BUSE 608

International Business
KAAU, 2011-12

Introduction to Module Introduction to International Business

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$700 billion
$1 trillion 12 billion 27 billion $2 trillion

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Source: http://news.bbc.co.uk

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America sneezes and the UK catches the cold

Dow Jones

FTSE

DAX

Nasdaq

CAC

Nikkei

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Hang Seng

Sydney

RTS

BSE

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This interactive timeline highlights key dates in the financial collapse and helps you find the original reports of the events as happened.

Click on an event on the timeline

http://news.bbc.co.uk/1/hi/business/8242825.stm

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AP A Chinese worker moves large tires at an assembly line for buses made by Chinese auto manufacturer Foton By JENNIFER LOVEN, AP White House Correspondent Jennifer Loven, Ap White House Correspondent Sat Sep 12, 5:34 pm ET WASHINGTON President

Barack Obama's decision to impose trade penalties on Chinese tires has infuriated Beijing at a time when the U.S. badly needs Chinese help on
climate change, nuclear standoffs with Iran and North Korea and the global economy. China condemned the White House's announcement late Friday as protectionist and said it violated global trade rules. At home, the punitive tariffs on all car and light truck tires coming into the U.S. from China may placate union supporters who are important to the president's health care push. To the White House, it was "simply about enforcing the rules of the road and creating a trade system that is based on those rules and is fair for everyone," spokesman Robert Gibbs told reporters traveling with Obama on Saturday to a health care event in Minneapolis. Chen Deming, China's minister of commerce, said the penalties would hurt relations with the U.S. A ministry statement said Obama had "compromised to the political pressure of the U.S. domestic trade protectionism."

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Introduction and Outline

There are two significant aspects to this module:
The international business environment, and the changes which have taken place in the post-war period The operation of business on an international basis, and the implications for managers in terms of strategy, structure and operational functions

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Introduction and Outlinecont

The module will develop an understanding of what is different about international business through study of the
international environment covering such issues as:

Changing world trade and investment conditions International economic agreements Political and economic risk Cultural and ethical differences International competitive conditions

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Introduction and Outlinecont

The module also examine why and how companies internationalise their operations, covering issues as:
Decisions on foreign market entry methods, ranging from exporting to different forms of foreign direct investment (FDI) Issues which arise in the operation of international business, incorporating decisions on international business strategy, and the management of business functions such as human resource management, logistics and marketing

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Learning Outcomes
At the completion of this module students will be able to:
Evaluate the key factors influencing the post-war trends in global trade, investment and competition Identify and analyse the opportunities and risks which exist in the international business environment

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Learning Outcomescont
Critically assess the relevance of international trade, investment and competition theories to the analysis of current business and management issues (both from a government and MNC perspective) Understand the motivating forces behind different foreign market entry decisions and evaluate the appropriateness of each entry method in a range of circumstances Analyse the strategic and functional decisions which companies take in the course of their international operations

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Reading List
The essential text for the module is:
Hill, C.W.L., International Business: Competing in the Global Marketplace (7th Edition), McGraw-Hill, 2009

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Reading List
Cavusgil, S. T., Knight, G., and Tiesenberger, J. R. 2008. International Business: Strategy, Management and the New Realities. Prentice Hall. Daniels, J. D., Radebaugh, L. H., and Sullivan, D. P. 2008. International Business: Environments and Operations. 12th Edition. Prentice Hall.

Recommended journals/Newspapers/Web links:

Journal of International Business Studies (JIBS) Financial Times (FT.com) The Economist (Economist.com)
http://nulis.napier.ac.uk/ http://proquest.umi.com/login

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Topic L1 W1

Introduction to International Business

L2
L3 L4 L5 L6 L7 L8 L9

W1
W1 W1 W2 W2 W2 W3 W3 W4

Globalisation of the World Economy

Political and Economic Risk Cultural and Ethical Risk International Trade Theories FDI: Home/Host Country Perspectives International Economic Agreements Foreign Market Entry Strategies Strategy, HRM and Marketing FINAL EXAMINATION

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L1 L2 L3

W1 W1 W1

Topic WalMarts Global Expansion IKEA Wipro Ltd Ecuadorean Valentine Roses Building a Market Economy in Piracy in the Video Game Market

L4
L5 L6
tutorial participation contribution

W1
W2 W2 W2 W3 W3 W4

Nike: The Sweatshop debate

Italian Ceramic Tile Industry The Rise of the Finlands Nokia FDI in South Africa The Great Banana Wars NAFTA and the Textile Industry Getting Airline Alliances Off the Ground Nestle: Global Strategy FINAL EXAMINATION

L7 L8 L9

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Assessments
There are three forms of assessment for this module, and the overall mark will be made up as follows:
50% Coursework
1. 30% Coursework, Submission date ... 2. 20% Tutorial Participation and Contribution (Continuous)

50% Exam

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Coursework
Coursework Question:
Evaluate the impact of global recession on international trade and investment with respect to the country of your choice. Support your arguments with the use of relevant examples wherever possible.

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Guidelines

Length: Minimum 2,000 words, maximum 3,000

(Reports in excess of the word limit will be capped to 40%)

Completion date:

December, 2011

All reports should be typed and must include a list of references. Give the word count on the front page (indicate clearly) A list of references along with appendices while necessary is NOT included in the word account.

