BMCF I TM I Prague

University Of Finance & Administration

INTERNATIONAL BUSINESS[NA_IB]

Ing. Pavla Břečková, Ph.D.pavla.breckova@vsfs.cz

2.

INTERNATIONAL BUSINESS

Part-time course = 4 guided consultations á 90 mins. (winter term 2010)

1. GLOBAL BUSINESS ENVIRONMENT & EXPORT+ Case study setting

2. WORLD BUSINESS TERRITORIES and EMERGING MARKETS+ Case study elaboration

3. INTERNATIONAL TRADE & FDI+ prezentation of the Case study results

4. EUROPEAN MARKETS & PREDISPOSITIONS for working in IB+ oral exam possible

 

3.

EXAM terms NA_IB

4 lectures / guided consultations [GC] (per 90 mins)Completion: exam / 6 credits

Completion CONDITIONS:

Active participation in the guided consultations [active listening, discussing, reading, analyzing & interpreting of economic articles or case study results, presence at GC – 50%]

Case study elaboration & it’s prezentation

Oral exam [prove of knowledge in IB]

If unfulfilled: 1. semester elaborated quality paper (methodics in IS – Study materials) 2. and oral or written exam

CASE study / team work

CASE study on one of these topics: 1. BUSINESS TRENDS / opportunities in the next 10 years

Largest threats & opportunities from the point of view of international business, where it (IB) is going. Areas where it is likely to find the business opportunities during next 10 years + explain what brought you to such results.

2. EXPORT STRATEGY Mid term view (3-5 years). What it should lie in, generally - how to

support export (of CZ enterprises), concrete forms + in which business and industry areas (if in any / if not in all of them) + explain why

3. Finding the COMPETITIVE ADVANTAGE for the Czech Republic (and of the CZ businesses). Competitive advantage + consequently what areas of business and industry should be preferential (if any) + what to do for succeeding in international business from the point of view of competitive advantage (micro and macro view). Possibly also what kind of business environment (or changes in the present one) would help developing the CZ businesses competitive advantage?

CASE study - elaboration

CASE study on one of these topics:

1. BUSINESS TRENDS / opportunities in the next 10 years2. EXPORT STRATEGY 3. Finding the COMPETITIVE ADVANTAGE for the Czech Republic

ELABORATION: Elaboration in teams per 3-4 people Presentation of the results - ppt possible, cca 10 min., structured way, clear outcomes (solutions, results)

PREZENTATION:- 29/11/2010- up to 10 min. / all the team members should be involved

6.

LITERATURE SOURCES

Woods, M.: International business. Basingstoke, Palgrave, 2001. ISBN: 0-333-75979-6. Wild, J., Wild, K., Han, J.: International business: the challenges of globalization. 4th ed. – Pearson, Upper Saddle River, 2008. ISBN: 978-0-13-174743-6. Griffin, R.W., Pustay, M.W.: International business: a managerial perspective. 5th int. ed. - Upper Saddle River, Prentice Hall, 2007. ISBN: 0-13-233532-8 Czinkota, M.R., Ronkainen, I.A., Moffett, M.H.: International business. 7th ed. - Australia. ISBN: 978-981-4246-05-7

PLEASE NOTE:No need to have the literature permanently at disposal during semester

GLOBAL BUSINESS ENVIRONMENT

Session one is devoted to a discussion of the global context within which IB must function in the 21st century.

The aim is to describe the external framework which exists today and which will influence company strategies in the international arena.

There are clearly some factors that will be more important than others in determining the likelihood of success in international markets:

The state of the world economy and the rules and regulations governing INT trade and investment are critical

The political and social environment also impinges on businesses, i.e. consideration of the role of culture in IB / importance of cultural empathy to business success

8.

International ENVIRONMENT

INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

GLOBAL

MACRO

MICRO

GLOBAL BUSINESS ENVIRONMENT

If a business is to be succesful – it needs to be aware of:the GENERAL ENVIRONMENT – 2 levels of understanding

BROAD

= relevant to most companies

[includes economy, political, tech. world

and sociological issues]

SPECIFIC

= important to the individual business[includes customer / supplier relations,

investor requirements, workplace issues]

9.

IB OPERATIONS

10.

11.

Principle of COMPARATIVE ADVANTAGE

Absolute advantage= a country has an absolute advantage over it trading partners if it is able to produce more of a good or service with the same amount of resources or the same amount of a good or service with fewer resources (copper, oil)

Comparative advantage (David Ricardo 1772-1823)= a country has a comparative advantage in the production of a good or service that it produces at a lower opportunity cost than its trading partners (relativity). = units of production (people/machines) will be employed in those processes in which they are relatively more productive (productivity)

Opportunity cost (John Stuart Mill)= is the value of the next-best choice available to someone who has picked between several mutually exclusive choices- opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, swag, pleasure or any other benefit

12.

