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
Profits
global operations offer greater profit potential through expanded operations
Customers
Global Operations offer new markets to gain customers and sell products and services.
Suppliers
Global operations offer access to products, services, and raw materials.
Capital
Global operations offer access to alternative providers of financial resources.
Labor
Global operations offer access to labor markets with low-cost, talented workers
Risk
Global operations offer risk management by spreading assets among multiple countries.
5 Market Entry Strategies
Global sourcing
Exporting
Importing
Licensing
Franchising
Global Sourcing
firms purchase materials or services around the world for local use.
Exporting
local producs are sold abroad
Importing
the process of acquiring products and selling them in domestic markets.
Licensing
one firm pays a fee for rights to make or sell another company's products
Franchising
a firm pays a fee for rights to use another company's name and operating methods.
4 Direct Investment Strategies
Joint Ventures
Global Strategic Alliance
Foreign Subsidiaries
Greenfield Venture
Joint Ventures
co-ownership arrangement in which the foreign and local business jointly operate the new business.
Global Strategic Alliance
Cooperative partnership to achieve a task that would be difficult for partners alone.
Foreign Subsidiaries
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
Global Corporations aka Multinational Corporations (MNC)
Extensive foreign operations in more than one country
Transnational Corporations
Operate without one national home
- an MNC that operates worldwide on a borderless basis
MNC-host country relationships: what should go right? (on chart)
Shared opportunities with potential for growth, income, learning, and development
MNC-Host country relationships: what can go wrong?
Complaints about MNC's
-excessive profits
-economic domination
-interference with government
-hires best local talent
-limited technology transfer
-disrespect for local customes
Complaints about host countries
-profit limitations
-overpriced resources
exp
Corruption
illegal practices
Foreign Corrupt Practices Act
U.S. legal standards apply to companies when operating in foreign countries
-makes it illegal for US firms and their representatives to engage in corrupt practices overseas
-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
Sustainable Development
Meets needs of present without compromising the future
Currency Risk
possible loss because of fluctuating exchange rates.
Weak Dollar: .75 euros = 1 $US
Strong Dollar: 1.35 euros = 1 $US
Political Risk
Risk of loss because of political instability in host country
Political Risk Analysis
Attempt to predict disruptive events
Global Managers
Competent in working in different cultures
Expatriate Wokers (Expats)
lives and works in a foreign country
Harley Davidson - case study
style and strategy have global reach
IN addition to gaining new markets, the reasons why businesses go international include the search for what?
lower labor costs
When Rocky Brands decided to increase its international operations by buying 70% ownership of a manufacturing company in the Dominican Republic, Rocky was engaging in which form of international business?
joint venture
When Limited Brands buys cotton in Egypt and has pants sewn from it in Sri Lanka according to designs made in Italy for sale in the US, this is a form of international business known as what?
Global Sourcing
A common form of international business that falls into the category of a direct investment strategy is what?
Joint Venuturing
A joint venture is a form of _____ in which each of the partners expects to gain something of value from working with the other.
Global Strategic Alliance
When a Hong Kong firm makes an agreement with The Walt Disney Company to legally make jewelry in the shape of Disney cartoon characters, Disney is engaging in a form of international business known as what?
Licensing
One major difference between an international business and a transnational corporation is that the transnational tries to operate without what?
without a strong national identity
The Foreign Corrupt Practices Act makes it illegal for what?
US businesses to make "payoffs" abroad to gain international business contracts.
The World Trade Organization, or WTO, would most likely become involved in disputes between countries over what?
Traiffs and Protectionism
New Balance discovered that exact copies of its running shoe designs were on sale in China under the name "New Barlun". This is an example of a ______ problem in international business.
Intellectual Property Rights
A global corporation whose executives worry that the firm's need for resource today will cause problems of resource shortages for future generations must successfully address the issue of what?
Sustainable Development
When foreign investment creates new jobs that are filled by local domestic workers, some call the result ______ as opposed to the more controversial notion of outsourcing.
Insourcing
If a new government comes into power and seizes all foreign assets in the country without any payments to the owners, the loss to foreign firms is considered a _______ risk of international business.
Political Risk
If an international business firm has separate vice presidents in charge of its Asian, African, and European divisions, it is most likely using a global ______ structure.
Area
A person who is sent overseas by his or her employer to work for an extended period of time in a foreign subsidiary is called a what?
Expatriate Employee