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Introduction To International Business Environment Analysis

This document provides an overview of key concepts in international business environments and analysis. It discusses how globalization has occurred due to several interrelated factors, including improvements in transportation and communication technologies, production techniques, economic liberalization, and the rise of outsourcing. As a result, the world now features deeply integrated and complex global production networks. This changing business landscape presents new challenges and opportunities for managers.

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38 views33 pages

Introduction To International Business Environment Analysis

This document provides an overview of key concepts in international business environments and analysis. It discusses how globalization has occurred due to several interrelated factors, including improvements in transportation and communication technologies, production techniques, economic liberalization, and the rise of outsourcing. As a result, the world now features deeply integrated and complex global production networks. This changing business landscape presents new challenges and opportunities for managers.

Uploaded by

shoumo12345
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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GM0116

INTRODUCTION TO INTERNATIONAL
BUSINESS ENVIRONMENT ANALYSIS

Dicken chs. 1 & 2


Buckley et al. chs 1 & 3
Main take-aways
• It’s really hard to tell what is done where nowadays.

• Several interrelated processes have resulted in globalization.

• We live in a world of deep integration.

• FDI and link patterns are no longer the way we have been used to.

• All this changes the opportunity landscapes of managers.


1. Defining International Business (IB)

2. Disruptive change
1. DEFINING INTERNATIONAL BUSINESS
• ”International business (IB) is about (1) businesses (firms”
engaging in international (cross-border) economic activities
and/or (2) the activity of doing business abroad…
• The most important actors in international business are known
as multinational enterprise (MNE), defined as a firm that
engages in foreign direct investment (FDI) by directly investing
in, controlling and manageing value-added activities in other
countries.”
(Peng and Meyer (2017) International Business, p. 5)
Typical IB focus
• Internationalization of firms

• Business conditions of MNEs

• Management issues in MNEs

• Managing global value chains and global production networks

• Local, national and global consequences of FDIs

• Effects of internationalization of ownership


Economics

Business strategy International


and management Economic geography
Business (IB)

Economic history
The CIBS faculty
• 10 economic geographers
• 10 organization/strategy researchers

Some typical article titles:


• The impact of foreign firm ownership on local
renewal activities and proceses
• Move first to grow slow: on the relationship between
timing, speed and performance of the foreign
network entry process
• Chinese foreign acquisitions aimed for strategic
asset-creation and innovation upgrading: The case of
Geely and Volvo Cars
• Are multinational enterprises in retreat?
• New technology development by Swedish MNEs in
emerging markets: the role of co-location of R&D
and production
The business environment
global
national
regional
The business environment: local factors
• Presence of other firms close by

• Access to local policy makers

• Local infrastructure

• Natural resources
“Again, in all but the earliest stages of economic development a
localized industry gains a great advantage from the fact that it offers a
constant market for skill. Employers are apt to resort to any place
where they are likely to find a good choice of workers with the special
skill which they require; while men seeking employment naturally go
to places where there are many employers who need such skill as
theirs and where therefore it is likely to find a good market. The owner
of an isolated factory, even if he has access to a plentiful supply of
general labour, is often put to great shifts for want of some special
skilled labour; and a skilled workman, when thrown out of
employment in it, has no easy refuge.”

(A Marshall: The Principles of Economics (1890, IV.X.9)

2019-09-02
The business environment: national factors

• National level policy policies and laws

• National level lobbying

• ”Business culture”
The business environment: international factors
• Trade block membership

• International trade agreements

• International codes of conduct

• International labour markets


The business environment
global
national
regional
2. DISRUPTIVE CHANGE
Transport and communication technologies:
globalization as a logistical challenge
• Falling transportation costs
– Sea freight: index 100 in 1930, index 20 in 2000
– Passenger air transport: index 100 in 1930, index 10 in 2000 and far safer