Awareness of the GENERAL ENVIRONMENT – 2 levels of understanding

BROAD

= relevant to most companies

[includes economy, political, tech. world

and sociological issues]

SPECIFIC

= important to the individual business[includes customer / supplier relations,

investor requirements, workplace issues]

GLOBAL BUSINESS ENVIRONMENT

Factors at BROAD level of IB understanding – influences on the IB environment

POLITICAL

• Integration of LDCs and Centrally planned economiesinto INT economy

• Difficulties (& oppo) raised by econ.inequalities

• Role of OECD, WTO,World Bank, EU commiss.- direction of INT Trade & Investment

• Environmental concerns

ECONOMIC

• INT economic agreem.(liberalisated trade & capitalflows) => led to establishingREGIONAL ECONOMICGROUPINGS - 3 main trading blocks TRIAD

• GATT (1947-95) =>WTO 2 particular issues ofImportance for FUTURE:- Labour standards- Environmental issues

FACTORS with SIGNIFICANT INFLUENCES on IB (BROAD level of understanding IB)

13.TECHNOLOGICAL

• Economic cycles in 50 years waves:- Prosperity- Recession - Depression- Recovery

• INFROMATION &COMMUNICATION wave(1980/90’)- driven via NETWORKS(comps, tech based com.,production, control systems)

• TRANSPORTATION

TRIAD – 3 main world trading blocks

NAFTA

ASEAN

• North American Free Trade Agreement• USA, CANADA, MEXICO

• East & South-East ASIA• Indonesia, Malaysia, Philippines, Singapore and Thailand from 1967• Brunei, Burma (Myanmar), Cambodia, Laos and Vietnam

EU

• 27 countries

14.

NAFTA member states

• FREE TRADEAREA• From 1994

• Population:457 million

Density: 25.1/km2 

• GDP/capita:35,490 USD• Water 7.4%

TRIAD – NAFTA

15.

EU member states

• EconomicUNION

• GDP / capita:39.729 USD

• Population:- 501 million- density: 115.9/km2• Water 3.08%

TRIAD – EUROPEAN UNION

16.

ASEAN

• Free Trade Area

• GDP / capita:5,131 USD

• Population:- 600 million (8.8% of world population)- density: 135/km2

TRIAD – ASEAN

17.

Features / consideration:

– Dollar / Euro ZONE– Business Culture – Law enforcement– Business Barriers– Business threats / opportunities

WORLD BUSINESS

18.

Few challenges which will need to be faced by business if expanding their international operations:

• increased competition arising from a greater freedom of world trade

• changing distribution of economic activity across the globe

• acceptance of changes in corporate structures in order to match the strategic changes required to survive the global marketplace

WORLD BUSINESS CHALLENGES

19.

The interesting QUESTION [from an economic perspective]

is what the above means for the future:

• the 19th century was dominated by Great Britain and Europe as colonial powers

• the 20th century by the USA as the great economic power

• the 21st century will be controlled by Asia, and China in particular

WORLD BUSINESS possible PROSPECT

20.

21.

ECONOMIC INTEGRATION

21.

Free Trade Area:

Type of trade bloc, a designated group of countries that have agreed to eliminate tarrifs, quotas and preferences on most (if not all) goods and services traded between them.

It can be considered the 1st - 2nd stage of economic integration (Preferential trading area)

ECONOMIC INTEGRATION Description I.

22.

Customs union

Composed of a Free Trade area with a COMMON EXTERNAL TARIFF. The participants set up common external trade policy, but in some cases they use different import quotas.

Purposes for establishing a customs union normally include increasing econ. efficiency + establishing closer political and cultural ties between members

It is the 3rd stage of economic integration

ECONOMIC INTEGRATION Description II.

23.

Common / Single market

Economic union

A single market is a type of trade bloc which is composed of a FTA (for goods) with common policies on product regulation, and FREEDOM of MOVEMENTof the FACTORS OF PRODUCTION (capital, labour) and of enterprise and services.

The physical (borders), technical (standards) and fiscal (taxes) barriers among the member states are removed to the maximum extent possible. These barriers obstruct the freedom of movement of the four factors of production. To remove these barriers the member states need political will and they have to formulate common economic policies.

A common market is a first stage towards a single market, and may be limited initially to a free trade area with relatively free movement of capital and of services, but not so advanced in reduction of the rest of the trade barriers.

Type of trade bloc which is composed of a common market with a customs union.

The participant countries have both common policies on product regulation, freedom of movement of goods, services and the factors of production and a common external trade policy.

What is?

– when you trade something out of the country. In economics, an export is any good or commodity, transported from one country to another country in a legitimate fashion, typically for use in trade.

EXPORT

Why export is good

for economy / country?

