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BUSS 3103
International Business Environments
Lecture 2
Globalisation & Internationalisation
• Educating Professionals • Creating and Applying Knowledge • Engaging our Communities
Recap
Globalisation and Internationalisation
Drivers of globalisation
Dimensions of globalisation
Societal consequences of globalisation
Firm-level consequences of globalisation
Review
1
4
Can you recall these?
a. key concepts
b. four major risks of international business
c. participants in international business
d. reasons for internationalisation
e. benefits of studying international business
Key Concepts
• Internationalisation vs. Globalisation
• International trade vs. International investment
• Exporting vs. Importing
• International portfolio investment vs. Foreign direct
investment
2
Four Risks
Types of Participants (cont’d)
government
Focal firms
8
consumers
Reasons for Internationalisation
• Seek opportunities.
• Earn higher margins and profits.
• Better serve key customers.
• Gain new ideas.
• Be closer to supply sources and production
factors.
• Economies of scale.
• International competitors.
• Rewarding relationship.
3
Globalisation & Internationalisation 10
10
What will you learn?
• Introduction of International Business (Ch.1)
• Globalisation and Internationalization (Ch.2)
• Cultural Issues in International Business (Ch.3)
• International Trade and Investment (Ch.5)
• Political and Legal Systems (Ch.6)
• Government and Regional Integration (Ch.7)
• Emerging Markets (Ch.8)
• Global Strategic Structure (Ch.11)
• International Entry Strategies (Ch.13~15)
• Contemporary Research in IB & Course Revision
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Concepts
• Internationalisation • Globalisation
the tendency of a macro-trend of intense
companies economic interconnectedness
systematically to between countries. It is
increase the associated with the
international internationalisation of countless
dimension of their firms, and with dramatic growth
business activities in the volume and variety of
cross-border transactions in
goods, services and capital
flows. It has also led to
widespread diffusion of
products, technology and
knowledge worldwide.
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13
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5
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Suppliers and Customers of
Boeing Company
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Globalisation
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Learning Objectives
1. Drivers of globalisation
2. Dimensions of globalisation
3. Firm-level consequences of globalisation
4. Societal consequences of globalisation
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2.1. Drivers of Globalisation
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2.1. Drivers of Globalisation (cont’d)
• Worldwide reduction of barriers to trade
and investment (e.g., WTO, EU)
2-21
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7
2.1. Drivers of Globalisation (cont’d)
• Market liberalisation and adoption of free
markets (e.g., marketization in India).
• Following independence from Britain in 1947, adopted a
quasi-socialist model of isolationism and government
control.
• High trade barriers, state intervention, a large public
sector, and central planning resulted in poor economic
performance.
• In the 1990s, markets opened to foreign trade and
investment; state enterprises were privatized.
• Protectionism has declined, but high tariffs
(averaging 20%) and FDI limitations remain.
2-22
Fast Growth of Indian Economy (GDP)
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2.1. Drivers of Globalisation (cont’d)
• Industrialisation, economic development and
modernization (e.g., Asia, Latin America, Eastern
Europe).
2-24
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2.1. Drivers of Globalisation (cont’d)
• Integration of world financial markets
2-25
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8
2.1. Drivers of Globalisation (cont’d)
• Advances in technology.
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2.1. Drivers of Globalisation (cont’d)
• Advances in technology
– Digital technologies
– Communication and Internet
– Manufacturing and transportation
2-27
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Scenario
• Global Operations Report.
As Vice President of Global Expansion for Pax Telecom,
Michael Eckstein is tasked with preparing a comprehensive
report on the company’s global operations over the past 20
years. Michael assigns three strategists to collaborate on the
History portion of the report, which details the rationale
behind Pax’s decisions to expand operations in particular
areas. Rashid Ahl focuses on early expansion to China,
which occurred after China began to make its market more
accessible to foreign companies. Markus Teller focuses on
Pax’s expansion to Eastern Europe, which was motivated by
increased industry privatisation in key countries. Lavonne
Jackson focuses on expansion to Japan, which happened
when the company’s commercial bank expanded its service
network to Asia. 28
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9
Scenario (cont’d)
• In describing the main driver behind Pax’s
expansion to China, Rashid most likely
emphasises ________.
a. high rate of employee attrition in China
b. advances in technology
c. reduction of barriers to trade
d. integration of world financial markets
Answer: C
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Scenario (cont’d)
• Which of the following drivers of market
globalisation does Markus most likely cite as
responsible for the company’s expansion to
Eastern Europe?
a. advances in technology
b. integration of world financial markets
c. market liberalisation
d. industrialisation
Answer: C
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30
Scenario (cont’d)
• Which of the following drivers of market
globalization is Lavonne's research most likely to
recognize as the factor responsible for the
company's expansion to Japan?
a. integration of world financial markets
b. the highly conservative nature of the Japanese
economy
c. the rise of monopoly markets in Japan
d. reduction of barriers to investment
Answer: A
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10
2.1. Drivers of Globalisation (cont’d)
- Long history
How Homo
Sapiens
Fragmented into
Many Tribes
(Archaeology)
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2.1. Drivers of Globalisation (cont’d)
- Rising skepticism
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2.1. Drivers of Globalisation (cont’d)
• Anti-globalisation movement
– e.g., Cultural angst
2-34
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2.1. Drivers of Globalisation (cont’d)
• Anti-globalisation movement
2-35
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A Video Scenario: Global Trade Without U.S.
