Lecture 1 - Why International Business Management Flashcards
Define an international business
1) a business (or firm) that engages in international (cross-border) economic activities
or
2) the action of doing business abroad
Define a global business
Business around the globe
- more than 2 countries
- bigger than an international business
Define a multinational enterprise (MNE)
A firm that engages in foreign direct investments
Define foreign direct investment (FDI)
Investing in, controlling, and managing value-added activities in other countries
What is a foreign portfolio investment?
Buying shares in a foreign country but you don’t control anything
What makes international business different from domestic business?
- boundaries
- currency
- cultures
- legal systems and different laws
- availability of resources
- skills and knowledge
Why should we study global business?
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
What is the fundamental question of international business?
What determines the success and failure of firms around the globe?
What is the institutional-based view?
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
What is the resource-based view?
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
What are the three views of globalization?
- 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
What is risk management?
The identification and assessment of risks and the preparation to minimize the impact of high-risk, unfortunate events
What is scenario planning?
A technique to prepare and plan for multiple scenarios (either high or low risk)
Explain what semi-globalization is
Suggests that barriers to market integration at borders are high, but not high enough to completely insulate countries from each other
What is total isolationism?
Staying away from the global arena
- no countries have total isolation
What compels firms to become more global?
- 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)
What are the advantages of globalization?
- 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
What are the negative aspects of globalization?
- 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)
What are the implications for international business in the following scenario:
- lower barriers to trade and investment
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
What are the implications for international business in the following scenario:
- advances in technology
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
