Electronic Commerce and Export-Import Management in RMG

Lecture Outline
1. International Business
2. Factors Contributing to Rapid Growth of
International Business
Chapter-1 3. Globalization
Course Introduction, Part-2 4. The positive effects of globalization
Course Title: Electronic Commerce and Export-Import 5. The negative effects of globalization
Management in RMG
6. Why Companies Engage in International
Course Instructor : Business?
S.M. Akterujjaman
Associate Professor
Dept. of Business Administration, BUFT
7. Modes of Operation in International
E-mail: smakter2010@gmail.com
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Business. 2

Chapter Objectives International Business

• To define globalization and international International business consists of all

business and show how they affect each other commercial transactions—including
• To understand why companies engage in sales, investments, and transportation—
international business and why international
business growth has accelerated that take place between two or more
• To discuss globalization’s future and the major countries.
criticisms of globalization
• To become familiar with different ways in which Increasingly foreign countries are a
a company can accomplish its global objectives
• To apply social science disciplines to source of both production and sales for
understanding the differences between domestic companies.
international and domestic business
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Electronic Commerce and Export-Import Management in RMG

Factors Contributing to Rapid Growth of Increase in and Expansion of

International Business
1. Increase in and expansion of technology
Technology
2. Liberalization of cross-border trade and
resource movements • Vast improvements in transportation and
3. Development of services that support communications technology—including the
international business development of the Internet—have
4. Growing consumer pressures significantly increased the effectiveness
5. Increased global competition and efficiency of international business
6. Changing political situations operations.
7. Expanded cross-national cooperation
8. Acquiring resources and supplies
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9. Seeking new markets

Liberalization of Cross-Border Development of Services That

Trade and Resource Movements Support International Business
• Over time most governments have lowered
restrictions on trade and foreign investment • Services provided by government, banks,
in response to the expressed desires of their transportation companies, and other
citizens and producers. In addition, the businesses greatly facilitate the conduct
General Agreement on Tariffs and Trade, the and reduce the risks of doing business
development of economic blocs such as the internationally.
European Union, and other such facilitating
mechanisms has provided increased access
to many foreign markets.
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Electronic Commerce and Export-Import Management in RMG

Growing Consumer Pressures

Increased Global Competition
• Because of innovations in transportation • The pressures of increased foreign
and communications technology, competition often persuade firms to
consumers are well-informed about and
expand internationally in order to gain
often able to access foreign products.
access to foreign opportunities and to
Thus competitors the world over have
improve their overall operational flexibility
been forced to respond to consumers’
and competitiveness.
demand for increasingly higher quality,
more cost-competitive offerings.

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Expanded Cross-National
Changing Political Situations
Cooperation
• Governments have increasingly entered into cross-
• The transformation of the political and national treaties and agreements in order to gain
economic policies of the former Soviet Union reciprocal advantages for their own firms, to attack
and the People’s Republic of China has led problems jointly that one country cannot solve
to vast increases in trade between those alone, and to deal with areas of concern that lie
countries and the rest of the world. In outside the territory of all countries. Often, such
addition, the improvements in national cooperation occurs within the framework of
infrastructure and the provision of trade- international organizations such as the United
related services by governments the world Nations, the International Monetary Fund, the
over have further led to substantial increases World Trade Organization, and the International
in foreign trade and investment levels. Bank for Reconstruction and Development (World
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Electronic Commerce and Export-Import Management in RMG

Acquiring resources and supplies Seeking new markets

Another important reason of going for foreign seeking a new market is also a common motive for
trade is to acquire resource such as materials foreign trade. When a firm’s domestic market becomes
labor, capital or technology. In some cases, matured it won't be difficult to generate high revenue
and profit growth. For example: the market for tooth
organizations must go to foreign sources because paste in Canada, the united states and the European
certain products or services are either scarce union can be classified as mature most people there
scarce or unavailable locally. who understand the value of oral hygiene and have the
financial resources to regularly purchase toothpaste.

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Globalization
Globalization has expanded the resources,
products, services and markets available to people.
The broadening set of interdependent relationships Globalization is the ongoing process
among people from different parts of a world that that deepens and broadens the
happens to be divided into nations. It is the process relationships and interdependence
of growing interdependence among countries. among countries. International
People get more variety, better quality or lower Business is a mechanism to bring
prices because of globalization. However, these about globalization.
connections between supplies and markets would
not happen without international business.
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Electronic Commerce and Export-Import Management in RMG

5. The positive effects of globalization

5. The positive effects of
(1) Changed food supply
globalization
• Food supply is no longer tied to the seasons. We can buy food
anywhere in the world at any time of the year.

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5. The positive effects of globalization 5. The positive effects of globalization

(2) More efficient markets (3) Division of labour
• Efficient markets should be what every economy strives for. • Because MNCs search for the cheapest locations to
Essentially, the sign of an efficient market is where there is an manufacture and assemble components, production processes
equilibrium between what buyers are willing to pay for a good may be moved from developed to developing countries where
or service and what sellers are willing to sell for a good or costs are lower.
service.
• If you can improve the way you produce a good or service by
doing things such as outsourcing certain processes or buying
from an overseas supplier that offers discounts, you can then
afford to lower your selling price which results in increased
demand and affordability.

