chapter 1 intenational business economy
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Regional and global strategy
Chapter 1
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Slide 1.2
Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Regional and global strategy
Objectives
Introduction
World business: a brief overview
Todays international environment Globalization and strategic management
The study of international business
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Slide 1.!
Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Objectives
Defnethe terms international business andMNE.
Discuss thetwo "rimary ways in whichinternational business occurs: trade and #I$
Examinethe im"act of the triad oninternational trade and investment$
Describe the current state of world economiesand the role of government and traderegulations in the conduct of international
business$ Discuss the im"ortance of technology and the
role of %&'s in the international businessarena$
Examine how &('s use triad)regionalstrategies to com"ete e*ectively in the
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Introduction
International business:the study oftransactions ta!ing "lace across nationalborders for the "ur"ose of satisfying theneeds of individuals and organizations$
Multinational enterprises (MNEs):acom"any head+uartered in one country buthaving o"erations in other countries$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
World business: a brief overview
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
&ost &(' activity can be classi,ed into twomajor categories:-./ Trade -e0"orts and im"orts/: &ore than
123 of all trade is made by the worlds largest
122 &('s$-4/ oreign direct investment -#I/: 523 of all#I is made by the worlds largest 122 &('s$
MNE activity
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Trade and investment
Tradeconsists of e0"orts and im"orts: Exports:goods and services "roduced in
one country and then sent to anothercountry$
Imports:goods and services "roduced inone country and bought in another country$
Foreign Investment:consists ofcom"anies investing funds to start orim"rove o"erations in another country$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Table .$. World Trade6 4221(ote: #ata for 'uro"ean 7nion include intra8'7 trade$ '0"orts are calculated by including freight and insurance while im"orts do notinclude freight and insurance$ 9s a result data might not be consistent with other data in this boo!
Source: 9da"ted from International &onetary und6 Direction o Trade Statistics Yearbook, 2006 -Washington6 #: I&6 422;/6 ""$ 4
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Table .$4 Intra8regional trade in the triad6 .=52
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Table .$@a oreign direct investment in the 7nited %tates6 4221
(ote: #ata are on a historical8cost basis$ (umbers might not add u" due to rounding
Sources: 9uthors calculations and 7% #e"artment of ommerce6 Sur$e% o &urrent 'usiness6 >une 422A6 "$ #;A
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
&a'le 1.!' (oreign direct in)estment '* the +nited States, 2005ote- ata are on a historical/cost 'asis. um'ers might not add u due to rounding
Sources- Authors calculations and +S eartment o Commerce, Survey of Current Business, 3une 200$, . #5
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
The triad
&ost global transactions ta!e "lace withinand between three !ey regions: the 7nited%tates6 the 'uro"ean 7nion and >a"anBthese are referred to as: the Ctriad$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
The triad: the 7nited %tates -7%/
The 7% has the largest economy in theworld with a G#D of over E.2 trillion$
The 7% is "art of the (orth 9merican reeTrade 9greement -(9T9/ with anada and
&e0ico$
The 7% economy is signi,cantly larger thanthat of its two trading "artners and is
therefore a triad member on its own$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
The triad: the 'uro"ean 7nion -'7/
The '7 -or '74A/ is com"osed of thecountries in the '7.1 -9ustria6 Felgium6#enmar!6 inland6 Germany6 Greece6rance6 Ireland6 Italy6 u0embourg6 the
(etherlands6 Dortugal6 %"ain6 %weden6 andthe 7?/ and twelve new6 mainly entral'uro"ean6 countries that joined in 422H and422A$
The collective G#D of the '7 is greater thanthat of the 7% and >a"an$
The '74A is the worlds largest im"orter and
e0"orter$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
The triad: >a"an
>a"an is the largest economy in 9sia$ >a"an is the Hth largest im"orter and Hth
largest e0"orter in the world$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Todays international environment
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
The international business environment haschanged ra"idly in recent years as a resultof:
an overall slowdown of triad economiesB
increased trade liberalization through tradeagreementsB
im"rovements in technologyB
the emergence of %&'s$
International business environment
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
%lowdown of triad economies
In the late .==2s and early 4222s6 the7nited %tates6 the '7 and >a"an alle0"erienced a reduction in economicactivity6 which in turn decreased
international business activity$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
International trade regulation
9n im"ortant international business trendhas been the emergence of regional andglobal trade and investment liberalizationand international regulation$
The World Trade Organization -WTO/$ General 9greement on Tari*s and Trade
-G9TT/$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
The world trade organization
'stablished on >anuary .6 .==1$ 9n international organization that deals with
rules of trade among member countries$
'nforces the "rovisions of the General9greement on Tari*s and Trade -G9TT/$
9cts as a dis"ute8settlement mechanism$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
The general agreementon tari*s and trade -G9TT/
'stablished in .=HA to liberalize trade andto negotiate trade concessions amongmember countries$
Today6 the WTO is enforcing the "rovisionsof the G9TT$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Im"roved technology
&ore "owerful and a*ordable technologyhas "romoted fast easy worldwidecommunication and im"roved "roductionca"abilities enabling organizations to
o"erate more e*ectively in theinternational mar!et"lace$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
%mall and medium8sizedenter"rises -%&'s/
The de,nition of %&'s varies according tothe nation$ In general6 it refers to com"anieswith between .. and 122 em"loyees withsales of less than E1 million$
&('s often "urchase from %&'s$ This isbecause their s"ecialized wor!forces6innovation and technology allows %&'s to
"rovide goods and services more ecientlythan if the &(' were to source theseinternally$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Globalization and strategicmanagement
Regional triad strategies
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
&isconce"tions about &('s
ommon misconce(tionsabout &('s: &('s have far8Jung o"erations or earn most
of their revenues overseas$
&('s are globally monolithic and e0cessively
"owerful in "olitical terms$ &('s "roduce homogeneous "roducts for
the world mar!et and through their ecient
techni+ues are able to dominate local
mar!ets everywhere$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
)n act6 &('s earn most of their revenues in their
home regions$
The largest 122 &('s are not s"read around
the world but clustered around the triad$ These &('s engage not in global
com"etition but in triad)regionalcom"etitionB this rivalry e*ectively
eliminates enduring "olitical advantage$ &('s ada"t their "roducts for the local
mar!et$
&isconce"tions about &('s -ontinued/
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Globalization and strategic
management
Maintaining economic competitiveness
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
Dorters determinants ofnational com"etitive advantage
Why are some ,rms able to innovateconsistently while others are notK
actor conditions
#emand conditions
Related and su""orting industries
irm strategy6 structure6 and rivalry$
'ach of these determinants de"ends on the
others as a system$
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
From general to strategic emphasis
The study o international business
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Alan M Rugman and Simon Collinson, International Business,5thEdition, Pearson Education Limited 200
&a'le 1." Comarati)e dierences in the stud* o international 'usiness, 15042010
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Frame!or" or this boo"
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(igure 1.1 Model or this 'oo