De La Salle University

COBIBAC – INTERNATIONAL BUSINESS AND OPERATIONS

OVERVIEW OF
INTERNATIONAL
BUSINESS
1.1. Overview of International Business

• The definition of international business

• International business activities
• The contemporary causes of globalization
• Global marketplaces and business centers
What is International Business?

International business consist of business transactions between

parties from more than one country.

Note: The parties involved in international business transactions may include

private individuals, companies (individual or group), or governmental agencies.
International vs. Domestic Business
International business can differ from domestic business for several
reasons:
▪ Different currencies requiring currency conversion
▪ Different legal systems forcing one or more parties to adjust their
practices to comply with local law
▪ Different cultures of the countries
▪ Different resources (natural resources, well-trained workforce)
available
International Business Activities
1. Exporting and Importing

• Selling of products made in one’s

Exporting country for use or resale in other
countries Merchandise
(goods) /
Services
• Buying of products made in other (intangibles)
Importing countries for use or resale in one’s
own country
International Business Activities
2. International Investments – capital supplied by residents of one
country to residents of another.

• Investments made for the purpose of actively

Foreign direct investments
controlling property, assets or companies
(FDI)
located in host countries.

• Purchases of foreign financial assets (stocks,

Foreign portfolio
bonds and certificates of deposits) for a
investments (FPI)
purpose other than control.
International Business Activities
3. International Licensing, Franchising, Management Contracts

• Contractual arrangement in which a firm in one country

International Licensing licenses the use of its intellectual property (patents,
trademarks) to a firm in another country (e.g. Walt Disney)

• A specialized form of licensing when one firm in another

country (the franchisor) authorizes a firm in second country
International Franchising (the franchisee) to use its brand names, trademarks, logos
(e.g. McDonald’s)

• Arrangement wherein a firm in one country agrees to

International Management operate facilities or provide other management services to
Contracts a firm in another country for an agreed-on fee (e.g.
Marriott, Hilton).
International Business Activities
4. Multinational Corporations (MNCs) are firms that owns or
controls value-adding activities in more than one country. MNCs
typically buy resources in a variety of countries, create goods or
services in a variety of countries, and then sell these goods and
services in a variety of countries.
Multinational Enterprises (MNEs) – businesses that are not incorporated but
has extensive involvement in international business
Multinational Organizations (MNOs) – any organization (not-for-profit) with
extensive international involvement.
Contemporary Causes of Globalization
Globalization is defined as “the inexorable integration of
markets, nation-states, and technologies… in a way that is
enabling individuals, corporations and nation-states to reach
around the world farther, faster, deeper and cheaper than ever
before.”
Contemporary Causes of Globalization
Strategic Imperatives
▪ To leverage core competencies (distinctive strength or advantage) to
increase revenues and profits
▪ To acquire resources and supplies (materials, labor, capital or
technology)
▪ To seek new markets (less dependent on its sales in one country)
▪ To better compete rivals (e.g. Coca-Cola and Pepsi)
Contemporary Causes of Globalization
Environmental Causes
▪ Changes in the political environment (less barrier against foreign trade
and investment – for example, reductions in tariffs and quotas by
major trading powers and major economies)
▪ Technological changes (improvements in communication,
transportation, and information processing)
Global Marketplaces and Business Centers
Global Marketplaces and Business Centers
The Marketplaces of North America: United States
The United States has the world’s third
largest population and fourth largest land
mass, yet it possesses the largest
economy, accounting for 24% of the
world’s GDP in 2017.
Global Marketplaces and Business Centers
The Marketplaces of North America: Canada
Canada has the world’s second largest
land mass. Exports are vital to the
Canadian economy. Canada’s most
important exports reflect its rich natural
resources: forest products, petroleum,
minerals and grain.
Global Marketplaces and Business Centers
The Marketplaces of North America: Mexico, Central America and the
Caribbean
▪ Mexico, the most populous Spanish-speaking nation, opened its markets to foreign
goods and investors (with Canada and the United States, Mexico signed the North
American Free Trade Agreement (NAFTA) resulting to thousand of companies
establishing new factories in Mexico
▪ Several island states with vibrant offshore financing or tourism industries (Aruba,
Bahamas, Cayman Islands, Curacao achieved high-income status while Costa Rica
and the Dominican Republic are classified as upper-middle income)
Global Marketplaces and Business Centers
The Marketplaces of Western Europe: Members of European Union

European Union comprises of 27 countries (after

UK exit on January 31, 2020) that are seeking to
promote European peace and prosperity by
reducing mutual barriers to trade and investment.

