Introduction to international business DPP20013
COURSE OUTLINE WEEK UNIT ACTIVITIES Registration Week and Orientation - 1 -2 Overview of International Business Quiz 1 3-4 Political And Legal Environment Test 5-7 International Business Organization Design EOC 8-12 Entry and expansion Quiz 2 13-15 The Culture Environment Case Study Presentation 16 Semester Break Final Exam ASSESSMENT PERCENTAGE (%) Continuous Evaluation: 50 a. Quiz (minimum 2) 15 b. Test (minimum 1) 10 c. Presentation (minimum 1) 10 d. End Of Chapter (minimum 1) 5 e. Case Study(minimum 1) 10 Final Examination: 50 TOTAL 100 1. Daniels,JohnD. International Business:Environments &Operations.Pearson Education Limited 2019 2. Fariza Hashim, Abdul Rahim Abu Bakar and Asmat Nizam Abdul Talib (2010). International Business (2nd Edition), Oxford Fajar Sdn. Bhd. 1. Hill W.L. (2014). Global Business Today (9th Edition), McGraw Hill, Richard Irwin, Inc. 2. Rugman M. A. (2009). International Business (5th Edition), Pearson Education, Inc. 3. Ball A. D. et all. (2013). International Business, The Challenge of Global Competition (13th Edition). McGraw Hill, Richard Irwin, Inc.
TOPIC 1: OVERVIEW OF INTERNATIONAL BUSINESS
Definition of international business Term that is used to jointly describe all commercial transactions that take place between two or more nations or across national borders International Business is one whose manufacturing and trade occur beyond the borders of the home country. All the economic activities indulged in cross-border transactions comes under international or external business. It includes all the commercial activities like sales, investment, logistics, etc., in which two or more countries are involved. The company conducting international business is known as a multinational or transnational company.
Domestic business So, what is definition of domestic business???
DEFINITION OF DOMESTIC BUSINESS
Main different of international business and domestic business The main difference between IB and DB is the prohibitive cost involved in international business. Higher costs arise from tariffs imposed on trade, time cost of border delays and cost associated with country differences such as language, the legal system and different culture.
Differentiation of international business and domestic business BASIS FOR COMPARISON DOMESTIC BUSINESS INTERNATIONAL BUSINESS Meaning A business is said to be domestic, when its economic transactions are conducted within the geographical boundaries of the country. International business is one which is engaged in economic transaction with several countries in the world. Area of operation Within the country Whole world Quality standards Quite low Very high Deals in Single currency Multiple currencies Capital investment Less Huge Restrictions Few Many Nature of customers Homogeneous Heterogeneous Business research It can be conducted easily. It is difficult to conduct research. Mobility of factors of production Free Restricted
EXTERNAL environments IN ib ECONOMIC ENVIRONMENT POLITICAL & LEGAL ENVIRONMENT SOCIOCULTURAL ENVIRONMENT TECHNOLOGICAL ENVIRONMENT • Economics explains country differences in costs, currency values and market size. • Economics helps explain why countries exchange goods and services, why capital and people travel among countries in the course of business, and why one country’s currency has a certain value compared to another’s. • Politics often determines where and how IB can take place. Obviously, political disputes particularly military confrontations can disrupt trade and investment. • Domestic and international laws play a big role in determining how a company can operate abroad. International law in the form of legal agreements between countries determines how earnings are taxed by all jurisdictions. • Eg: Trademarks, patented knowledge and copyrights. • The related disciplines of anthropology, psychology and sociology can help managers better understand different values, attitudes and beliefs to help them make operational decisions abroad. • Technological changes also have driven international businesses to escalate through advances in communications, information processing and transportation technology, including the Internet and the World Wide Web (WWW) COMPETITION ENVIRONMENT • Companies’ competitive situations may differ by their relative size in different countries, the competitors they face by country and the resources they can commit internationally.
INTERNAL ENVIRONMENT IN IB 1. CAPITAL 2. RAW MATERIALS 3. PEOPLE 4. PERSONNEL
INTERNAL ENVIRONMENT IN IB 5. FINANCE 6. PRODUCTION 7. MARKETING
Definition of globalization Globalization can be described as an ongoing process in which regional economies, societies and cultures become integrated with an independent on one another. The term is often used to refer particularly to economic globalization through which national economies are integrated into the international economy by mean of trade, foreign direct investment (FDI), capital flows, migration and the spread of technology.
Group activity In a group of 3, describe the drivers of globalization towards international business activities.
