Define the concept of international business and describe how it is different from foreign business ?
International business is defined in terms of activities which are carried out across international trade and foreign manufacturing , transportation, tourism, advertising , construction , retailing , wholesaling and mass communication -pg 11.
International business is defined in terms of activities which are carried out across international borders and includes international trade and foreign manufacturing, transportation, tourism, advertising, construction, retailing, wholesaling and mass communications, however foreign business refers to operations outside a company’s home or domestic market and is often used interchangeably with the term international business.
This information was taken from page 11 of the study guide
Describe the concepts of multidomestic, global and international companies, and show how these relate to the concepts such as multinational enterprises
RESPONSE:
Multidomestic is an approach whereby a company operates in multiple countries and caters to each market’s unique needs and preferences . Global and international companies refers to companies that operate across the world
Hence these three elements meet at a point of all operating across the globe
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How is international business different from domestic business? Specifically refer to the different environmental forces.
Domestic business is the business that operates within the geographical boundaries of a country. It involves transactions between buyers and sellers who belong to the same country and use the same currency. For example, a bakery in New York that sells bread to local customers is a domestic business, however an international business refers to International business refers to the trade of Goods and service goods, services, technology, capital and/or knowledge across national borders and at a global or transnational scale. It involves cross-border transactions of goods and services between two or more countries.
Domestic environments are characterized by a focus on a single country, with unique cultural, political, and legal factors influencing business operations. On the other hand, international environments involve conducting business across national borders, encompassing diverse cultures, legal systems, and trade barriers
Information obtained from page 12 in study guide
What do the external forces consist of?
External factors are elements from outside the company that affect business performance, such as competition, economic climate, political and legal environment, technological advances, or major global events.
Information obtained from external sources
Briefly describe the history of international business and illustrate how international firms and businesses have expanded up to the present time.
International business practices have a long and varied history. Ball et al. (2012) start exploring the history of international business well before the time of Christ, with the Phoenician and Greek merchants and the expansion of trade to China as an international integrated trading system. Ball et al. (2012) furthermore refer to the rise of the Ottoman Empire and how they expanded their trading web. In the 1600s, the British East India Company started setting up trade in Asia, shortly followed by other European nations. By the 17th and 18th centuries, the “age of mercantilism” was truly established.
In the late 1800s, a number of multinational companies existed, such as Singer Sewing Machines and the Ford Motor Company. By 1930, the level of intercompany trade by multinationals had exceeded the proportions seen at the end of the 20th century. In recent years, foreign international concerns, investments and exports have increased rapidly and in the modern business environment, business without foreign or international links is unthinkable.
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Define and discuss the concept of globalisation.
Ball et al. (2012: 15) define globalisation in terms of economic globalisation, which refers to “the tendency towards an international integration of goods, technology, information, labour and capital, or the process of making this integration happen”.
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What are the main drivers of globalisation?
The major factors that drive globalisation – all based on change – are (1) political, (2) technological, (3) market, (4) cost and (5) competiveness.
1. Political There are major trends towards unifying and socialising global communities. Furthermore, barriers to trade and foreign investments are substantially being reduced by governments, opening new international markets.
2. Technological The advent of ITC and the World Wide Web has increased the flow of ideas and information across borders. This has informed customers about foreign goods and services and has enabled companies to compete and do business globally.
3. Market The globalisation of companies has resulted in them also becoming global customers and integrating their business with other foreign companies. Home market saturation has furthermore forced companies to find markets in the international domain.
4. Cost One way of achieving economies of scale is to go global, not just in terms of products and services, but also in terms of globalising product lines so as to reduce development, production and inventory costs.
5. Competitiveness As competition increases in intensity, globalisation of markets increases. Companies are also defending their own home markets from foreign competitors and often enter their competitor’s home market to distract them.
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8. Discuss the main motives for companies entering foreign markets.
Organisations mainly enter the global market for two reasons: firstly, to increase profits and sales and secondly, to protect markets, profits and sales.
To increase profits and sales In order to increase profits and sales,
international business managers have to enter new markets, often because of domestic market saturation.
They also have to create new markets, access faster growing markets which are often found in the international arena, obtain greater profits on the global level and obtain greater revenue in foreign markets.
Improved communications with modern technology allows for better foreign control of operations and lower costs of goods sold and higher overseas profits serve as an investment motive.
To protect markets, profits and sales To protect markets, profits and sales in the global environment, organisations can and should consider:
• protecting their domestic market by following the customer overseas;
• attacking the competitor in their own home market;
• using foreign production to lower costs;
• protecting foreign markets by changing from exporting to overseas production;
• finding a lack of foreign exchange as inhibiting;
• protecting against local production by competitors;
• downstream markets;
• protectionism of domestic markets;
• guaranteeing supply of raw materials;
• acquiring technology and management know-how;
• geographic diversification; and
• satisfying management’s desire for expansion.
