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The Rapid Change of International Business
This chapter covers: Internationalization of markets Various names given to firms in multiple countries Effect of the internet on international business Drivers leading firms to globalization of product Differences between domestic and international businesses Three environments of international business
Chapter Objectives
Appreciate the dramatic internationalization of markets. Understand the various names given to firms that have substantial operations in more than one country. Appreciate the profound effect of the Internet on many international business firms. Understand the five kinds of drivers that are leading international firms to the globalization of their operations. Comprehend why international business differs from domestic business. Describe the three environments--domestic, foreign, and international--in which an international company operates
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Business people
define a transnational as a company formed by a merger of two firms of approximately the same size that are from two different countries
Unilever (Dutch-English) Dunlop-Pirelli (English-Italian)
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Definitions
International Business
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Definitions
Foreign Business
domestic operations within a foreign country
A Multidomestic Company
has multicountry affiliates, each of which formulates its own business strategy based on perceived market differences.
A Global Company
attempts to standardize and integrate operations worldwide in all functional areas.
International Company
describes both global and multidomestic companies
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Have a worldwide presence in its market Allen-Edmonds produces all shoes in Port Washington, Wisconsin ships to over 33 nations Standardize operations worldwide in one or more functional areas P&G has operations in more than 70 countries and sells essentially the same products in over 140 countries Integrate operations worldwide Multicultural multinationals respond to local markets, produce products worldwide, exploit knowledge and technology on a global basis
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Globalization
Economic Globalization
is the international integration of goods, technology, labor, and capital. refers to the implementation of global strategies which link and coordinate a firms international activities on a worldwide basis. definition continues to broaden to include
political, social, environmental, historical, geographical, and cultural implications
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Globalization Forces
There are five major kinds of drivers that are leading international firms to the globalization of their operations. Political Technological Market Cost Competitive
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Globalization Forces
Political
There is a trend toward the unification and socialization of the global community. Preferential trading agreements
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Globalization Forces
Technological
Advancements in computers and communication technology are permitting an increased flow of ideas and information across borders.
The Internet and network computing enables small companies to compete globally. Business to business commerce is experiencing significant savings by using the Internet for business exchanges.
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Globalization Forces
Market
As companies globalize, they also become global customers. Companies follow customers abroad Saturation of the home market Customer tastes and lifestyles are converging
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Globalization Forces
Cost
Globalizing product lines can reduce development, production, and inventory costs can help achieve economies of scale.
Globalization Forces
Competitive
Companies are defending their home markets from competitors by entering the competitors home markets to distract them.
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Explosive Growth
Foreign Direct Investment
One commonly used measure of growth
Refers to direct investment into equipment, structures, and organizations in a foreign country sufficient to obtain management control
World stock of FDI rose from $519 billion in 1980 to $6.6 trillion in 2001.
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Explosive Growth
Exporting
Refers
to the transportation of any domestic good or service to a destination outside the home country or region The level of world merchandise exports more than tripled from 1980 to 2002. The level of service exports worldwide more than quadrupled in the same period.
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Foreign affiliates sales were $17.7 trillion in 2002. Growth due in part to liberalization of government policies toward foreign investment
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Ranking Nation or Firm 1. United States 2. Japan 3. Germany 4. United Kingdom 5. France 6. China 7. Italy 8. Canada 9. Mexico 10. Spain
$10,207.0 4,323.9 1,876.3 1,510.8 1,362.1 1,234.2 1,100.7 702.0 597.0 296.5
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Supporting
Globalization Concerns
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The sum of all forces surrounding and influencing the life and development of the firm. Forces can be classified as External forces Management can exert influence but cannot control Internal forces Management must administer and adapt
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Competitive Kind, number, location Distributive For goods and services Economic GNP, labor cost Socioeconomic Characteristics of population Financial Interest rates, inflation, taxes
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Legal Laws governing business Physical Topography, climate Political Form of government Sociocultural Attitudes, beliefs Labor Skills, attitudes Technological Equipment, skills
Domestic Environment
most familiar
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Foreign Environment
Operates differently than the domestic environment for the following reasons
Forces interrelated
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International Environment
The International Environment is
the interaction between the domestic environmental forces and the foreign environmental forces.
the interaction between the foreign environmental forces of two countries when an affiliate in one country does business with customers in another. Decision making is more complex
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International business transactions take place across national borders and may involve three environments.
Domestic
Foreign International
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www.export.gov/comm_svc/
AD VALOREM EQUIVALENT The duty collected under a specific tariff or a compound tariff expressed as a percentage of the value of the imported item. Since a specific tariff is calculated on the basis of units (of volume or weight), rather than value, and since prices can change over time, the ad valorem equivalent could differ when calculated for different time periods.
www.usinfo.state.gov/products/p ubs
AGREEMENT ON RULES OF ORIGIN A WTO agreement addressing the rules that determine the country of origin of an imported product. Rules of origin play an important role in international trade due to the fact that the application of duties and other restrictions on entry often depends on the deemed source of the imports. The agreement provides for harmonization in the practices of WTO members in determining the country of origin of products.
Toyota Motor Nippon Telegraph and Telephone Hitachi Honda Motor Sony
Trademarks Trademark eBusiness Search File Assign Ownership Search Assignments Status File TTAB Documents Search & View TTAB Proceedings
www.ecommerce.gov
Patents Patent Electronic Business Center Electronic Filing (EFS) Status Information (PAIR) Assign Ownership Search Assignments Patent Searches Sequence Searches (biotech) Software