Globalization and

International Business
EXPLORING MANAGEMENT
Global economy
Resources, markets and competition are
worldwide in scope
Globalization
Process of growing interdependence of
global economies


Insourcing
Domestic jobs are created by foreign
employers
Outsourcing
Jobs are shifted to foreign locations to take
advantage of lower wages, infrastructure,
educated workforce or government support


International Business
Conducts transaction across international
boundaries
Reasons to go international

Profits
Customers
Suppliers
Capital
Labor
Risk
Market Entry Strategies
Global
Sourcing
materials,
components
or services
are purchased
worldwide
Exporting
selling locally
made
products in
foreign
markets
Importing
buying
foreign-made
products and
selling them in
domestic
markets
Licensing
foreign firm
pays for rights
to make or sell
another
companys
products
Franchising
foreign firm
buys rights to
anothers
name and
operating
method in its
home country
Direct Investment Strategies
Joint Venture
co-ownership
arrangement in
which the foreign
and local business
jointly operate the
new business
Global
Strategic
Alliance
Cooperative
partnership to
achieve task that
would be difficult
for partners alone
Foreign
Subsidiary
operation
completely owned
and controlled by
a foreign firm
Greenfield
Venture
subsidiary
established after
firm has
experience in joint
ventures
International business is complicated by
different legal and political systems
Health and safety
Equal employment
Sexual harassment
Incorporation and ownership
Foreign currency exchange
Intellectual property

Tariffs
Taxes placed on imports
Protectionism
Tariffs, subsidies and other tactics that give
advantages to domestic producers
World Trade Organization
Global institution to promote free trade and open
markets around the world
Membership of around 153 countries
Most Favored Nation status
www.wto.org


Global corporations or MNCs do
substantial business in many countries
The actions of global corporations can be
controversial at home and abroad
Managers of global corporations face a
variety of ethical challenges

Planning and controlling are complicated
in global corporations
Organizing can be difficult in global
corporations
Leading is challenging in global
corporations
Global corporations and also known as
Multinational corporations (MNC)
Extensive foreign operations in more than one
country
Transnational corporations
Operate without one national home

Corruption
Illegal practices
Foreign Corrupt Practices Act
U.S. legal standards apply to companies when
operating in foreign countries
Prevents
Bribes, gifts to foreign officials in return for business
favors
Sweatshops
Employees work long hours in poor or unsafe
conditions
Child labor
Full-time employment of children



Currency Risk


Scenario 1:
Weak dollar
.75 Euros = 1 $US
Take home revenue
= $133,00
Scenario 2:
Strong dollar
1.25 Euros = 1 $US
Take home revenue
= $80,000
Political risk
Risk of loss because of political instability in
foreign country
Political risk analysis
Forecasts how political events may impact
foreign investments
Currency risk
Possible loss because of
fluctuating exchange rates