Leadership. Does Donald Trump Care?
2-36
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A Video Case: Global Trade Without U.S.
Leadership. Does Donald Trump Care?
1. Why does Donald Trump feel his policy
will benefit American companies and
American workers?
2. Why did Prime Minister Justin Trudeau
and Prime Minister Narenda Modi call on
Donald Trump to re-evaluate his outlook on
globalisation and trade?
2-37
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12
2.1. Drivers of Globalisation (cont’d)
• Is globalisation in retreat? No!
e.g., China’s “Belt and Road Initiative”
e.g., Australia-Japan-India Trilateral
2-40
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2.2. Dimensions of Globalisation
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2.2. Dimensions of Globalisation (cont’d)
• Integration and interdependence of national
economies (e.g., multi-country operations, global
value chain).
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2.2. Dimensions of Globalisation (cont’d)
• Regional economic integration blocs.
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2.2. Dimensions of Globalisation (cont’d)
• Global investment and financial flows.
2-44
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2.2. Dimensions of Globalisation (cont’d)
• Convergence of consumer lifestyles and
preferences.
2-45
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2.2. Dimensions of Globalisation (cont’d)
• Globalisation of production
(Intel’s global manufacturing)
2-46
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2.2. Dimensions of Globalisation (cont’d)
• Globalisation of services
• Globalisation of services.
2-47
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2.3. Firm-level Consequences
48
15
Scenario
• Acme Software
Acme Software is a U.S.-based maker of software products
for the health care industry. Recently Acme has been
investigating whether it would be beneficial to internationalize
some of its value-chain activities. Acme hires a consulting group
to help determine which, if any, value-chain activities could be
conducted abroad to promote business growth. The consulting
group identifies two health care software development
companies in India that could provide programming services at
a lower cost than Acme's current expenditures for programming.
In addition, the consultants conduct international market
research which shows that German health care companies have
a strong demand for the type of software that Acme offers.
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Scenario (cont’d)
• Which of the following activities in Acme's value
chain would be internationalized if Acme decides
to establish a development contract with one of
the Indian software firms?
a. sales
b. distribution
c. marketing
d. procurement
Answer: D
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Scenario (cont’d)
• Which of the following would be most important for
Acme to determine before outsourcing its
programming services to India?
a. What benefits have Indian companies gained historically
from internationalizing their value-chain activities?
b. Do Indian businesses outsource value-chain activities to
Europe?
c. Would the lower cost of outsourcing allow Acme to sustain a
competitive advantage in its business operations?
d. Is either of the Indian health care companies interested in
moving their operations abroad?
Answer: C
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51
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Scenario (cont’d)
• Which of the following would be most important
for the consulting group to consider when
deciding whether to recommend that Acme
internationalize its sales efforts to Germany?
a. Will Acme save money on advertising by targeting small
rather than large companies?
b. How intense is the competition from German companies
offering similar products?
c. What type of training is received by programmers in
software firms abroad?
d. Is employee empowerment culturally favoured in
Germany?
Answer: B 52
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2.3. Firm-level Consequences (cont’d)
• Opportunities and Risks
2-53
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2.3. Firm-level Consequences (cont’d)
• Demanding buyers & Proactive internationalisation
2-54
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2.3. Firm-level Consequences (cont’d)
• Internationalised value chains
2-55
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2.4. Societal Consequences
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2.4. Societal Consequences (cont’d)
• Rapid spread of crises
2-57
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2.4. Societal Consequences (cont’d)
• Loss of (effects on) national sovereignty
- Only 14 countries have
annual GDP figures greater
than Apple's market cap,
which is just below the $1.4
trillion GDPs each for
Australia and Spain.
- The nations with GDP
figures immediately below
$1.3 trillion are Mexico,
Indonesia, The Netherlands,
Saudi Arabia, Turkey, and
Switzerland. (Investopedia
2018)
2-58
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2.4. Societal Consequences (cont’d)
• Offshoring and the flight of jobs
2-59
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2.4. Societal Consequences (cont’d)
• Offshoring and the flight of jobs
– Job Losses? It is not totally true due to productivity.
2-60
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2.4. Societal Consequences (cont’d)
• Fragmentation of the new media landscape and
erosion of trust in institutions
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2.4. Societal Consequences (cont’d)
• Effects on the poor: The poor becomes
poorer.
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2.4. Societal Consequences (cont’d)
• Effects on the natural environment
2-63
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2.4. Societal Consequences (cont’d)
• Effects on the national culture
2-64
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2.4. Societal Consequences (cont’d)
“Do not blame globalization. It is a
symptom, and not the cause, of the
introspection convulsing some western
societies groping for the right balance
between work and leisure in lifestyle, as
well as between the competing claims
of consumerism, corporate interests,
and social justice.”
--- Farok J. Contractor
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Globalisation
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Do you get some ideas about
Globalisation? 68
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Do you understand these?
a. drivers of globalization
b. dimensions of globalization
c. firm-level consequences of globalisation
d. societal consequences of globalisation
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Tutorial in this Week
• In tutorial
– Video case discussion: “Adidas: Keep
Running in Post-COVID”
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Next Week
• In lecture
– “Cultural Issues in International
Business”
• In tutorial
– Case study: “Amazon India Launces
Hindi App and Website”
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Attendance Record
• Please say “Hello” in the chat box as shown below:
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Comments & Questions?
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