International Business

Week 1.2 03/11/2020

Copyright ©2011 Pearson Education, Inc.

publishing as Prentice Hall

AGENDA

1. Group Project Organization and

Instructions

2. Finalize Group Contract

3. Chapter 1 Discussions

4. Assignments Week 2.1

Chapter Learning Goals

1. Understand the global business environment and how it affects the strategic and operational decisions which managers must make.

2. Critically assess the developments, advantages, and disadvantages of globalization.

3. Review the role of technology in international business.

4. Develop an appreciation for the ways in which political, economic, legal, and technological factors and changes impact the opportunities that companies face.

5. Discuss the complexities of the international manager’s job.

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What is International Management?

The process of developing

strategies, designing and

operating systems, and working

with people around the world to

ensure sustained competitive

advantage

What is Globalization?

…characterized by • networks of international linkages

• that bind countries, institutions,

and people

• in an interdependent global

economy

What are CHALLENGES for International Management? Discuss with your Team

• language barriers

• business attitude

• custom differences

• technical

development

• legal environment

• natural resources

• different ethics

• currency

• wage differences

• taxes

• different

markets/customer

needs

• terrorism

• health issues and

system

• different time zones

What are BENEFITS of International Management? Discuss with your Team

• economic growth

• company revenue

increases

• buying power

• cultural integration

• risk management

improves

• less restrictive labor

laws

• lower operation

cost/economy of

scale

• larger variety of

products & services

• natural resources

• decrease of

competition

• job creation

• increase/improve-

ment of technology

• higher profitability

• larger market/

market share

Typical Challenges that Managers Face in the 21st Century

 Political and cultural differences

 Global competition

 Terrorism

 Technology

 Finding ways to balance their

social responsibilities, their images,

and their competitive strategies

Challenges to Globalism

 Backlash against capitalism and

rekindling of nationalism

 Increased protectionism of high-

demand resources

 Need to develop top managers

with international understanding

and experience

Benefits of Globalism

▪ Access to more markets

▪ Growth of developing economies

▪ Opportunities for flexibility and

efficiency

▪ Opportunities for small and

medium-sized enterprises (SMEs)

▪ Many more…

Regional Trading Blocks

Examples:

European

Union (EU)

Regional Trading Blocks

North American

Trade Agreement

(NAFTA)

The Impact of the Information Technology

 Making geographic barriers less

relevant

 Lowering cultural barriers

 Encouraging convergence of

consumers’ tastes and

preferences

1-

13

The Global Manager’s Role

The Political and Economic Environment

• Sustainability—economic, political, social,

and environmental—has become a

significant worldwide issue

• Ethnicity—a driving force behind political

instability around the world

• Religion—religious disputes lie at the heart

of regional instabilities: former Yugoslavia,

Northern Ireland, the Middle East…

Political Risk

Examples:

Any governmental action or politically motivated

event that could adversely affect the long-run

profitability or value of a firm

Venezuela took control

of cement plants and

offices belonging to

Mexico, after failing to

reach an agreement in

nationalization talks.

Bolivian president’s

move to

nationalize the

national gas

industry followed

that in Venezuela.

The Political Risk Cont.

Typical Political Risks

• Expropriation and confiscation

• Nationalization

• Terrorism

• Macro-political risk event

• Micro-political risk event

• Discriminatory treatment

• Barriers to repatriation of funds

• Interference in managerial decision making

• Corruption/Dishonesty by government officials

Political Risk

Assessment

 Helps companies manage

exposure to risk and

minimize financial loss

 Two forms:

 Consultation with experts

 Development of internal

staff capabilities

Managing Political Risk

Avoidance and

Adaptation

• Equity sharing

• Participative management

• Localization of the operation

• Development assistance

Dependency and

Hedging

• Input control

• Market control

• Position control

• Staged contribution

• Political risk insurance

(OPIC and FCIA)

• Local debt financing

Categories of Economic Risk

1. Loss of profitability due to abrupt

changes in monetary and fiscal policies

2. Loss of profitability due to changes in

foreign investment policies

3. Risk of currency exchange rate

• Example: devaluation of peso in 1990s

The Legal Environment

Consists of

▪ the local laws and legal systems of

those countries in which an

international company operates and

▪ of international law, which governs

relationships between sovereign

countries

Other Regulatory Issues

 Protectionist policies, such as tariffs or

quotas

 The attractiveness of the tax system

 The level of government involvement in

the economic and regulatory

environment

Assignments Week 2.1

1. Study Chapter 2

2. Read articles and watch videos

posted in Week 2 folder on ulearn

3. Start preparing UNIT A of Group

Project (due in Week 3)