Lecture 2 3- Intro. to International Business and Globalisation

Definition:
- Commercial transactions involve buying and selling goods (tangibles) and services (intangibles) between two or more countries.

Key Drivers:
- Economies of Scale: Larger production volumes reduce costs.
- Trade Policy: Evolving regulations promoting international trade.
- Technology Improvements: Enhancements in transportation and communication.
- Institutional Support: Organizations like the WTO facilitate trade.
- Service Expansion: Growth of global banking and shipping services.
- Consumer Demand: Increased need for diverse products.
- Global Learning: Companies learning best practices from each other.

Objectives:
- Sales Expansion: Increased revenue opportunities.
- Resource Acquisition: Access to cheaper or superior components and services.
- Foreign Investments: Seeking capital and technological advancement.
- Risk Minimization: Diversifying across markets.
- Business Cycle Advantage: Timing product/service introduction.

Domestic Business: Operates within one country.
International Business:
- Requires distinct procedures for exporting/importing.
- Involves navigating various political, legal, cultural, and demographic contexts.
- Impacts business strategy differently.

MNC:
- Engages in direct investments in multiple countries.
- Requires specialized strategies, particularly in HR.
Multinational Enterprise (MNE):
- Takes a global approach to markets and production.
- Utilizes various entry modes for market interaction.
MNC vs. MNE:
- Not all international businesses are structured as corporations (e.g., accounting partnerships).

Definition:
- A process influenced by economic forces leading to the integration of production, trade, and financial markets.
Underlying Factors of Globalisation:
- Growth of global finance and markets.
- Enhanced communication and technology access.
- Increased presence of multinational firms.
- Erosion of geographic and operational barriers.
- Influence of supranational organizations (EU).

Transition from colonialism to free trade and market liberalization.
Evolutionary processes:
- Rise of communism and state socialism, re-emerging trends today.
- Establishment of GATT in 1948, leading to WTO in 1995.

Dimensions:
- Economic integration influencing markets, production, and investment dynamics.
- Its reality comes with both opportunities and hazards, especially for developing nations.
Impact of Globalisation:
- It changes how people think globally and locally, necessitating a new approach in planning and operations.

Business Operations:
- Lower trade barriers lead to global perspectives for production and market strategy.
- Technological advancements change production and communication dynamics.
- Global markets promote cultural convergence but also pose risks to local economies.

Movement of People: Global employment opportunities and challenges.
Movement of Capital: Quick transfer of funds via technology, mainly through Foreign Direct Investment (FDI).
Free Trade: Development of trading blocs affecting global market dynamics (e.g., NAFTA, now USMCA).
Technical Assistance: Historical and modern shifts in support systems between nations.

Facilitates communication and awareness of global issues (e.g., environmental concerns, human rights).

Encouragement of globalization through deregulation and privatization policies by governments worldwide.

Supporters argue for a world of cheaper goods, job creation, economic growth, and skill transfer.
Critics highlight loss of sovereignty, increased unemployment, and environmental risks.

Benefits: Wide access to goods and services, job creation, and investment capital.
Negatives: Job losses in developed nations, cultural diminishment, and financial market volatility.

The continual evolution of global systems brings risks like the financial crises and pandemics, prompting discussions on interdependence and market regulation.

Understanding the complexity and multifaceted effects of globalization helps in strategic decision-making for international management.