IBUS1101 Lecture Notes - Lecture 1: Japanese Yen, Multinational Corporation, Freight Forwarder
5 Jun 2018
School
Department
Course
Professor
Learning Objectives:
1.1 Describe the key concepts in international business
1.2 Understand how international business differs from domestic business.
1.3 Identify major participants in international business.
1.4 Describe why firms internationalize.
1.5 Appreciate why you should study international business.
LO1: What are the key concepts in International Business
Performance of trade and investment activities by firms across national borders
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Firms organize, source, manufacture, market, and conduct other value-adding activities on an
international scale.
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They seek foreign customers and engage in collaborative relationships with foreign business
partners.
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Firms and nations exchange many physical and intel- lectual assets, including products,
services, capital, technology and labor.
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Firm seek international market opportunities
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Globalization of markets
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Foreign market entry strategies
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Participants
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International business risks
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International investment
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International trade
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Characterized by six major dimensions
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International business (cross cultural business):
Ongoing economic integration and growing interdependency of countries worldwide.
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Such as Modern online platforms such as Amazon, Alibaba, Facebook, and Instagram
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Globalization of markets:
the tendency of companies to deepen their international business activities systematically
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It has led to widespread diffusion of products, technology, and knowledge worldwide.
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Internationalization
Chapter 1 Introduction: What is International Business
Saturday, 10 March 2018
2:32 PM
Textbook Page 1
Exchange of products and services across national boarders
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outbound flow of goods/service
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Sale of products or services to customers located abroad from a base in the home
country or a third country.
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Exporting
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inbound activity
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procurement of prod- ucts or services from suppliers located abroad for
consumption in the home country or a third country
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Importing/global sourcing
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Exchange can occur through:
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International trade :
The transfer of assets to another country or the acquisition of assets in that country
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Such assets are factors of production (economics)
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investment implies that the firm itself crosses borders to secure ownership of assets located
abroad.
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the passive owner- ship of foreign securities such as stocks and bonds to gain
financial returns.
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It does not entail active management or control over these assets.
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The foreign investor has a relatively short-term interest in the ownership of these
assets.
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International portfolio investment
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an internationalization strategy in which the firm establishes a physical presence
abroad through acquisition of productive assets such as land, plant, equipment,
capital, and technology.
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It is a foreign-market entry strategy that gives inves- tors partial or full ownership
of a productive enterprise typically dedicated to manufacturing, marketing, or
management activities.
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Investing such resources abroad is generally for the long term and involves
extensive planning
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Foreign direct investment
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Two essential types of cross boarder investment:
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International investment:
export growth has outpaced the growth of domestic production during the past few decades,
illustrating the fast pace of globalization
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These rapidly developing economies are home to swiftly growing middle-class
households possessing substantial disposable income.
▪
the rise of emerging markets during the past three decades.
1.
Three factors explaining trade growth outpacing GDP growth:
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advanced (or developed) economies such as the United States and the European Union are
now sourcing many of the products they consume from such low-cost manufacturing locations
as China, India, and Mexico.
2.
advances in information and transportation technologies, decline of trade barriers, and
liberalization of markets all con- tribute to rapid growth of trade among nations.
3.
Nature of international trade:
FDI is the foreign entry strategy practiced by the most internationally active firms.
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Companies usually undertake FDI for the long term and retain partial or complete ownership
of the assets they acquire.
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In the process, the firm establishes a new legal business entity in the host country, subject to
the regulations of the host government.
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many European and U.S. firms have invested in China, India, and Russia to establish
plants to manufacture or assemble products, taking advantage of low-cost labor or
natural resources in these countries. At the same time, companies from these rapidly
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Example:
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The nature of international investment:
Textbook Page 2
natural resources in these countries. At the same time, companies from these rapidly
developing economies have begun to invest in Western markets.
growth of FDI into developing economies results from their need for modern industrial
infrastructure.
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RLA = It reflects the growing importance of developing economies and emerg- ing markets as
target markets and sourcing bases.
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International trade occurs for both goods and service
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Not all services can be exported.
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Examples are repair work done on your car or the experi- ence of eating a meal in a restaurant.
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Although some services can be digitized and moved across borders, most service providers
can operate internationally only by establishing a physical pres- ence abroad through direct
investment.
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Firms invest abroad to set up restaurants, retail stores, and other physical facilities through
which they sell billions of dollars’ worth of services every year.
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Service as Well as Products:
international banking and financial services are among the most internationally active service
industries.
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Explosive growth of investment and financial flows has led to the emergence of capi- tal
markets worldwide.
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the internationalization of banks and the massive flow of money across national borders
into pension funds and portfolio investments.
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In the developing economies, banks and other financial institutions have fostered
economic activity by increasing the availability of local investment capital, which
stimulates the develop- ment of financial markets and encourages locals to save money.
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It resulted from two main factors:
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The international financial services sector:
LO2: How Does International Business Differ from Domestic
Business?
Textbook Page 3
Document Summary
1. 1 describe the key concepts in international business. 1. 2 understand how international business differs from domestic business. 1. 5 appreciate why you should study international business. Lo1: what are the key concepts in international business. Performance of trade and investment activities by firms across national borders. Firms organize, source, manufacture, market, and conduct other value-adding activities on an international scale. They seek foreign customers and engage in collaborative relationships with foreign business partners. Firms and nations exchange many physical and intel- lectual assets, including products, services, capital, technology and labor. Ongoing economic integration and growing interdependency of countries worldwide. Such as modern online platforms such as amazon, alibaba, facebook, and instagram. Internationalization the tendency of companies to deepen their international business activities systematically. It has led to widespread diffusion of products, technology, and knowledge worldwide. Exchange of products and services across national boarders.
