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Copyright @ Oxford University Press Copyright @ Oxford University Press International Business R. M. JoshiInternational Business R. M. Joshi

11

GLOBALIZATION GLOBALIZATION

ANDAND

INTERNATIONAL INTERNATIONAL

BUSINESSBUSINESS

Chapter 1


22

Learning ObjectivesLearning Objectives

To explain the concept of globalization To explain the concept of globalization

To elucidate factors influencing globalization To elucidate factors influencing globalization

To discuss global business expansion strategy for emerging To discuss global business expansion strategy for emerging

market companiesmarket companies

To explicate the concept of international businessTo explicate the concept of international business

To delineate motives for international business expansionTo delineate motives for international business expansion

To expound the strategy for managing business in the To expound the strategy for managing business in the

globalization eraglobalization era


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Globalization of Business: A Historical Perspective

In the initial years of human history, there were hardly

any formal barriers, such as tariffs or non-tariff

restrictions, for the movement of goods or visa

requirements for the people. The concept of

globalization can be traced back to the phenomenon of a

nation-state.


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Concept of GlobalizationConcept of Globalization

The process of integration and convergence of The process of integration and convergence of

economic, financial, cultural and political economic, financial, cultural and political

systems across the world.systems across the world.


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Globalization: A Holistic Approach Globalization: A Holistic Approach

Economic Globalization Economic Globalization

The increasing integration of national economic systems through The increasing integration of national economic systems through

growth in international trade, investment and capital flows.growth in international trade, investment and capital flows.

Financial Globalization Financial Globalization

The liberalization of capital movements and deregulations, The liberalization of capital movements and deregulations,

especially of financial services that led to a spurt in cross-border especially of financial services that led to a spurt in cross-border

capital flows.capital flows.


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Cultural GlobalizationCultural GlobalizationConvergence of cultures across the world.Convergence of cultures across the world.

Political GlobalizationPolitical Globalization

Convergence of political systems and processes around Convergence of political systems and processes around

the world. the world.


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Dimensions of Economic GlobalizationDimensions of Economic Globalization

Globalization of productionGlobalization of production

Globalization of marketsGlobalization of markets

Globalization of competitionGlobalization of competition

Globalization of technologyGlobalization of technology

Globalization of corporations and industries Globalization of corporations and industries


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Factors Influencing GlobalizationFactors Influencing Globalization


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Movers of GlobalizationMovers of Globalization Economic liberalization Economic liberalization

Technological breakthroughTechnological breakthrough

Multilateral institutionsMultilateral institutions

International economic integrationsInternational economic integrations

Move towards free marketing systemsMove towards free marketing systems

Rising research & development costs Rising research & development costs

Global expansion of business operationsGlobal expansion of business operations

Advents in logistics managementAdvents in logistics management

Emergence of the global customer segment Emergence of the global customer segment


1010

Factors Restraining GlobalizationFactors Restraining Globalization

Regulatory controlsRegulatory controls

Emerging trade barriersEmerging trade barriers

Cultural factorsCultural factors

NationalismNationalism

War and civil disturbancesWar and civil disturbances

Management myopiaManagement myopia


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Measuring Globalization Measuring Globalization

Trade OpennessTrade Openness

KOF Index of GlobalizationKOF Index of Globalization

A.T. Kearney/ Foreign Policy Globalization A.T. Kearney/ Foreign Policy Globalization

Index Index


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Reasons for Support of Globalization Reasons for Support of Globalization

Maximization of Economic EfficienciesMaximization of Economic Efficiencies

Enhancing TradeEnhancing Trade

Increased Cross-border Capital MovementIncreased Cross-border Capital Movement

Improves Efficiency of Local FirmsImproves Efficiency of Local Firms

Increases Consumer WelfareIncreases Consumer Welfare


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Criticism of GlobalizationCriticism of Globalization

Developed versus Developing Countries: Unequal Players in Developed versus Developing Countries: Unequal Players in Globalization:Globalization:

Widening Gap between the Rich and the PoorWidening Gap between the Rich and the Poor Wipes out Domestic IndustryWipes out Domestic Industry Leads to Unemployment and Mass Lay-offsLeads to Unemployment and Mass Lay-offs Brings in Balance of Payments ProblemsBrings in Balance of Payments Problems Increased instability of MarketsIncreased instability of Markets Diminishing Power of Nation States Diminishing Power of Nation States Loss of Cultural IdentityLoss of Cultural Identity Shift of Power to Multinationals Shift of Power to Multinationals


1414

Response Strategies to Globalization Forces for Response Strategies to Globalization Forces for Emerging Market CompaniesEmerging Market Companies

Defender Defender

ExtenderExtender

Dodger Dodger

Contender Contender


1515

Concept of International BusinessConcept of International Business

International Trade:International Trade: Exports of goods and services by a firm Exports of goods and services by a firm

to a foreign-based buyer (importer)to a foreign-based buyer (importer)

International MarketingInternational Marketing:: It focuses on the firm-level It focuses on the firm-level

marketing practices across the border, including market marketing practices across the border, including market

identification and targeting, entry mode selection, and identification and targeting, entry mode selection, and

marketing mix and strategic decisions to compete in marketing mix and strategic decisions to compete in

international markets.international markets.


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International Investments: International Investments: Cross-border transfer of Cross-border transfer of

resources to carry out business activities.resources to carry out business activities.

International ManagementInternational Management:: Application of management Application of management

concepts and techniques in a cross-country environment and concepts and techniques in a cross-country environment and

adaptation to different social-cultural, economic, legal, adaptation to different social-cultural, economic, legal,

political and technological environments.political and technological environments.


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International Business: International Business: All those business activities which All those business activities which

involves cross border transactions of goods, services, and involves cross border transactions of goods, services, and

resources between two or more nations resources between two or more nations

Global BusinessGlobal Business:: Conduct of business activities in several Conduct of business activities in several

countries using a highly co-ordinated and single strategy countries using a highly co-ordinated and single strategy

across the world.across the world.


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Reasons for International Business Reasons for International Business ExpansionExpansion

Market-Seeking MotivesMarket-Seeking Motives

• Marketing opportunities due to life cyclesMarketing opportunities due to life cycles

• Uniqueness of product or serviceUniqueness of product or service

Economic MotivesEconomic Motives

• Profitability Profitability

• Achieving economies of scaleAchieving economies of scale

• Spreading R&D costsSpreading R&D costs

Strategic MotivesStrategic Motives

• Growth Growth

• Risk spread Risk spread


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Differences Between Domestic and Differences Between Domestic and International BusinessInternational Business

Economic EnvironmentEconomic Environment

Socio-Cultural Environment Socio-Cultural Environment

Legal EnvironmentLegal Environment

Political Environment Political Environment

Competition Competition

InfrastructureInfrastructure

Technology Technology


2020

Managing Business in the Globalization Era

Global strategies adopted by business enterprises may include:

• Global conception of markets

•Multi-regional integration strategy

•Changes in external organisation of multinational firms

•Changes in internal organisation

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