From an economic perspective, Germany is EU’s

most important member. Germany possesses the
world’s fourth largest economy after United
States, China and Japan.
Global Marketplaces and Business Centers
The Marketplaces of Western Europe: United Kingdom

The United Kingdom is a major international

trading power, with the fifth-largest economy in
the world. While the United Kingdom is
geographically relatively small, it has a population
of more than 66 million people. Despite the
challenges and uncertainty posed by the effects
of Brexit and COVID-19, the UK remains a critical
market for American exports of goods and
services and a key destination of U.S. foreign
direct investment. Highly developed,
sophisticated, and diversified, the UK is the
second largest economy in Europe.
Global Marketplaces and Business Centers
The Marketplaces of Eastern Europe and Central Asia
Russia is the world’s 11th largest economy.
Russia has moved toward a more market-based
economy over the 30 years since the collapse of
the Soviet Union, but government ownership of
and intervention in business is still common.

As a leading exporter of oil and gas, as well as

other minerals and metals, Russia’s economy is
highly sensitive to swings in world commodity
prices.
Global Marketplaces and Business Centers
The Marketplaces of Asia: China
China is the world’s second largest
economy. China’s vibrant economy has
attracted the attention of firms worldwide.
MNCs saw China as a source of hard-
working, low-cost labor, an increasingly
scarce commodity in their own countries.
The urbanization process further
stimulated China’s growth – China
became the largest consumer in the world
of commodities like cement, cotton, coal,
steel and aluminum.
Global Marketplaces and Business Centers
The Marketplaces of Asia: Japan
Japan is the world’s third largest economy
(used to be second to the United States,
but China surpassed Japan starting 2010).
Japan’s economic success during the past
70 years is the result of the partnership
between the Ministry of International Trade
and Industry and its industrial sector.
Global Marketplaces and Business Centers
The Marketplaces of Asia: Australia and New Zealand

Australia and New Zealand are the traditional

economic powers in Pacific Asia.

Australia is rich in natural resources, its merchandise

exports are concentrated in natural resources such
as gold, iron ore and coal, and in a land-intensive
agricultural goods such as wool, beef and wheat.

New Zealand’s exports are attributable to extensive

pasture lands. These exports include dairy products,
meat and wool.
Global Marketplaces and Business Centers
The Marketplaces of Asia: The Four Tigers (South Korea, Taiwan,
Singapore and Hong Kong)
South Korea relied on
Taiwan economy focuses
tight cooperation between
on high-value-added
the government and large,
industries such as
privately-owned
electronics and
conglomerate (Samsung,
automotive products.
Hyundai, Daewoo, LG)

Singapore is an important Hong Kong’s

port and center for oil attractiveness to
refining, and it provides international businesses
sophisticated lies in its deep, sheltered
communications and harbor and its role as
financial services . entry point to China.
Global Marketplaces and Business Centers
The Marketplaces of Asia: India

India is the world’s second most populous country.

The country started opening its doors to FDI though
1991 market-opening reforms. Today, India has one
of the fastest growing technology and telecom
markets in the world and its GDP growth averaged
over 7% annually since 2000. However, the problem
in India is the existence of red tape which threaten
the flow of foreign capital.
Global Marketplaces and Business Centers
The Marketplaces of Africa and Middle East: South Africa

The African continent is home to 54 countries. These

countries heavily rely on agriculture, which accounts
for more than 40% of the GDP of some countries.

Many experts believe that South Africa will be a

dominant economic power during the 21st century as
the country possesses fertile farmland and rich
deposits of gold, diamonds, chromium, and platinum.
South Africa’s exports, primarily minerals and
agricultural goods, accounted for 30% of GDP.
Global Marketplaces and Business Centers
The Marketplaces of Africa and Middle East

Saudi Arabia is the largest economy in the Middle East, but

Qatar enjoys the highest per capita income.

Middle East region is home to many oil-rich countries but

some oil-rich nations are attempting to diversify their
economies. Dubai, one of the seven United Arab Emirates,
offers foreign investors all the benefits of a foreign trade
zone, an excellent infrastructure and an entry points for
exports to the region.
Global Marketplaces and Business Centers
The Marketplaces of South America: Brazil

Brazil is by far the largest and most important economy in

South America (the 12th largest economy in the world),
accounting for nearly half of the continent’s GDP. Brazil
has assumed regional leadership role in such organization
as the World Trade Organization and the World Bank.

Brazil’s diversified economy runs from heavy industries,

such as aircraft and automotive production, to mineral and
energy resource extraction. It also has a large agricultural
sector that makes it a major exporter of coffee and soy
beans.
References

TEXTBOOK:
▪ Griffin, R. & Pustay, M. (2020). International Business: A Managerial Perspective, 9e. Boston:
Pearson Education.