🌍Intro to International Business Unit 1 – Introduction to International Business

Global Business Landscape

• Globalization refers to the increasing interconnectedness of economies, cultures, and societies worldwide
• Key drivers of globalization include advances in technology, transportation, and communication
• Multinational corporations (MNCs) play a significant role in the global business landscape by operating in multiple countries (Coca-Cola, Toyota)
• Emerging markets, such as Brazil, Russia, India, and China (BRIC), have become increasingly important in the global economy
• International trade agreements, such as the North American Free Trade Agreement (NAFTA) and the European Union (EU), facilitate trade between member countries
• Offshoring involves relocating business processes or manufacturing to countries with lower labor costs (call centers in India)
• Global supply chains enable companies to source materials, manufacture products, and distribute goods across multiple countries
• The World Trade Organization (WTO) promotes free trade and sets rules for international commerce

Cultural and Economic Factors

• Cultural differences, such as language, religion, and social norms, can impact business practices and communication
• Hofstede's cultural dimensions theory helps analyze cultural differences across countries based on factors like power distance and individualism vs. collectivism
• Economic factors, such as GDP, inflation, and unemployment rates, influence a country's attractiveness for international business
• Political stability and the rule of law are essential considerations when entering foreign markets
• Infrastructure development, including transportation networks and telecommunications, affects a country's ability to participate in global trade
• Intellectual property rights protection varies across countries, impacting innovation and technology transfer
• Cultural intelligence (CQ) refers to the ability to function effectively in culturally diverse settings
• Economic integration, such as free trade areas and customs unions, reduces barriers to trade between participating countries

International Trade Theories

• Absolute advantage theory, proposed by Adam Smith, suggests that countries should specialize in producing goods they can make most efficiently
• Comparative advantage theory, developed by David Ricardo, argues that countries should specialize in goods they can produce at a lower opportunity cost
• Heckscher-Ohlin theory emphasizes the role of factor endowments, such as labor and capital, in determining a country's comparative advantage
• The Product Life Cycle theory explains how the location of production shifts as a product moves through its life cycle (introduction, growth, maturity, decline)
• New Trade Theory accounts for the role of economies of scale, product differentiation, and imperfect competition in international trade
• The Gravity Model of Trade suggests that trade flows between countries are influenced by factors such as economic size and geographic distance
• Intra-industry trade refers to the exchange of similar products within the same industry between countries (automobiles between the US and Japan)
• Trade liberalization, through the reduction of tariffs and non-tariff barriers, promotes international trade

Foreign Market Entry Strategies

• Exporting involves selling goods or services produced in one country to another country
  • Direct exporting requires the company to handle all aspects of the export process
  • Indirect exporting relies on intermediaries, such as export management companies or trading houses
• Licensing allows a foreign company (licensee) to use the intellectual property of the licensor in exchange for royalties
• Franchising is a form of licensing where the franchisor provides a proven business model and support to the franchisee (McDonald's)
• Joint ventures involve two or more companies pooling resources to establish a new entity in a foreign market
• Wholly-owned subsidiaries are foreign operations completely owned by the parent company, providing full control but requiring significant investment
• Greenfield investments involve building a new facility from the ground up in a foreign country
• Acquisitions refer to purchasing an existing company in a foreign market to gain quick access to the market and established operations
• Strategic alliances are cooperative agreements between companies to share resources or expertise without forming a new entity

Global Marketing and Branding

• Global branding involves creating a consistent brand identity across multiple countries (Nike's "Just Do It" slogan)
• Standardization strategy uses a uniform marketing mix across all markets, benefiting from economies of scale and a consistent brand image
• Adaptation strategy tailors the marketing mix to meet the specific needs and preferences of each market
• Glocalization combines elements of standardization and adaptation, thinking globally while acting locally (McDonald's offering local menu items)
• Country-of-origin effect refers to the influence a product's perceived country of origin has on consumer attitudes and purchasing decisions (Swiss watches, German cars)
• Digital marketing channels, such as social media and e-commerce platforms, enable companies to reach global audiences more easily
• Cultural sensitivity is crucial in global advertising to avoid offending or alienating target markets
• Brand positioning strategies must consider the unique competitive landscape and consumer preferences in each market

International Finance and Exchange Rates

• Exchange rates represent the value of one currency in terms of another and can be floating or fixed
  • Floating exchange rates are determined by market forces of supply and demand
  • Fixed exchange rates are pegged to another currency or a basket of currencies
• Currency appreciation occurs when a currency increases in value relative to another currency, making exports more expensive and imports cheaper
• Currency depreciation happens when a currency decreases in value relative to another currency, making exports cheaper and imports more expensive
• Hedging techniques, such as forward contracts and currency options, help mitigate foreign exchange risk
• Transfer pricing refers to the pricing of goods, services, or intangible assets between related entities within an MNC
• International taxation issues, such as double taxation and tax havens, impact global business operations
• Balance of payments measures the flow of goods, services, and capital between a country and the rest of the world
• Foreign direct investment (FDI) involves a company investing in a foreign country to establish a long-term presence

Managing Multinational Operations

• Global organizational structures, such as global product divisions or geographic areas, help MNCs coordinate their worldwide activities
• Expatriate management involves selecting, training, and supporting employees sent to work in foreign subsidiaries
• Global talent management focuses on attracting, developing, and retaining a diverse, international workforce
• Cross-cultural communication skills are essential for managing teams and stakeholders from different cultural backgrounds
• Global supply chain management requires coordinating the flow of goods, information, and finances across multiple countries
• Knowledge transfer between headquarters and foreign subsidiaries helps disseminate best practices and innovations throughout the organization
• Global leadership development programs prepare managers to lead effectively in a multicultural business environment
• International human resource management (IHRM) practices must consider local labor laws, customs, and employee expectations

Ethical Considerations in Global Business

• Bribery and corruption pose significant challenges in many countries, requiring companies to maintain strong ethical standards and compliance programs
• Labor rights issues, such as child labor, sweatshops, and fair wages, are important considerations in global supply chains (Nike's past controversies)
• Environmental sustainability concerns, including carbon emissions, waste management, and resource depletion, impact global business operations
• Corporate social responsibility (CSR) initiatives demonstrate a company's commitment to positively contributing to society and the environment
• Ethical sourcing practices ensure that suppliers adhere to acceptable labor, environmental, and safety standards
• Intellectual property rights protection is crucial to fostering innovation and preventing counterfeiting and piracy
• Privacy and data protection regulations, such as the European Union's General Data Protection Regulation (GDPR), affect how companies handle personal data across borders
• Stakeholder engagement, including dialogue with local communities, NGOs, and governments, helps companies understand and address ethical concerns in their global operations