Globalization and International Business How Does Globalization affect International Business Global community is rich with information opportunities controversies and complications World population Billions people 7 9 World population is decreasing aging population fewer kids Global business bottom line developing and selling products and services to all 7 billion people 3 Largest nation China India United States Globalization involves the growing interdependence of the world s economies Year reached 2011 2043 Years to next level 13 18 Global business 1 Global foundation 2 Global engagement 3 Global cultural issues Personal Corporate globalization the increased mobility of goods services labor technology and capital throughout the world process of growing interdependence among elements of the global economy most correct array of choice access to source capital Global economy resources markets and competition are worldwide are worldwide in scope Globalization the process of growing interdependence Insourcing creation of domestic jobs by foreign employers Outsourcing shifts local jobs to foreign locations to take advantage of lower wage labor in other countries Globalization creates a variety of international business opportunities International business conducts commercial transactions across national boundaries Why business go Global 1 New Market Profit gain profits through expanded operations 2 Customers enter new markets to gain customers 3 Sourcing Suppliers get access t products services and materials 4 Financing Capital get access to financial resources capital any assets that you can deploy to grow business 5 Labor get access to low cost talented workers 6 Risk recession upturn natural disaster 7 Technology Economic development communicate data Integration Responsiveness Grid High Global Transnational r o f e r u s s e r P l a b o l G Low International Low multinational High Pressure for local responsiveness Two major pressure integration and responsiveness Integration physically be in other nation Responsiveness to alter or change product to local nee 1 Global Strategic terms invested and project in many countries coordinate brand image globally single corporate office strategy direction ex McDonald fast food company 2 International focusing on importing and exporting strategic direction from home country low to moderate investment inside of home country language can be adjusted ex Xerox 3 Multinational local contract rule you can be here from other country substantial investment other countries form on adopting products for local needs strategy more home host country directed ex Toyota 4 Transnational substantial investment globally decision making R D and marketing distributed locally competitors compete globally ex Nestle need to be everywhere adapt How Global business is done Ways to enter a market from the home country Global sourcing exporting licensing franchising From Home country Ways to enter a market in host country Joint ventures foreign subsidiaries 1 Global sourcing import play the sourcing of materials or services from around the world for local use Ex boeing company Boeing dreamline airplane global sourcing Advantage Lower cost Global learning Access to skills resources Increase supply Expand your capacity Disadvantage Hidden costs Supplier quality Risk financial political Lost intellectual property Transportation cost 2 Exporting 3 Licensing Selling local home country products outside of the home country Advantage Increase sales profit Stabilize business Gain market share Business expansion Disadvantage Logistics service issue Cultural knowledge Government tariffs and regulations Increased cost tax on importing good 4 EE buyers disadvantage Potential loss of control Damage the brand Getting paid in honestly Lower margin Form of business by which the owner incensor gives rights to a buyer for specific uses of intangible or tangible property a license Ors sellers Ex Disney and marvel tangible is mini figure intangible is watching movie advantage Low to no cost Royalty stream Extend profit potential Expand the brand Attracts new customers franchising form of business by which the owner franchiser OR of a product service or method obtains distribution through affiliated dealers ex Yum brand holds other brands ex KFC in china franchise agreement agree to make 5 Global franchising Disadvantages Advantages Capital expansion Quality control Continuing revenue stream Understanding local culture Legal regulation Global brand building Economies of scale Potential loss of control Managerial talent development Supply chain complexity Host Country 1 joint venture operating in a foreign country through co ownership with local partners regulated help to not make mistake ex GM SAIC first 50 50 but later 49 51 Advantage Access to new markets Leverage local talent Understand culture Shared risks May be only option Potential cost advantages lower regulation fee Ex FDI foreign directed investment Advantage Profit Market expansion Control Protects technology Disadvantage Loss of technology Sharing profits Imbalance in contribution Conflict cultural misunderstanding Political risk Disadvantage Cultural issue Legal risk Political risk 2 Subsidiary company A know as the parent fully or partially owns a local enterprise Ex budwiser horse and dog fireston japan etc Global sourcing is a common international business activity Global sourcing firms purchase materials manufacturing or services around the world for local use advantage of international wage gaps by contracting for low cost goods and services in foreign locations Mainstay and market entry approaches Global sourcing Exporting and importing Licensing and franchising Direct Investment Approaches Foreign Joint Venture Subsidiaries Increasing involvement in ownership and control of foreign operations Global supply chain network of a firm s outsourcing suppliers and contractors Problem work hours 62 worker safety 35 hazardous substance practices 32 Reshoring moves foreign production and jobs back to domestic locations Because of sketchy suppliers rising labor costs high transportation costs expensive energy better public relations Export Import licensing and franchising Exporting local products are sold abroad Importing is the process of acquiring products abroad and selling them in domestic markets Licensing one firm pays a fee for rights to make or sell another company s product grants access to a unique manufacturing
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