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Course: International Business

Chapter 1: Introduction & Overview

Course Teacher: Dr. H. M. Mosarof Hossain

Professor
Department of Finance
University of Dhaka
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Chapter 1: Introduction & Overview

Introduction: A fundamental shift is occurring in
the world economy i.e. there is a movement
from a world in which national economies were
relatively self-contained, isolated from each
other by barriers to cross-boarder trade and
investment; by distance, time zones, and
language, and by national differences in
government regulation, culture and business
systems toward
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Introduction
a world in which barriers to cross-boarder trade
and investment are declining; perceived distance
is shrinking due to advances in transportation
and telecommunications technology, material
culture is starting to look similar the world over
and national economies are merging into an
independent, integrated global economic
systems.
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What is globalization?

The shift towards a more integrated and

interdependent world economy from isolated and
disintegrated economy for increasing efficiency
and productivity and decreasing production,
transportation and marketing costs of goods and
services is termed as globalization. There are two
components of this globalization such as:
 The globalization of markets
 The globalization of production
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Globalization of markets

The globalization of markets refers to the merging of

historically distinct and separate national markets
into one huge global marketplace. Falling barriers to
cross-boarder trade have made it easier to sell
internationally. This should be for minimizing the
following problems:
 Tastes and preferences are different,
 Firms should offer standardized products worldwide
creating a world market,
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Globalization of markets

 Significant differences exist between national

markets on many relevant dimensions,

 These differences require that marketing and

operating strategies and product features be
customized to best match conditions in a
country,
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Globalization of markets

 Countries are different,

 Range of problems are wider and more
complex,
 Government intervention in trade and
investment creates problems,
 International investment is affected by
different currencies.
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Globalization of production

 Refers to sourcing of goods and services from

locations around the world to take advantage
of
 Differences in cost or quality of the factors of
production
 Labor
 Land
 Capital
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Emergence of global institutions

Globalization has created the need for institutions to
help, manage, regulate and police the global
marketplace and to promote the establishment of
multinational treaties to govern the global business
system. A number of important global institutions have
been created to help in performing these functions
including:
 GATT
 WTO
 IMF
 World bank
 United Nations
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Global drivers

Macro factors that underlie trend towards greater

globalization
 Decline in trade ( import and export of goods and
services) and investment ( foreign direct investment)
barriers,
 The role of technological change i.e. change in
telecommunications, internet & worldwide web,
transportation technology etc.
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Pattern of declining tariffs

Country 1913 1950 1990 2005 2016

France 21% 18% 5.9% 3.9% 3.9%
Germany 20 26 5.9 3.9 3.9
Italy 18 25 5.9 3.9 3.9
Japan 30 - 5.3 2.3 3.9
Holland 5 11 5.9 3.9 3.9
Sweden 20 9 4.4 3.9 3.9
Britain - 23 5.9 3.9 3.9
US 44 14 4.8 3.2 3.9
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Declining barriers to trade and investment

 Globalization of markets and production has

been facilitated by
 Reduction in trade barriers
 Removal of restrictions to foreign direct
investment
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Globalization debate-Pro (For)

 Lower prices for goods and services

 Economic growth stimulation
 Increase in consumer income
 Creates jobs
 Countries specialize in production of goods
and services that are produced most efficiently
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Globalization debate-Con (Against)

 Destroys manufacturing jobs in wealthy and

advanced countries
 Wage rates of unskilled workers in advanced
countries declines
 Environmental degradation
 The cultural imperialism
 Companies move to countries with fewer labor
and environment regulations
 Loss of sovereignty
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Managing in the Globalization Marketplace

An international business is any firm that

engages in international trade or investment.
As the world shifts toward a truly integrated
global economy, more firms both large and
small are becoming international business. As
organizations increasingly engage in cross-
boarder trade and investment
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Managing in the Globalization Marketplace

managers need to recognize that the task of

managing an international business differs
from that of managing a purely domestic
business in many ways such as:
Differences in cultures, tastes & preferences,
attitudes of the government, attitudes of
customers, political systems, economic
systems, legal systems and levels of economic
development.