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Electronic Commerce and Export-Import Management in RMG

5. The positive effects of globalization 5. The positive effects of globalization

(4) Increased standard of living (5) Benefits of the consumer
• Hundreds of thousands of people around the world now have • Greater competition among producers resulting from
jobs, have started their own businesses and can provide globalization may lead to increased consumers’ choice.
comfort for their families because of globalization. For Consumers now enjoy improved quality and lower prices for
example due to globalization many MNCs have increased their several products.
investments in BD. This means thousands of people are getting • Consumers can get new goods more quickly.
highly paid jobs and enjoy a higher standard of living than was
possible earlier.
• It also helps countless people in developing countries to
sustain their families’ livelihoods.

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5. The positive effects of globalization 5. The positive effects of globalization

(6) Spread of technical know-how (7) Spread of education
• While it is generally assumed that all the innovations • One of the most powerful effects of globalization is the spread
happen in the Western world, the know-how also comes of education. A good example of that is how the American
into developing countries due to globalization. managers went to Japan to learn the best practices in the field
of mass production and incorporated that knowledge in their
own production units.

BUFT MoU with China Wuhan Textile University

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Electronic Commerce and Export-Import Management in RMG

6. The negative effects of globalization 6. The negative effects of globalization

(1) Less job security
• In the global economy jobs are becoming more temporary and
insecure.

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6. The negative effects of globalization 6. The negative effects of globalization

(2) Damage to the environment (3) Resource scarcity
• More trade means more transport which uses • In some regions companies overuse natural resources like
more fossil fuels and causes pollution. water and soils
• Climate change is a serious threat to our
future.

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Electronic Commerce and Export-Import Management in RMG

5. Threats to National Sovereignty

6. The negative effects of globalization
• Many citizens fear that a country’s participation in
(4) Cultural impacts multilateral agreements will diminish its sovereignty
• Websites such as YouTube connect people across the planet. and freedom from external control and curtail its
As the world becomes more unified, diverse cultures are being ability to act in its own best interests. In particular,
ignored.
people in small countries worry that dependence on
• MNCs can create a monoculture as they remove local
larger countries for sales and/or supplies, as well as
competition and thereby force local firms to close.
the presence of large international firms, will make
them vulnerable to the demands of parties against
which they are essentially powerless. In addition,
people the world over are concerned that
Replacing globalization will bring the homogenization of
products and traditional ways of life—including
language and social structure.
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6. Economic Growth
• Clearly, economic growth can result in both
positive and negative consequences, including • 7. Off-shoring: The transferring of
damage to society and the environment. While production abroad – is controversial in
globalization can, in fact, support the terms of who benefits when costs are
sustenance of natural resources and the reduced and whether the process
maintenance of an environmentally sound exchanges good jobs for bad ones.
planet, unless the positive consequences of
globalization keep pace with the negative costs
of economic growth, the sustainability of
economic improvement on a worldwide basis
will, at best, be problematic. 1-31 1-32

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Electronic Commerce and Export-Import Management in RMG

Why Companies Engage in International Modes of Operation in International

Business? Business
• To Expand Sales: pursuing international sales
increases the potential market and potential • Merchandise exports and imports
profits • Service exports and imports
• To Acquire Resources: may give companies  Tourism and Transportation
lower costs, new and better products, additional  Service Performance
operating knowledge  Asset Use
• To Diversify or Reduce Risks: international • Investments
operations may reduce operating risk by  Foreign Direct Investment (FDI)
smoothing sales and profits, preventing  Portfolio Investment
competitors from gaining advantage
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Merchandise Exports and Service Exports and Imports

Imports • Service exports and imports represent
intangible (invisible), i.e., non-
• Merchandise exports consist of tangible merchandise, products.
(visible) products, i.e., goods that are sent • Tourism and Transportation: When an
to a foreign country for use or resale. American flies to Paris on Air France and
Merchandise imports consist of tangible stays in a French-owned hotel, payments
products, i.e., goods, brought into a made to the airline and the hotel represent
country for use or resale. service export earnings (income) for
France and service import payments
(expenses) for the United States.
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Electronic Commerce and Export-Import Management in RMG

• Use of Assets: Firms may receive export

• Performance of Services: Some earnings, i.e., royalties, by allowing foreign
services, such as banking, insurance, clients to use their assets (trademarks, patents,
rentals, engineering, turnkey operations copyrights, and other expertise). Licensing
(construction, performed under contract, of agreements are contracts that represent a
facilities that are transferred to the owner transaction in which a licensor sells the rights to
when they are ready for operation), and the use of its intellectual property to a licensee
management contracts (arrangements in in exchange for a fee or royalty. Franchising is
which one firm provides personnel to a special form of licensing in which the
perform management functions for franchisee is granted additional control over the
another), net companies export earnings operation in exchange for the provision of
in the form of fees paid by a foreign client. additional support and services by the
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franchisor. 1-38

Investments
• Foreign investment consists of the ownership of
foreign property for the purpose of realizing a
financial gain via profits, growth, dividends, and/or • Portfolio Investment: Portfolio
interest. investment is a no controlling interest in a
• Foreign direct investment (FDI) occurs when an venture made in the form of either debt or
investor gains a controlling interest in a foreign equity. Often, firms use portfolio
operation. Sole ownership represents 100% investment as part of their short-term
ownership of an operation; however, effective financial strategy.
control can be realized with just a minority stake if
the remaining ownership is widely dispersed. A
joint venture represents a direct investment in
which two or more parties share ownership. 1-39 1-40

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