• Regulatory reforms
– Transport regulations and harmonization

• Logistic innovations
– Containers
– Digitalization

• Communication technologies, telephones and the internet


– Phonecall charges are down to a fraction of costs in 1930
– Increased speed, availability and confidentiality
Globalization according to (Martin Henning’s modern
interpretation of) Weber!
• The idea of Weber’s was that firms tend to try to find the location
that minimizes their transportation costs.
• There is always a ”transportation cost punishment” if a firm
decides to chose another location (shown by isodapanes).
• But it might still pay off to re-locate, if labour costs are far lower
in another location. The trade-off border is shown by the critical
isodapane!
• Transportation improvements have widened the isodapanes
(”transportation cost punishment”) and moved the critical
isodapane.
• Suddenly, it might pay off to re-locate from Europe to Asia =
globalization!
• This does not mean that geography doesen’t matter, it actually
matters even more.
Production technologies evolution
• Flexible specialization (/production)
– Scale economies in smaller series
– More flexible real capital
– Segmented markets

• Digitalization
Economic liberalization
• Lower barriers to trade
– GATT and WTO
– International investment agreements

• Market-economy idea prevailed (?)


– Fall of many (well, most) centralized command economies in the 1990s)
– Notorious problems that the command economies were unable to solve

• Liberalization of capital markets


= market integration
• Factor markets

• Consumer markets

• This does not mean that the world is boundaryless in an


economic sense, but it’s far more integrated than in 1950.
• Integration is however spiky
The service shift in Western economies
• Increasing incomes and
prosperity
• Expansion of education and
health
• A more complex economy, and
need for more specialized
services
• Outsourcing and externalization
• Increasing service trade
Outsourcing and externalization
• The process of letting others do what previously was done
inhouse, in vertically integrated firms.
– Allows end producers to concentrate on ”core activities” = specialization
– Greater flexibility in the end producer firms - risk outsourcing
– Access to very specialized competencies

• Most global trade is intermediate goods and services (about


60%)!
• Growth of contract manufacturers, specialist suppliers and value
chain fragmentation
production technologies evolution
+transport technologies evolution
+economic liberalization
+the service shift
+outsourcing and externalization
+growth of contract manufacturers and specialist suppliers
=globalization at an amazing speed
=globalization at an amazing speed
• ”Today, we live in a world in which a deep integration, organized primarily
within and between geographically extensive and complex global
production networks (GPNs), and through a variety of mechanisms, is
increasingly the norm.” Dicken (2015) Global Shift, p. 6)

• It is a local-regional-national-international-global process.
• Global competition not only for final products, but on factor- and
intermediate markets too: globality

• Some call it
– Global production networks
– Global value chains
– Global factory
Indicators
1. Trade
1. Since 1960, trade has grown much faster (20-fold) than total
production (6-fold)
2. FDI
1. FDI: Since 1985 until the mid 1990s, FDI has grown much faster
(250%) than exports (100%)
2. Shift towards services
3. Shifts from greenfield to M&As (sevenfold increase in foreign-owned
employment in Sweden since 1980)
4. Developing regions play a more significant role than before
Globalization also means a locational shift
• ”…different locations play different roles in global value chains”
(Buckley et al 2018, p. 18).
• geographical division of labour
• Specialization from industries to tasks (for firms, this already
happened)

• The big trade players, by far, is Europe, Asia and North America
(“The Triad”)
• Developing countries play a more important role in FDI
FDI and link patterns are no longer the way we
have been used to!
The Asian Miracle
• Japan after WWII

• The ”Four Tigers”: Hong Kong, Korea, Singapore and Taiwan

• China

• India, in recent years


Disconcerting
• The ”persistent peripheries”
– SSA
– Parts of Asia
– Parts of Latin America

• The persistent US trade deficit

• Environmental issues

• Labour market divergence and social concerns in many Western


economies
All this changes the opportunity landscapes of
managers
• Different technological challenges

• Different ethical challenges

• Different institutional challenges

• Different locational challanges

• This does not mean that everything is global. The regional


structures matter, but in qualitatively different ways.
Main take-aways
• It’s really hard to tell what is done where nowadays.

• Several interrelated processes have resulted in globalization.

• We live in a world in which a deep integration.

• FDI and link patterns are no longer the way we have been used to.

• All this changes the opportunity landscapes of managers

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