The International Business Imperative

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Need for International Business
More and more firms around the
world are going global, including:
Manufacturing firms
Service companies (i.e. banks, insurance,
consulting firms)
Art, film, and music companies

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Need for International Business
International business:
causes the flow of ideas,
services, and capital
across the world
offers consumers new
choices
permits the acquisition of
a wider variety of
products

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Need for International Business
International business:
facilitates the mobility of labor,
capital, and technology
provides challenging
employment opportunities
reallocates resources, makes
preferential choices, and shifts
activities to a global level

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What is International Business?

International business consists of

transactions that are devised and
carried out across national borders
to satisfy the objectives of
individuals, companies, and
organizations.

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Types of International Business
Export-import trade
Foreign direct
investment

Licensing

Franchising

Management contracts

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History International Business
From the Roman Empire to the Modern Eras
Indonesia: The pre-Dutch East Indies Era
(Portuguese)
The Dutch East Indies Era (VOC): Vereenigde
Oostindische Compagnie
The Indonesia Era
ASEAN: AFTA
APEC (Asia-Pacific Economic Cooperation

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Expansion of International Trade
In the past 30 years, the volume of
international trade has expanded from
$200 billion to over $7.5 trillion.

The sales of foreign affiliates of

multinational corporations are now
twice as high as global exports.

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The U.S. International Trade Position
2020
Exports and Imports of Goods
(Billion - USD)
Country Exports Imports
Canada 225.4 270.4
Mexico 212.7 325.4
China 124.6 435.4
Japan 64.1 119.5
United Kingdom 59 50.2
Germany 57 115.1
South Korea 51.2 76

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Indonesia International Trade Position
2020
Exports and Imports of Goods
(Billion - USD)
Country Exports Imports
China 31.8 39.6
US 18.6 8.6
Japan 13.7 10.7
Singapore 10.7 12.3
India 10.4 3.8
Malaysia 8.1 6.9
South Korea 6.5 6.8

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Assignment#1
From the website of UNCTAD (UN Conferences on
Trade and Development) get the history of the most
high ranked trading countries in the world
Write a report based on the data: what do the data
mean?
You may complete the report with the GDP of each
countries listed

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Foundations of International
Business
Actions
Actors
Systems

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Actions
Trading
Comparative Advantage
(opportunity cost)
Competitive Advantage
(resources and competences)
Investing
Foreign Direct Investment
Eclectic Paradigm (OLI)

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Actions
Globalizing
Markets
Production

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OLI Model – The O
Ownership Advantages:
include proprietary information and various ownership rights of
a company
These may consist of branding, copyright, trademark or patent
rights, plus the use and management of internally-available skills
Ownership advantages are typically considered to be intangible
They include that which gives a competitive advantage, such as a
reputation for reliability

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OLI Model – The L
Locational Advantages
Companies must assess whether there is a comparative
advantage to performing specific functions within a particular
nation
Often fixed in nature, these considerations apply to the
availability and costs of resources, when functioning in one
location compared to another
Location advantage can refer to natural or created resources, but
either way, they are generally immobile, requiring a partnership
with a foreign investor in that location to be utilized to full
advantage 16
OLI Model – The I
Internalization Advantages
Is it more attractive to perform the value chain activity
in-house than to have it performed by an external party?
Reasons to outsource certain activities to different
companies abroad might be because they are better at
it, are able to do it cheaper, have more local market
knowledge, or because management simply wants to
focus on other activities in the value chain such as
marketing or design

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18
 No
Ownership Advantage over Remain Domestic
foreign rivals?

Yes

No
Location Advantage in Export
foreign country?

Yes

Advantage in No
Internalizing Licensing
production?

Yes

FDI
Actors
Firms
Governments
Institutions

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Systems
Trading
Currency
Finance

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International Business and Globalization
Globalization is the ongoing
process that deepens and
broadens the relationships
and interdependence among
countries
International Business is a
mechanism to bring about
globalization
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 International Environment
Historic transformation:
From a world in which national
economies were relatively isolated from
each other by different barriers,
towards a world in which national
economies, are merging into an
interdependent global economic system
The emerging global economy creates
opportunities as well as presents
challenges and threats to the business

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 CLASSIFICATION OF IB
ENVIRONMENT
Micro and Macro Environment
(scope of influence)
Domestic, Foreign and Global
Environment (Location)

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 Micro Environment
Forces in the firm’s immediate
environment which directly influence
the firm’s decisions and operations:
Suppliers
Various market intermediaries and
service organizations
Competitors
Customers
General public
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 Macro Environment
Broader forces/factors which affect
the firm as well as the other forces in
the firm’s micro environment:
Political
Legal
Economic
Socio-cultural

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 Domestic Environment
Factors:
Competitive which are essentially
structure uncontrollable by a
Economic climate firm

Political operate at the

Legal national level
Socio-cultural
generally well known
by the firm
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 Foreign Environment

Competitive Factors: prevails in

structure foreign country (ies).
Economic climate
The firm can neglect
Political
them only at the cost
Legal of losing business in
Socio-cultural the foreign markets

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 Global Environment
Global Enviro
World economic transcends national
conditions boundaries
International
financial systems is not confined in its
International impact to just one
agreements and country
treaties
exerts influence over
Regional economic
domestic as well as
groupings.
foreign countries
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This is the end of
THE INTERNATIONAL BUSINESS IMPERATIVES

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