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9. What are the main dimensions along which management can globalise?
These dimensions are:
(1) the product,
(2) markets,
(3) promotion,
(4) where value is added to the product,
(5) competitive strategy,
(6) the use of foreign staff and
(7) the extent of global ownership of the company. A company can be partially global in some dimensions and completely global in others (Ball et al., 2012)
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10) Describe the types of institutions and what the new institutional theory constitutes?
Business institutions are constructed to achieve common business goals. In order to understand institutions, the new institutional theory suggests that institutions are socially constructed and consist of a collection of norms, rules or unwritten codes of conduct that structure the relations of individuals with each other (Ball et al., 2012). In the business environment, two types of institutions are found, namely formal and informal institutions. A formal institution is regulated and influences behaviour through formal laws and regulations, whereas an informal institution utilises norms, values, customs and ideologies to influence behaviour
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11. Describe the United Nations as a global organisation, how it functions, its purpose, its structure and how it contributes to international business.
The United Nations, which has 192 nation members, is dedicated to promoting global peace and stability. Many of its activities are geared towards business activities and business infrastructure. The UN, as mainly an informal institution, plays a significant role in various areas of international business. Of these roles, the most significant are the UN agreements that set technical standards and norms; preparing the ground for investment in emerging economies; addressing the downsides of globalisation; seeking solutions to global environmental problems; addressing health issues that require globallevel solutions; and promoting social justice and human rights. Furthermore the UN also has an impact on how business is done internationally. Various UN committees address global “rules of the game”, such as maritime and airline rules, pharmaceutical quality and standardisation, international postal protocols, allotment of international radio frequencies, worldwide weather forecasting and establishing rights and obligations for traders in international transactions.
The UN is divided into five bodies, or organs, which are responsible for all the UN activities. The General Assembly, which is the main deliberative body, consist of all the member nations of the UN. Each member has an equal vote on matters which express the will of the member nations. The UN’s permanent staff, headed by the secretary-general, are responsible for the day-to-day management of the UN. This organ is called the UN’s Secretariat. To address and maintain international peace and security, the UN Security Council, with five permanent and 10 non-permanent members, deliberates and implements strategies to maintain international peace. A major component of the Security Council’s initiatives is to deploy peacekeeping operations and political missions. The Economic and Social Council of the UN is a body which is concerned with mainly economic and social issues. The main focus is on trade, development, education and human rights. Lastly, the UN is furthermore responsible for the International Court of Justice, or World Court. This court mainly addresses disputes between national governments and provides advisory opinions in this regard.
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12. Discuss the two main international monetary institutions and how they contribute to international business.
The two main international monetary institutions, namely, the International Monetary Fund (IMF) and the World Bank, are both initiatives by the UN. The IMF was set up to establish rules for international monetary policies and their enforcement and the World Bank to provide funding for development projects.
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13) Describe the EU as an international body and discuss its impact on businesses external to the EU.
The European Union (EU), which developed out of the European Community (EC), consists of 27 European states and mainly strives to integrate the European economic community, foreign policy and domestic affairs. The EU’s day-to-day operations are administered by the European Commission and the European Parliament, elected from member states who represent the people of Europe. The European Monetary Union (EMU) was responsible for establishing a common European currency, the Euro, which is currently used by 17 of the EU countries. Other EU institutions focus on financial and social issues and include the European Central Bank (ECB) and the European Court of Justice (ECJ). The EU, as a major international political and economic force, plays a vital role in international business. The EU is the world’s largest trading economy and the source of approximately 20% of the world’s total output. The impact of the EU on international business and how managers conduct business is significant. From the reduction of costs because of a common currency, to common rules and regulations by which business is conducted, foreign companies accessing the EU market have to be knowledgeable and vigilant of what is expected at global and EU level. This study unit has given you a basic introduction to the world of international business. The subsequent study units will provide substantially more detail so as to ensure that you become knowledgeable and competent as an international business manager. Ensure that you work through the summary, case studies and questions in your text
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14. Describe the World Trade Organisation as a global entity, its principles for global trade and how it impacts on international business.
The World Trade Organisation (WTO), established in 1995, attempts to reduce or eliminate trade barriers and restrictions at international level. The WTO furthermore helps implement rules of trade between countries. Its membership currently represents approximately 97% of international trade. WTO members have established five principles which guide the global trade system. These principles are:
1. Trade without discrimination.
2. Freer trade, gradually, through negotiation.
3. Predictability, through binding and transparency.
4. Promotion of fair competition.
5. Encouragement of development and economic reform.
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