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ecture 1ecture 1GLOBALIZATIONLOBALIZATIONInternational Business BUSI
2490
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Objectivesbjectivesq Define International
Business
q Define Globalization
q ExamineGlobalizationAreas; Drivers;
Reasons
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Businessusinessq Definition: ANY COMMERCIAL
TRANSACTIONTHAT CROSSES THE
BORDERS OF TWO(OR MORE)COUNTRIES
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qObjects?Goods Consumer & Industrialgoods
Services Large varietyInvisibles Intellectual
property (licensing,
franchising), ManagementServices, Tourism,
Transportation
Financing Lending & Borrowing
usiness cont d
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nternational Business cont d nternational Business cont d
q Differences fromdomestic
business ?Legal-political,economic, social-
cultural,technological
Complexity, Size
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nternational Businessnternational Business ont dont dq It involves us all! HOW? Imports are the source of things
we use (toys, education,infrastructure)
Foreign markets (i.e., exports)are essential for our economicwellbeing
Companies we work for havesignificant internationalbusiness activities
We determine government
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ACTIVITIESCTIVITIES
q Exportq ImportqInternational Trade - for use or resaleqOriginating in North Africa Middle East
2000 B.C.
qInternational Investments(originating during colonialism)
qFDI controlling assets, propertyor companies in a host country
qPortfolio investments purchasing financial assets (notfor control)
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ASIC ACTIVITIESASIC ACTIVITIES ont dont d
qGlobal Financial Services IndustryqBanking, Securities, Insurance, Credit
cards, etc.
qSpecial, modern activitiesqLicensing intellectual property for
royaltyqFranchising know-how, logos, brand
names, etc. for royalty
qManagement contracts operatingfacilities for a feeqOutsourcing performing a business
function for a fee
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Copyright 2010 Pearson Education, Inc. publishing as Prentice HallInternational Business 5e Chapter 1 - 9
FactsFacts of Small Biz Exportingof Small Biz Exporting
ost exportersost exportershaveaveewer than 50ewer than 50employeesmployeesomprehensiveomprehensive
elpelps availables available
ost products doost products donototeed an exporteed an exportlicenseicensexport financingxport financings availables available
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Globalizationlobalization
qGlobalization is an ever
increasing relationship andinterdependency betweenentities of various countries,encompassing:
qBusinesses,qAll types of organizationsqGovernmentsqPeople
in many areas of humandevelopment:qEconomic including financialqSocial and culturalqPolitical and legalqTechnological and operational
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eas o eas oGlobalizationlobalizationq
q
q Globalization of Marketsq
q Globalization of Productionqq Globalization of Consumers
qq Globalization of Financingq
Itappliestol
arge
organiza
tionsand
SMEs
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ont dont dq
qGlobalization of MarketsqConsumer goodsqe.g., credit cards, burgersqnot prevalent, still maintaining
national characteristicsqIndustrial goods
qmost global markets
qraw materials; aircraft;computer software &hardware; financialinstruments
q
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q
qGlobalization ofProductionqseeking competitive
advantageqCost & Quality
qfor factors ofproductionqLabour , Energy,
Land, Capital,
Expertise
eas o o a za on ont d
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qGlobalization of Consumersqcommunicationtechnology providesorganizations consumersfrom any place on earth
qtastes, habits,preferences of
consumers have becomemore and more similar
qtechnology has created a
well informed global
ont d
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GlobalizationlobalizationqGlobal InstitutionsqDeclining (or removal
of) Trade and
Investment BarriersqTechnological Changeq
Otherq
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GlobalizationlobalizationqGlobal InstitutionsqGATT to reduce trade
barriers
qWTO to police the worldtrade system
qIMF to maintain order inthe international monetarysystem
qThe World Bank toromote economic
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GlobalizationlobalizationqDeclining/removal ofTrade and Investment
Barriers through
qmultilateral agreementson the free flow ofgoods, services & capital
qregional & bilateralagreements on cross-border trade and
resource movement
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GlobalizationlobalizationqTechnological ChangeqTransportation
qCommunications
qInformation processing
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Globalizationlobalizationq
OtherqPolitical changesqEmergence of mini-
Multinationals
qThe effects of expandingFDI
qDevelopment of servicesdedicated to the globalbusiness
qEver increasing
competition
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re Globalization and re Globalization and nternational Business one andnternational Business one andhe same phenomenon?he same phenomenon?
