International Business

The activity of doing business

abroad

Firms engaging in international

(cross-border) economic activities
Peng and Meyer (2011)

Figure 1.1

Changes in trade and capital flows

Sources: World Bank, UNCTAD (various)

Boundaries between domestic and international

become increasingly blurred in reality
Increase in import/export
Increase in cross-border mergers/acquisitions
Increase in fdi (foreign direct investment)
View moving from US/Europe/Japan
(incumbents) to RDEs (Rapidly Developing
Economies)

High risk and high reward

Levels have decreased since the global credit
crunch but trend is still a strong increase
overall.

...... Inflows as a percentage of GDP

Country

2007

2012

Brazil

3.3

3.4

Russia

4.3

2.6

India

2.0

1.7 (2011)

China

4.5

3.1

WORLD

4.4

2.1

Different groups have different perspectives

Economists
Business Leaders
Political Scientists
Sociologists
International Relations Specialists

the process of transformation of local phenomena

into global ones. It can be described as a process by
which the people of the world are unified into a single

society and function together. This process is a

combination of economic, technological, sociocultural
and political forces
(Croucher, S. 2003)

a widening, deepening and speeding up of

interconnectedness in all aspects of contemporary
social life from the cultural to the criminal, the

financial to the spiritual

(Held et al. 1999)

.increasing global interconnectedness, so

that events in one part of the world are
affected by, have to take account of, and also
influence, other parts of the world. It also
refers to an increasing sense of a single
global whole
(Tiplady, R. 2003)

refers to the shift toward a more integrated

and interdependent world economy[through]
the merging of historically distinct and separate

national markets into one huge global market

place
(Hill, C. 2005, p.6)

process by which the whole world becomes a

single market. This means that goods and
services, capital and labour are traded on a
worldwide basis, and information and the results
of research flow readily between countries
(Black, J. 2002)

reflects a business orientation based on the

belief that the world is becoming more
homogenous and that distinctions between

national markets are not only fading but, for some

products, will eventually disappear
(Czinkota, M., Ronkainen, I., Moffat, M. 1999, p.454)

More open global markets, leading to

More globally dispersed value chains
Government encouragement via tools such as
RTAs (Regional Trade Agreements)
BITs (Bi-lateral Investment Treaties
DTTs (Double Taxation Treaties)

 Shrinking

space
Shrinking time
Disappearing bordersleading to . .
.
new
new
new
new

markets
means of communication
actors
rules and norms

Consider . . .
Products (global markets, global brands)
Services such as banking, insurance,
transport
Financial markets: deregulated, globally
linked, working around the clock, with action
at a distance in real time, with new
instruments such as derivatives.
Growth of mergers and acquisitions.

Free Trade Areas

Where member countries reduce or abolish
restrictions on trade with each other while
maintaining their individual protectionist measures
against non-members.

Customs Unions
Where, as well as freeing trade among
members, a common external tariff is
established to protect the group from
imports from any non-member.

Common Market
Where the customs union is extended to include the
free movement of factors of production as well as
products within the designated area.

Economic Union
Where national economic policies are
also harmonised among member
states within the common market.

1. Hyperglobalists
... argue that increasing globalisation is
fragmenting nation states and decreasing their
power so that states are becoming decisiontakers rather than decision-makers.

 Loss of competence
Loss of autonomy
Loss of legitimacy

2. Sceptics
... argue that increasing globalisation is not new
and the more recent increase of international and
social activity has reinforced and enhanced state
powers.

3. Transformationalists
... argue that increasing globalisation is creating
new PESTLE conditions and believe the outcome
of this is uncertain. They believe that politics can
no longer simply be based on nation states.

That globalisation encompasses conflicting

tendencies

Universalisation versus Particularisation

Homogenisation versus Differentiation
Integrations versus Fragmentation

An activity largely conducted by a set of

MNCs based in the United States, Europe, and
Japan, known as incumbents.
Driven by the quest for low-cost production
and the desire to enter promising new
markets in developing countries.

We are now experiencing a completely

different phenomenon . . . .
. . . . mainly fueled by a set of business
competitors, based not in the developed
world but in the rapidly developing
economies (RDEs), the global challengers

During globalization, incumbents competed

primarily with other incumbents in markets
around the world
In the new era of globality, incumbents
suddenly find themselves competing with
everyone from everywhere for everything
Global challengers are nimble, ambitious,
and efficient, emerging from many countries
to battle the incumbents at home and abroad

EVERYWHERE!
not only from the high-profile BRIC countries
(Brazil, Russia, India, and China) but also from
Argentina, Chile, Egypt, Hungary, Indonesia,
Malaysia, Mexico, Poland, South Africa,
Thailand, and Turkey.

Grupo Bimbo (Mexico) the largest bread baker in the

world
JBS (Brazil) the largest meat producer
Rusal (Russia) the largest producer of aluminum
Bajaj Auto (India): leading maker of small motorcycles
BYD (China): worlds largest producer of nickelcadmium batteries
Cemex (Mexico): worlds largest ready-mix concrete
player
CSAV (Chile): largest shipping-container company in
South America

Embraer (Brazil): worldwide leader in the

manufacture of regional jets of up to 120 seats
Gazprom (Russia): largest natural-gas company in
the world

Goodbaby (China): global supplier of childrens

goods
Natura (Brazil): fast-growing maker of personal care

products

Tata Group (India): superstar conglomerate

Over the past decade, the share of global GDP

generated by (RDEs) rose from 18 percent to 31
percent
Their share of world trade jumped almost as
much, from 18 percent to 28 percent.
RDEs in the Fortune Global 500 has more than
tripledfrom 21 to 75in the past decade.
The 2010 list of Forbes 2000 companies included
398 companies from RDEs, nearly triple the
number just five years ago.

According to the World Investment Report

2009, the outward foreign direct investment
(OFDI) of Chinese and Indian MNEs increased
significantly - China increased 111%, up to
$56 billion, making it the 12th largest source
country of OFDI in the world.

Deal value of cross-border M&As undertaken

by Chinese MNEs in 2008 was $68 billion,
21% more than the OFDI flow from China.
This means that Chinese MNEs not only use
cross- border M&As as a primary mode of
internationalization, but also raise significant
capital or debt from foreign markets.