International Business- Chapters 1-5

LO 1.1 Identify the types of companies active in international business.

• International business is a commercial transaction that crosses the borders of two or more nations.

• Most international business is conducted by large multinational corporations (MNCs), which have great economic muscle and do deals often worth billions of dollars.

• Born global firms adopt a global perspective and conduct international business from inception. They tend to have innovative cultures, knowledge-based capabilities, and quickly build competitive advantage.

LO 1.2 Explain globalization and the significance of global markets and production.

• Globalization is the trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies.

• Globalization passes through phases of expansion and contraction, with nations now trading approximately 60 percent of their yearly output.

• The globalization of markets helps companies (1) reduce costs by standardizing marketing activities, (2) explore international markets if the home market is small or saturated, and (3) level income streams.

• The globalization of production helps companies (1) access low-cost labor and become more price competitive, (2) access technical know-how, and (3) access natural resources nonexistent or too expensive at home.

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LO 1.3 Detail the forces that drive globalization.

• The broad forces behind increased globalization are falling barriers to trade and investment and technological innovation.

• The World Trade Organization (WTO) is designed to support the free flow of trade, help negotiate the opening of markets, and settle trade disputes. But its effectiveness has been lower in recent years.

• Some nations are forming smaller, regional trade agreements because negotiating with fewer nations can be an easier task.

• Innovations in information technology are making it easier, faster, and less costly to move data, goods, and equipment around the world.

• Specific innovations include global e-commerce, digitalization, communication tools such as videoconferencing, and advancements in transportation technologies.

LO 1.4 Summarize the main arguments in the debate about globalization.

• Globalization opponents say it (1) moves developed-country jobs to developing countries, (2) decreases wages, job security, morale, and loyalty in developed nations, (3) exploits developing-nation workers, and (4) reduces the bargaining power of labor.

• Globalization supporters say it (1) fuels efficiency and increases incomes, (2) promotes labor market flexibility, (3) provides jobs to developing nations that elevate living standards, and (4) perhaps strengthens labor rights.

• Inequality within a nation can decrease when a developing country (but perhaps not a developed nation) integrates itself into the global economy. Inequality between nations can decrease when a country embraces world trade and investment.

• Evidence suggests that the cultures of developing nations are thriving in an age of globalization and that deep elements of culture are not easily abandoned, as critics say.

• Some say globalization reduces national sovereignty. Others say globalization has helped democracy to spread worldwide and has aided progress on many global issues.

• It seems globalization has not caused an environmental “race to the bottom,” but instead encourages firms to embrace sustainability as a precondition to fostering healthy future markets.

LO 1.5 Identify the skills this course will help you develop for your career.

• The employability skills this course can help you develop are application of knowledge, reflective (critical) thinking, communication, and ethics and social responsibility.

• The global business environment model will help you to understand the nature of international business today and aid in your skills development.

• Global forces are transforming commercial activity. Globalization influences every aspect of global business and increases competition everywhere. Businesses must be vigilant to issues of ethics, social responsibility, and sustainability.

• Separate national business environments comprise unique cultural, political, economic, and legal characteristics that define business activity within every nation.

• The international business environment influences how firms conduct operations, while globalization further entwines the flows of trade, investment, and capital.

• International business management is vastly different from domestic business. Companies need to anticipate events and forces in their business environments that can affect operations.