qInternational Business andGlobalization influence andfacilitate each othersevolution
Internationalbu
sinessisabout
internationaliz
ation
Globalizationisabou
tgreater
interdependenc
eamongnations&
economies(de
nationalization
)
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GlobalizationlobalizationqTo decrease cost, improve quality and
increase productivity e.g., by avoidingcostly and risky transportation systemsand using less costly inputs
qTo obtain new markets and reduce marketing
costs (Bombardier)qTo acquire inputs, resources and expertise(Mittal)
qTo access information
qTo leverage core competencies (banks)qTo minimize risks (level income streams,
complement business cycles from market tomarket)
qTo become more competitive including by- -
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Globalizationlobalization Globalization Costs Jobs &Lowers Wages
new jobs in host country =
lost jobs in home countryv Globalization Creates Jobsand Boosts Wagesvefficiencies create
savings, new investments& wealth
qv
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Globalization Has a NegativeImpact on Labour andEnvironmental Regulationsfirms move to countries with low
labour and environmental
standardsv Globalization brings positiveinfluences to Labour &Environmental regulations
vthere is evidence contradictingthe critics claims regardinglabour standards, including newlabour legislation adopted bymany emerging markets
vgovernments of emerging nations
Globalization
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Copyright 2010 Pearson Education, Inc. publishing as Prentice HallInternational Business 5e Chapter 1 - 25
Labor, Environment, &Labor, Environment, &MarketsMarkets
Globalization lowerslabor standards
Weakens protection ofthe environment
Exploits workers inpoor nations
+ Investment raiseslabor standards
+ Open economies mostenvironment friendly
+ Companies concernedfor future markets
Opponents Supporters
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Globalization is a threat toDemocracy and NationalSovereigntySupranational institutions
with appointed officialsdictate the actions ofsovereign nations
v Globalization has helped theworldwide spread of democracyvmore democracies than evervsometimes, the loss of
sovereignty (e.g., in
Globalization
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Copyright 2010 Pearson Education, Inc. publishing as Prentice HallInternational Business 5e Chapter 1 - 27
National SovereigntyNational Sovereignty
SupportersSupporters
Globalization hasGlobalization hasbenefited societies bybenefited societies by
helping to spreadhelping to spreaddemocracy worldwidedemocracy worldwide
OpponentsOpponents
SupranationalSupranationalinstitutions reduceinstitutions reduce
autonomy of national,autonomy of national,
regional, and localregional, and localgovernmentsgovernments
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Globalization has a negativeimpact on cultureCultural diversity is
destroyed and smalllocal business is wipedout
vGlobalization protects thedeep moral and culturalnorms, allows countries toexport their cultural goods
and to trade for goods that
Globalization
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Copyright 2010 Pearson Education, Inc. publishing as Prentice HallInternational Business 5e Chapter 1 - 29
Impact on CultureImpact on Culture
Opponents
Destroys culturaldiversity
Homogenizes ourworld
Bankrupts localsmall businesses
Supporters
Specialize and tradeto obtain othergoods
Import cultural
goods from othernations
Protects deepermoral and cultural
norms
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Globalization leads to a highcosts for economic growth andincome inequality
vGlobalization - a major reason for theunprecedented economic growthworldwidevhigh costs - temporary; investments =
huge benefits
vexpanding middle-classes and highstandard of livingvincome inequality is influenced more by
technology and politics than globalizationvcountries open to trade and investment
grow faster
Globalization
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Copyright 2010 Pearson Education, Inc. publishing as Prentice HallInternational Business 5e Chapter 1 - 31
Income InequalityIncome Inequality
debatedebateInequality within nationsPoor people in developingnations benefit most from
an open economy
Inequality between nationsNations open to world tradeand investment grow faster
than rich nations
Global inequality
Inequality has fallen, butexperts disagree on theextent of the decline
Income Inequa lit yIncome Inequa lit y
3
1
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ecap ofecap ofObjectivesbjectivesq Define International
Business
q Define Globalization
q ExamineGlobalizationAreas, Drivers &
Reasons
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Objectivesbjectives
q Examine some definitions ofculture
q Identify components of culture
q Discuss two frameworks forclassifying cultureq Evaluate implications of
cultural differences forinternational businessmanagement
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Prentice Hall, 2008 International Business 4e Chapter 2 - 35
What Is Culture?What Is Culture?
