Lecture 1 - Why International Business Management

Question 1

Define an international business

Answer 1

1) a business (or firm) that engages in international (cross-border) economic activities

or

2) the action of doing business abroad

Question 2

Define a global business

Answer 2

Business around the globe

• more than 2 countries
• bigger than an international business

Question 3

Define a multinational enterprise (MNE)

Answer 3

A firm that engages in foreign direct investments

Question 4

Define foreign direct investment (FDI)

Answer 4

Investing in, controlling, and managing value-added activities in other countries

Question 5

What is a foreign portfolio investment?

Answer 5

Buying shares in a foreign country but you don’t control anything

Question 6

What makes international business different from domestic business?

Answer 6

• boundaries
• currency
• cultures
• legal systems and different laws
• availability of resources
• skills and knowledge

Question 7

Why should we study global business?

Answer 7

EMPLOYABILITY:

• mastering global business knowledge helps advance your employability and career in an increasingly competitive global economy
• an ignorant individual is unlikely to emerge as a winner in global competition

CAREER ADVANCEMENT:

• expertise in global business is often a prerequisite to join the top ranks of firms
• in order to set yourself apart as an ideal candidate, you will need a mastery of global business knowledge

GLOBALIZATION:

• this is an age of extensive global interaction and competition
• understanding how global business decisions are made may facilitate your own career in global firms

Question 8

What is the fundamental question of international business?

Answer 8

What determines the success and failure of firms around the globe?

Question 9

What is the institutional-based view?

Answer 9

Formal and informal rules of the game

• a leading perspective in global business that suggests that firm performance is, at least in part, determined by the institutional frameworks governing firm behaviour around the world

Question 10

What is the resource-based view?

Answer 10

Firm-specific resources and capabilities

• a leading perspective in global business that suggests that firm performance is, at least in part, determined by its internal resources and capabilities

Question 11

What are the three views of globalization?

Answer 11

• a new force sweeping through the world in recent times
• a long-run historical evolution since the dawn of human history
• a pendulum that swings from one extreme to another from time to time
• of the three views, the pendulum view probably makes the most sense, because it can help us understand the ups and downs of globalization

Question 12

What is risk management?

Answer 12

The identification and assessment of risks and the preparation to minimize the impact of high-risk, unfortunate events

Question 13

What is scenario planning?

Answer 13

A technique to prepare and plan for multiple scenarios (either high or low risk)

Question 14

Explain what semi-globalization is

Answer 14

Suggests that barriers to market integration at borders are high, but not high enough to completely insulate countries from each other

Question 15

What is total isolationism?

Answer 15

Staying away from the global arena

- no countries have total isolation

Question 16

What compels firms to become more global?

Answer 16

• to leverage core competencies (a core competency is a strength or advantage that is central to a firm’s operations)
• to acquire resources and supplies
• to seek new markets
• to compete better with rivals
• imitating others
• changes in the political environment
• technological changes (e.g. communication, information processing and transportation)

Question 17

What are the advantages of globalization?

Answer 17

• the world at your doorstep
• increased international trade lowers prices for goods and services
• globalization stimulates economic growth, raises the income of consumers and helps create jobs

Question 18

What are the negative aspects of globalization?

Answer 18

• globalization, labour policies and the environment (e.g. moving production to countries where labour and environmental regulations do not exist, or are not enforced)
• globalization and national sovereignty (shifting of economic and political power to supranational organisations like the WTO, UN, EU, etc)
• globalization and the world’s poor (is inequality increasing?)
• globalization and the death of industries in some countries (e.g. UK lost the textile industry to China and other developing countries)

Question 19

What are the implications for international business in the following scenario:

• lower barriers to trade and investment

Answer 19

Lower barriers to trade and investment mean firms can:

• view the world as their market
• base production in the optimal location for that activity
• learn from and compete with their competitors better

Question 20

What are the implications for international business in the following scenario:

• advances in technology

Answer 20

Technological advances mean:

• lower transportation costs helps create a global market
• lower information and communication costs
• low-cost global communications networks help create an electronic global marketplace
• global communication networks and global media create a worldwide culture, and a global market for consumer products