Why export is good

for economy / country?

Why to aim to world

business territories?

Why to aim to world

business territories?

What is an emerging market?

– Emerging markets are nations with social or business activity in the process of rapid GROW and INDURSTRALIZATION.

– Currently, there are 28 emerging markets in the world, with the economies of CHINA and INDIA considered to be by far the two largest.

– The ASEAN–China Free Trade Area, launched on January 1, 2010, is the largest regional emerging market in the world.

– An emerging market economy (EME) is defined as an economy with low to middle per capita income. • Such countries constitute approximately 80% of the global

population, and represent about 20% of the world's economies. The term was coined in 1981 by the World Bank.

– One key characteristic of the EME is an increase in both local and foreign investment (portfolio and direct). A growth in investment in a country often indicates that the country has been able to build confidence in the local economy

EMERGING MARKETS

Special problems related to entering EM

– Lack of information (problematic data collection)

EMERGING MARKETS [EM]entering

EM’s market-potential analysis:– Market SIZE– Market INTENSITY – estimates wealth, buying

power– Market GROWTH rate – GDP, energy

consumption etc.– Market CONSUMPTION CAPACITY – spending

capacity (% of middle class, core of buying power)– Commercial INFRASTRUCTURE – chanels for

com./distrib.– Economic FREEDOM – free market principles

domination– Market RECEPTIVITY – market ‘openness’– Country RISK – of doing business

VIETNAM

• 80 million people• est. 1945 • division into 2 parts (Hanoi /

Saigon – Ho Chi Minh City)• Vietnam war 1963 – 73• Member of ASEAN• Elements of free trade

principles• Dynamically developing

VIETNAM

29.

• competitive advantage: persistence, hard-working, humility

• education – better avg.in south Asia (no illiteracy)• not developed country

but growing rapidly (7-8%)• relations (1/4 million of

V.studied in CZ – backbone of V.economy)

• bad infrastructure • no history and exp. in industry / engineering

• corruption• QM missing => low VA industries, no experience

• business culture (no long-term relations / businesses)• very low law enforcement• not fully liberalised envi

VIETNAM

+ -

Business doing

– Patience, long meetings / negotiations– No long contracts – chaos: changing mind,

no reliability in European understanding (effort to satisfy)

– No business drive in Euro perception (enq./offers – lengthy via email)

– Personal contacts necessary / local– No win-win (‘loss of face’ danger)– Business cards handling – ‘YES’ even if meant NO

VIETNAM

CHINA

32.

• hard-working • education – in towns and

industry areas• no-VA parts (or

normalised) very cheap• massive gov. investments

in infrastructure• railways net / HSR (but

due to industrialization too busy)

• rising prices• only large series /

payments in advance• control (necessity of Chinese citizen in the business) - not fully

liberalised envi• quality instability (no

sustainable Q)• fractionalism

• no ENVI issues / labour conditions

CHINA

+ -

Business doing

– Smiles not usual in business– Nepotism, preference of family members– Patience – time to succeed– Seniority respect – Double check of mutual understanding /

samples precision etc.– Contract – precision (parameters, samples

– signed etc.)

CHINA

TAIWAN

TAIWAN

– Republic of China– Capital: Taipei– Population: 23

million

- Density: 668 /km2

36.

• extremely hard-working • good knowledge of English

(EU/USA education)• industrial tradition (cca 30

years)• no-VA parts (or normalised)

very cheap• flexibility & professional

approach (enq./ sampling / quality)

• ISO norms not a formality• good infrastructure: airport /

HSR• fully free market

• raw materials import – dependence on China • changing EUR / USD • status manipulation +

pretending “made in Taiwan” (PRC reality)• frequent typhoons

(supplies postponing)

TAIWAN

+ -

Business doing

– Professional, very polite – Business cards handling– Quick response / sticking on agreed– Willingness to sort out the claims– No need to double-check understanding– In machine production – taking shoes off in

offices– Strong green teas at business meetings

TAIWAN

INDIA

INDIA

– Capital: New Delhi / largest: Mumbai

– Language: Hindi, English

– Population: 1,118,521,000

- Density: 361 /km2 - GDP per capita:

3,100 USD

40.

• good education, English

• bank sector highly developed

• large market with over 1mld. people / growing

purchasing power

• distinctive ability

• secluded economy (extremely high import

taxes)

• changing EUR / USD

• productivity

INDIA

+ -

Business doing

– English – Demanding negotiations, long

(several hours)– Half-truths common– Compromise necessary (Indian -

bargaining) + keep the positions (manipulation resistance)

– Agreements – sticking on

INDIA

INTERNATIONAL BUSINESS - BMCF / TM - winter term 2010

Thank you for your attention

Ing. Pavla Břečková, Ph.D.pavla.breckova@vsfs.cz