Set ofvalues, beliefs, rules, and
institutions held by a specificgroup of people
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ore definitionsore definitionsq CULTURE (Diana Kendall, et al, Sociology in ourtimes, 3ce)
qthe knowledge,language, values,
customs and materialobjects that are passedfrom person to personand from one generation
to the next in a humangroup of society;qin other words: ideas,
behaviour ANDmaterialpossessions common to a
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ore definitionsore definitionsq
qCULTURE = Tradition (collectiveprogramming of the mind) making the members of one groupdistinct from others.
qCulture is a societys (or a groups)
system of shared and learnedvalues and norms; as a whole,these VALUESand NORMSarethe societys (or the groups)design for living
qqValues: abstract ideas about the
good, the right, the desirableqNorms: social rules and guidelines;
determine appropriate behaviourin s ecific situations
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Prentice Hall, 2008 International Business 4e Chapter 2 - 38
Components of CultureComponents of Culture
Physicalenvironme
nts
Education
Personalcommunic
ationReligion
Socialstructure
Manners &customs
Values &attitudes
Aesthetics
CultuCulturere
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Prentice Hall, 2008 International Business 4e Chapter 2 - 39
AestheticsAesthetics
Music
Painting
Dance
Drama
Architecture
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Prentice Hall, 2008 International Business 4e Chapter 2 - 40
Values and AttitudesValues and Attitudes
ValuesValuesValuesValues AttitudesAttitudesAttitudesAttitudes
Positive or negativePositive or negative
evaluations, feelings, andevaluations, feelings, andtendencies people holdtendencies people holdtoward objects or conceptstoward objects or concepts
The ideas, beliefs, andThe ideas, beliefs, andcustoms to whichcustoms to whichpeople are emotionallypeople are emotionallyattachedattached
FreedomFreedom ResponsibilityResponsibility
HonestyHonesty
TimeTime WorkWork
Cultural changeCultural change
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Prentice Hall, 2008 International Business 4e Chapter 2 - 41
Manners and CustomsManners and Customs
MannersAppropriate behavior,
speech, and dressing in
general
CustomsTraditional ways or behavior
in specific circumstances
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Prentice Hall, 2008 International Business 4e Chapter 2 - 42
PhysicalPhysicalandandMaterial CultureMaterial Culture
These influence a cultures development and pace of change
TopographyPhysical features characterizing the surface of a geographic region
Climate
Weather conditions of a geographic region
Material CultureTechnology used to manufacture goods and provide services
INFLUENCEON:
Agri-foodproductio
n&
consumption
Houseconstruction&living
conditions
Transportation
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Prentice Hall, 2008 International Business 4e Chapter 2 - 43
Social StructureSocial Structure
Social structureCultures groups, institutions, socialpositions, and resource distribution
Social stratificationProcess of ranking people into social layers
Social mobilityEase of moving up or down a culture's
"social ladder"
Slide
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McGraw-Hill Ryerson 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Social Structure and Culture
TWO MAIN CRITERIA TO COMPARECULTURES whether the unit of social organization is the
individual or the group
the degree to which a society is stratifiedinto classes or castes
3-3
Slide
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McGraw-Hill Ryerson 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Business implications of Individual vs.Group Societal Characteristics
Individual Managerial
mobilitybetween
companies Economic
dynamism,innovation
Good general
skills Teamwork difficult,
non-collaborative
Exposure todifferent ways
Group Loyalty and
commitment tocompany
In-depth knowledgeof company
Specialist skills
Easy to build teams,collaboration
Emotionalidentification withgroup or company
e.g., Japanese
companies
3-4
Slide
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McGraw-Hill Ryerson 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Social StratificationFamily Background, Occupation, Income
Social Mobility Caste system
Positiondetermined by
family Change not
usually possible
Class system
Position at birthcan be changedby luck orachievements