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Web references MUST contain the full URL and state the date accessed e.g.: http://www.wto.org/english/tratop_e/tratop_e.htm (Accessed 08 September 2009)
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Case Study Analysis

In this module, tutorials will be based on the analysis of case studies, mostly taken from the Hill text. In the examination there is also a compulsory case study question on a case which students will only see on the day It is, therefore, essential that students understand our expectations of you in terms of conducting an effective case study analysis

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Case Study Analysiscont

In tutorials, and in respect of the exam compulsory case study question, students will be expected to answer specific questions about the case
However, for a full expos on the subject, students should consult :
Strategic Management, Competitiveness and Globalisation, Concepts and Cases, Hitt, Ireland and Hoskisson: read the full chapter; Preparing an Effective Case Analysis Any edition has the full chapter, available in the library

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Case Study Analysiscont

The case should then be read thoroughly, to identify the facts which are critical to the analysis The question(s) are likely to require students to identify tools/frameworks which will have to be applied in the analysis The analysis will further be required to enable students to evaluate the key issues and come to a coherent judgement in relation to the question(s) posed Students should be aware that the foregoing methodology will be required, not only in tutorials, but also in the compulsory case study exam question
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BUSE 608

International Business
KAAU, 2011-12

Introduction to International Business

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Globalisation
Introduction to International Business

Political & Economic Risks Cultural & Ethical Risks International Trade Theories

Revision/CW feedback

FDI: Host/Home Country Perspectives International Economic Foreign Market Agreements Entry Strategies

MFO: Strategy, HRM and Marketing

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Learning Outcomes
Define what constitutes international business Evaluate the key differences in conducting business internationally, as opposed to remaining in a companys domestic market Critically assess the objectives of an organisation in internationalising its operations Understand the key factors in the development of the world trading system

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What is International Business

International business consists of transactions carried out across national borders to satisfy the objectives of business organisations Business activity which crosses national boundaries takes several forms:
Trade exporting/importing Contracting licensing/franchising Investment foreign direct investment (FDI) through wholly owned subsidiaries, alliances, or acquisitions

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The Internationalisation of Business

Sectors with which the study of international business is concerned:
Manufacturing: taking advantage of cost-effective locations Resource-based: minerals/metals, oil and agriculture Construction: multinational projects such as dams & airports Services: rapid expansion in financial services, telecoms and retail

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What is Different about IB?

Additional costs:
Trading costs e.g. import duties, distribution agents Travel/relocation costs e.g. use of expatriate managers Local market costs e.g. government regulations, product/service modifications

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What is Different about IB?

Additional risks:
Political/Legal e.g. import/investment barriers, lack of legal protection Economic/Financial e.g. inflation levels, foreign exchange risks Cultural/Ethical e.g. differences in values, beliefs, and practices

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What is Different about IB?

Hill puts it thus Managing an international business is different from managing a domestic business for at least four reasons:
1. 2. 3. Countries are different The range of problems confronted by a manager is wider and the problems themselves more complex than those confronted by a manager in a domestic business Managers must find ways to work within the limits imposed by governments intervention in the international trade and investment system International transactions involve converting money into different currencies

4.

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Objectives of International Expansion

Expanding the potential market
particularly relevant for firms whose domestic markets are small or saturated

Achieving a satisfactory return on investment

particularly relevant for firms which have made significant investments in plant and machinery and/or research and development

Obtaining location advantages

such as lower labour and transport costs and/or to circumvent trade and investment barriers
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Objectives of International Expansion

Counteracting competitor moves
pre-empting competitors by entering markets first and/or entering markets to prevent already present competition from dominating these markets

Personal ambition
international expansion may reflect the ambition of senior executives rather than the more rational reasons cited above

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World Trading System

The UK was the pioneer of free trade (from the 1850s)
The Great Depression put the cause back significantly (NB the Smoot-Hawley tariff in the USA) This was reversed in the expansionist post war climate
the establishment of General Agreement on Tariffs and Trade (GATT), a multilateral trade agreement, in 1947

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GATT
Tariff reduction was spread over 8 rounds Membership grew from 19 to over 120 nations Although GATT was extremely successful in reducing barriers to trade and investment, in the 1980s new strains to the world trading system appeared: the success of Japan; the failure of the USA; and the increasing use of bilateral trade agreements Early 90s GATT becomes World Trade Organisation (WTO)

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WTO
Since 2003 the WTO has had 145 members, with a further 25 countries negotiating for membership Between 1995 and 2003, more than 280 trade disputes between member countries were brought to the WTO, compared with a total of 196 cases handled by GATT in its entire existence The WTO has widened its remit to encompass regulations governing foreign direct investment (FDI), and has subsequently reformed the international regulation of the global telecoms and financial services industries
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WTO
A further significant issue to the WTO has been that of protecting intellectual property products of the mind, ideas (e.g. books, music, computer software, designs, technological know-how) The 1995 Uruguay agreement contained a protocol to protect intellectual property (the trade related aspects of intellectual property rights the TRIPS agreement) As with GATT, the WTO has been successful in further lowering trade and investment barriers. There remain problem areas, however, particularly in disputes between developed and developing countries a theme that will be covered in depth in lecture 2 on globalisation

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Summary
International business is different because it involves costs and risks not present in a companys home market International managers are, therefore, faced with a much more complex set of problems arising out of differences in diverse international business environments

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Summary
Businesses internationalise their operations for a variety of reasons, ranging from increasing the scale of their markets to counteracting competitive pressures although international expansion may have more to do with the ego of the senior executives than delivering shareholder value

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Summary
International trade and investment has grown substantially in the post war period, aided by multilateral agreements such as GATT and the WTO The range of areas covered by the WTO has been extended to cover service businesses, and intellectual property rights Next weeks lecture will explore the role which such multilateral agreements has played in advancing the process of globalisation

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Reading List
This lecture is based around Hill Chapter 1, as is next lecture Class Discussions:
Cave Rescue (handouts) Wal~Marts Global Expansion, Hill p. 443 IKEA, Hill p. 36

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