THE NATURE OF INTERNATIONAL BUSINESS

THE NATURE OF INTERNATIONAL BUSINESS

Globalization Globalization describes the mobility of goods, services, labor, technology and capital throughout the world. Initial processes that have categorized globalization:- 1. Industrialization/Deindustrialization. The North industrialized while the South deindustrialized. In the second wave, the South industrialized while the North deindustrialized. 2. International divergence/convergence. The first wave saw the North & South incomes diverge, while the second wave witnessed a convergence. 3. Trade. International trade in goods and factors exploded in the first wave; the second wave has witnessed the opposite. 4. Growth take-off. 5. Urbanization 6. Internal divergence

Need for 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 Facilitates the mobility of labor, capital, and technology Provides challenging employment opportunities Reallocates resources, makes preferential choices, and shifts activities to a global level

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.

Types of International Business Joint Venture Cooperative effort among two or more organizations that share a common interest in a business enterprise. Management contract an arrangement by which one firm provides management in all or specific areas to another firm. Licensing a contractual arrangement in which one firm grants access to its patents, trade secrets or technology to another for a fee. Franchising a form of licensing in which one firm contracts with another to operate a certain type of business under an established name according to specific rules.

Types of International Business Export Import Trade Foreign Direct Investment Licensing Franchising Management Contracts

International Business and the Roman Empire Pax Romana, or Roman Peace ensured that merchants were able to travel safely and rapidly. Common coinage simplified business transactions. Rome developed a systematic law, central market locations, and an effective communication system; all of which enabled international business to flourish in the Roman Empire. The growth of the Roman Empire occurred mainly through the linkages of business

International Business and the Roman Empire The decline of the Roman Empire can be attributed in part to: infighting and increasing decadence the Pax Romana being no longer enforced the decline of use and acceptance of the common coinage declining levels of communication As a result, former Roman allies cooperated with invaders.

United States: A Global Leader The United States has developed a world leadership position due to: a) Its use of market-based transactions in the Western world b) A broad flow of ideas, goods, and services across national borders c) An encouragement of international communication and transportation d) Pax Americana, an American sponsored and enforced peace

The Smoot-Hawley Act In the 1930 s, the U.S. passed the Smoot-Hawley Act, which raised import duties to reduce the volume of goods coming into the U.S. The act was passed in the hope that it would restore domestic employment. The result was a worldwide depression and the collapse of the world financial system.

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.

Global Links Today International business has created a network of global links that bind countries, institutions, and individuals with trade, financial markets, technology, and living standards. For example, a reduction in coffee production in Brazil would affect individuals and economies worldwide.

Recent Changes in International Business Total world trade declined dramatically after 2000, but is again on the rise. The rate of globalization is accelerating. Regionalization is taking place, resulting in trading blocs. The participation of countries in world trade is shifting.

The Composition of Trade Between the 1960 s and the 1990 s the importance of manufactured goods increased while the role of primary commodities (i.e. rubber or mining) had decreased. More recently, there has been a shift of manufacturing to countries with emerging economies. There has been an increase in the area of services trade in recent years.