Significance Class
consciousness
Relationshipsare based onclassbackgrounds
Mutual
antagonismeven hostility
Raises cost ofdoingbusiness
3-4
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ore on Social Classore on Social Classi.a.w. the relationto
Means of
Production(KarlMarx):
qCAPITALISTS- own & controlthe means ofproduction;
achieve wealththrough capital
qWORKINGCLASS
(PROLETARIAT) own and sell
u ltid im e n sio n a lp p ro a ch to so cia lstra tifica tio n ( )ax Weber
qW E A LT HqP O W E RqP R E S T IG E :x a m p le o f cla sse s
U p p e r ( - , -upper upper lower)u p p e r
M id d le ( - ,upper middle lower)middle
Working class Working poor
Underclass
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Prentice Hall, 2008 International Business 4e Chapter 2 - 48
World ReligionsWorld Religions
ChristianityIslamHinduismBuddhismConfucianismJudaismShinto Origin ofOrigin of
Human ValuesHuman ValuesOrigin ofOrigin of
Human ValuesHuman Values
C
Slide3 5
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McGraw-Hill Ryerson 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Religion, Ethics, and Culture
Religion = system ofshared beliefs about the sacred
Ethical systems = moral principles or values thatshape & guide behaviour; often, products ofreligion
Economic characteristics of major religious groups:
Christianity - Protestant work ethic
Islam similar principles with those inJudaism and Christianity
Hinduism - anti-materialistic, sociallystratified
Buddhism - anti-materialistic, socialequality
Confucianism - hierarchy, loyalty, honesty Shinto loyalty, respect, enjoyment of life
All have significant sub-sets with distinct beliefs and
3-5
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Prentice Hall, 2008 International Business 4e Chapter 2 - 50
EducationEducation
Cultures pass on traditions, customs, and values throughschooling, parenting, group memberships, etc.
Education level
Well-educated attract high-paying jobs, while poorly educatedattract low-paying manufacturing jobs
Brain drainDeparture of highly educated people from one profession,
geographic region, or nation to another
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ayers of Cultureayers of CultureqLayers
qValues, Rituals, Heroes, Symbols =>Practices
qLevels of layers*qNational level the nation as a
wholeqRegional level ethnic, linguistic,
religious differences within anation
qGender level female vs. maleqGeneration level parents &
children, parents & grandparents
qSocial class level differences in
occupation, educational* Source: www.tamu.edu/classes/cosc/choudhury/culture.html
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Prentice Hall, 2008 International Business 4e Chapter 2 - 52
Cultural LiteracyCultural LiteracyDetailed knowledge of a culture that enables
a person to function effectively within it
PolycentrismAdapt to the
local culture
Ethnocentrism
Belief that ones own ethnicgroup or culture is superior
to that of others
XXGeocentric Approach
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lassifyinglassifyingCulturesultures
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Copyright 2010 Pearson Education, Inc. publishing as Prentice HallInternational Business 5e Chapter 2 - 55
Hofstede FrameworkHofstede Framework
IndividualismIndividualism
vs. collectivismvs. collectivism
IndividualismIndividualismvs. collectivismvs. collectivism
Power distancePower distanceAccepting socialAccepting social
inequalityinequality
Power distancePower distanceAccepting socialAccepting social
inequalityinequality
UncertaintyUncertaintyavoidanceavoidance
UncertaintyUncertaintyavoidanceavoidance
AchievementAchievementvs. nurturingvs. nurturing
AchievementAchievementvs. nurturingvs. nurturing
Long-termLong-termorientationorientationLong-termLong-termorientationorientation
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Prentice Hall, 2008 International Business 4e Chapter 2 - 56
Power Distance &Power Distance &Individualism vs. CollectivismIndividualism vs. Collectivism
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Prentice Hall, 2008 International Business 4e Chapter 2 - 57
Power Distance & UncertaintyPower Distance & UncertaintyAvoidanceAvoidance
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ooking forwardooking forwardq
q Please Read: CHAPTERS 3and 4
qHOMEWORK!q Presentation assignments!q Keep up with MESP
requirements for TermProjects
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