Russia, India, and China) but also fromArgentina, Chile, Egypt, Hungary, Indonesia,Malaysia, Mexico, Poland, South Africa,

Thailand, and Turkey.

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Grupo Bimbo (Mexico) the largest bread baker in theworld

JBS (Brazil) the largest meat producerRusal (Russia) the largest producer of aluminum Bajaj Auto (India): leading maker of small motorcyclesBYD (China): world s largest producer of nickel-cadmium batteriesCemex (Mexico): world s largest ready-mix concrete

playerCSAV (Chile): largest shipping-container company inSouth America

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Embraer (Brazil): worldwide leader in themanufacture of regional jets of up to 120 seats

Gazprom (Russia): largest natural-gas company in

the worldGoodbaby (China): global supplier of children sgoods

Natura (Brazil): fast-growing maker of personal careproducts

Tata Group (India): superstar conglomerate

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Over the past decade, the share of global GDPgenerated by (RDEs) rose from 18 percent to 31percentTheir share of world trade jumped almost asmuch, from 18 percent to 28 percent.RDEs in the Fortune Global 500 has more thantripled from 21 to 75 in the past decade.

The 2010 list of Forbes 2000 companies included398 companies from RDEs, nearly triple thenumber just five years ago.

http://money.cnn.com/magazines/fortune/global500/2009/index.htmlhttp://money.cnn.com/magazines/fortune/global500/2009/index.htmlhttp://www.forbes.com/2010/04/21/global-2000-leading-world-business-global-2000-10_land.htmlhttp://www.forbes.com/2010/04/21/global-2000-leading-world-business-global-2000-10_land.htmlhttp://www.forbes.com/2010/04/21/global-2000-leading-world-business-global-2000-10_land.htmlhttp://www.forbes.com/2010/04/21/global-2000-leading-world-business-global-2000-10_land.htmlhttp://www.forbes.com/2010/04/21/global-2000-leading-world-business-global-2000-10_land.htmlhttp://www.forbes.com/2010/04/21/global-2000-leading-world-business-global-2000-10_land.htmlhttp://www.forbes.com/2010/04/21/global-2000-leading-world-business-global-2000-10_land.htmlhttp://money.cnn.com/magazines/fortune/global500/2009/index.htmlhttp://money.cnn.com/magazines/fortune/global500/2009/index.htmlhttp://money.cnn.com/magazines/fortune/global500/2009/index.html

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According to the World Investment Report2009, the outward foreign direct investment(OFDI) of Chinese and Indian MNEs increasedsignificantly - China increased 111%, up to$56 billion, making it the 12th largest sourcecountry of OFDI in the world.

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Deal value of cross-border M As undertakenby Chinese MNEs in 2008 was $68 billion,21% more than the OFDI flow from China.This means that Chinese MNEs not only usecross- border M As as a primary mode ofinternationalization, but also raise significantcapital or debt from foreign markets.