DRIVERS OF GLOBALIZATION IN INTERNATIONAL BUSINESS International Business Drivers Economic Market Cost Resources Competition Political Government Legal Liberalization Technological Telecommunicatio n Innovations ICT
MOTIVES FOR ENTERING FOREIGN MARKETS IN IB 1. Increase profits and sales • A company’s sales depend on consumers’ demand. • Any good company could raise greater profits and improve its sales from operating internationally if they enter the market at the right time and place. • Pursuing international sales usually increases the potential sales and potential profits
MOTIVES FOR ENTERING FOREIGN MARKETS IN IB 2. Protect markets, profits and sales • An expansion not only helps a company to keep and protect the same market share, but also increase its share the pie in a newer market. • Access to a larger market, gain market power and maximize production possibilities • International operations may reduce operating risk by smoothing sales and profits and preventing competitors from gaining advantages.
5 KEYS FUNCTIONAL AREAS IN INTERNATIONAL BUSINESS 5 FUNCTIONAL AREAS INTERNATIONAL MARKETING GLOBAL SUPPLY CHAIN MANAGEMENT INTERNATIONAL FINANCE INTERNATIONAL ACCOUNTING INTERNATIONAL HUMAN RESOURCE
INTERNATIONAL MARKETING • Definition: The International Marketing is the application of marketing principles to satisfy the varied needs and wants of different people residing across the national borders. Simply, the International Marketing is to undertake the marketing activities in more than one nation. • Domestic marketing deals with only a single market while international marketing deals with several different countries and markets. ... In domestic marketing, the company can have the same policies and strategies while international marketing requires different strategies in the promotion of their products.
INTERNATIONAL MARKETING cont. • Market orientation is a business philosophy where the focus is on identifying customer needs or wants and meeting them. When a company has a market orientation approach, it focuses on designing and selling goods and services that satisfy customer needs in order to be profitable. • Market segmentation is the process of dividing a market of potential customers into groups, or segments, based on different characteristics. The segments created are composed of consumers who will respond similarly to marketing strategies and who share traits such as similar interests, needs, or locations. For example, common characteristics of a market segment include interests, lifestyle, age, gender, etc. Common examples of market segmentation include geographic, demographic, psychographic and behavioral.
INTERNATIONAL MARKETING cont. • Market targeting is the selection of potential customers to whom a business wishes to sell products or services. The targeting strategy involves segmenting the market, choosing which segments of the market are appropriate, and determining the products that will be offered in each segment. • Small businesses can best identify their target markets through market research. For example, a small hardware company may conduct 300 phone surveys among customers in its various markets. The company may ask these consumers to provide information such as age, education, employment status, household size and income. • The main target customer for McDonald's includes parents with young children, young children, business customers, and teenagers. Perhaps the most obvious marketing for McDonald's is its' marketing towards children and the parents of young children.
CONCEPT OF GLOBAL SUPPLY CHAIN MANAGEMENT • A global supply chain is a dynamic worldwide network when a company purchases or uses goods or services from overseas. It involves people, information, processes and resources involved in the production, handling and distribution of materials and finished products or providing a service to the customer. • Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business's supply-side activities to maximize customer value and gain a competitive advantage in the marketplace.
CONCEPT OF INTERNATIONAL FINANCE International Finance is an important part of financial economics. ... International finance is concerned with subjects such as exchange rates of currencies, monetary systems of the world, foreign direct investment (FDI), and other important issues associated with international financial management.
DIFFERENCE IN THE CONTENT OF FINANCIAL INFORMATION a. Language Difference •Financial statement for different country will use different type of language. •Sometimes, they will use dual language. b. Currency Difference • Accounting currency is the monetary unit used when recording transactions in a company's books. It is also called the reporting currency. ... Often, the accounting currency is in the same currency denomination as the local currency where the company operates. c. Underlying GAAP •GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting. The acronym is pronounced "gap." GAAP specifications include definitions of concepts and principles, as well as industry-specific rules. •Principle of regularity: GAAP-compliant accountants strictly adhere to established rules and regulations. Principle of consistency: Consistent standards are applied throughout the financial reporting process. Principle of sincerity: GAAP-compliant accountants are committed to accuracy and impartiality
INTERNATIONAL HUMAN RESOURCE • International Human Resource Management (IHRM) can be defined as a set of activities targeting human resource management at the international level. It strives to meet organizational objectives and achieve competitive advantage over competitors at national and international level. • IHRM comprises of typical HRM functions such as recruitment, selection, training and development, performance appraisal and dismissal done at the international level and additional exercises such as global skills management, expatriate management and so on.