International Business in English
BUS 460
CHAPTER 1
INTERNATIONAL BUSINESS IN THE TWENTY-FIRST
CENTURY
Introduction:
The broad environment includes:
The economy, the political and technological world, and sociological issues.
The specific environment includes:
Customer-supplier relations, investor requirements, workplace issues and individual financial and operational requirements.
Introduction:
Companies entering international business in the next decade face challenges that are any different from to those which they would have encountered in the 1950s, 70s, or 90.
The answer is,
Almost inevitably, yes.
The Role of History
History colours the present and nurtures the future.
The distribution of wealth across the world today is a consequence of several thousand years of economic change.
Over the course of history:
We have witnessed an increasing internationalization of business activity, particularly during the twentieth century.
The Role of History
Companies may manufacture components in several different countries.
Assemble them in another .
and then sell the finished product globally.
The Political Environment
Some political factors that would influence business:
1- The integration of Less Developed Countries (LDC’s) and formally centrally planned economies into the international economy.
2- The difficulties and the opportunities raised by economic inequalities across the world.
3- The sheer size of the world’s largest multinational companies (MNCs), raises issues of where the center of control?
In the boardroom or in government.
The Political Environment
Some political factors that would influence business:
4 - The role of major world institutions such as the
Organization for Economic Cooperation and
Development (OECD), World Bank, World Trade
Organization (WTO), the European Commission and the International Monetary Fund (IMF).
In relation to:
The direction of international trade and investment.
5- The twentieth-century division of the world into geographic areas which were ‘the home’ countries of MNC’s and ‘the host’ countries is now: disappearing.
The Political Environment
Some political factors that would influence business:
6- Environmental concerns:
As consumers and governments recognize the direct environmental impact of greater industrial production resulting from higher level of general consumption,
The question of whether market or regulatory mechanism should be used to limit levels of:
International pollution.
Economics:
Internalization – or Globalization of business over the last 100 years can be said to have re- drafted the world economic map.
In particular, over the last 50 years, we have witnessed international economic agreements which:
Liberalized trade and capital flows, and
Led to the establishment of regional economic groupings.
Economics:
The process of trade liberalization was set in motion by the General Agreement on Tariff and Trade (GATT), established in 1947.
After 8 different rounds of multilateral trade negotiations over 50 years:
The conclusion of the Uruguay Round of GATT in December 1993 marked the end of the GATT achievements in:
Cutting import duties and tariffs. And
Creating a new multinational framework for world trade.
Economics:
In January 1995,
GATT was replaced by :
The World Trade Organization (WTO), a regulatory body which now defines and enforces rules.
Which cover 90% of world trade.
Economics: (Challenges)
Challenges which will be need to be faced by organizations seeking to expand their international operations:
1- The increased competition arising from a greater freedom of world trade.
2- The changing distribution of economic activity across the globe arising from the importance of regional trading blocks.
Economics: (Challenges)
3- The threat created by increased level of foreign direct investment, made easier by highly efficient international financial markets.
4- The need to devise strategies which take the maximum advantage of trading and investment opportunities within regional trading blocks.
5- Acceptance of changes in corporate structures in order to match the strategic changes required to survive the global marketplace.
The Technological Environment
Technological changes drove the first industrial revolution in the 19th century.
And, seems set to drive a second one some two centuries later.
The impact of technology upon international business can be classified under three separate headings:
1- Transportation.
2- Communication.
3- Product and process innovation, and sales and marketing.
The Technological Environment 1- Transportation
Transportation has , over the centuries, led to global shrinkage.
In the 19th century the railways and steamships made it much easier for goods to be transported over long distances relatively quickly.
The 20th century developments of the jet engine and containerized shipping speeded the process still further.
The usefulness of such technology from a business prospective is the extent to which it facilitates geographic specialization.
The Technological Environment 2- Communication
Communication technology has been
revolutionized over the last 50 years. Firstly, by satellites and more recently by the use of optic fiber and digital systems.
The time required to send data from one side of the world to the other has shrunk to almost
nothing.
Example:
It is now possible for a multinational company to run its design office at the other side of the world from its production units. Because it is simple to transmit data through high tech technology and videoconferencing.
The Technological Environment 3- Product and Process
Since the mid 20th century, the key change in production technology has been the progress from traditional automated mass productions,
Via, numerically controlled methods (CNC) and Computer-Aided Design and
Manufacturing (CAD-CAM),
Into flexible manufacturing systems (FMS).
The Technological Environment 3- Product and Process
The use of FMS offers benefits in terms of product design, because it makes design modification easier and lower cost.
As a result, where the competitive
environment has created a short product life cycle which demands regular innovation,
The firm using the flexible technology are at an advantage.
The Technological Environment 3- Product and Process
Large-scale multinational producers tend to be the main users, ..
Because the cost, risks and complexity of investing in the technology mean that ..
Large markets need to be available in order to earn a reasonable return on investment (ROI).
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