BUSINESS IN A

BORDERLESS WORLD
FHF CHAPTER 3
THE ROLE OF
INTERNATIONAL
BUSINESS
International Business
The buying, selling, and trading
of goods and
services across national
boundaries
✓ Most of the world’s population and two-thirds
of its total purchasing power are outside of
the U.S.

✓ Global marketing requires balancing global

brands with the needs of local consumers
WHY NATIONS
TRADE
Absolute Advantage
 A monopoly that exists when a country
is the only source of an item, the only
producer of an item, or the most
efficient producer of an item
Comparative Advantage
 The basis of most international trade,
when a country specializes in products
that it can supply more efficiently or
at a lower cost than it can produce
other items
INTERNATIONAL
TRADE BARRIERS
Free trade seldom exists
• Economic barriers
• Ethical, legal, and political
barriers
• Social and cultural barriers
• Technological barriers
ECONOMIC
BARRIERS
✓ Industrialized nations are economically
advanced
✓ Less-developed countries have low per
capita income
✓ The physical facilities supporting a country’s
economic activities
✓ The ratio at which one nation’s currency can
be exchanged for another nation’s currency
ETHICAL, LEGAL,
AND POLITICAL
BARRIERS
✓ When entering the international
marketplace, companies must
contend with potentially
complex relationships
✓ Different laws of its own nation,
international laws, and laws of
nation with which it’s trading
✓ Various trade restrictions
✓ Changing political climates
✓ Different ethical values
 LAWS AND
REGULATIONS
 Political instability in many
nations has led to an influx of
refugees. The potential for
POLITICAL political turmoil is a substantial
BARRIERS risk businesses face when
expanding overseas.
SOCIAL AND
CULTURAL
BARRIERS
Research can help minimize the
problems associated with social and
cultural differences
• Differences in the spoken and written
language
• Appropriate body language, posture,
facial expressions, and personal space
may vary by nation
• Family roles may differ in different
societies
• Other nations often have a different
perception of time
• National customs and holidays must be
respected
GETTING INVOLVED
IN INTERNATIONAL
BUSINESS
Dumping
 The act of a country or business
selling products at less than
what it costs to produce them
A company may dump its products
for several reasons:
1. Permits quick entry into a market
2. When the domestic market for a
firm’s product is too small to
support an efficient level of
production
3. Technologically obsolete products
that are no longer salable in the
country
MODES OF ENTRY INTO INTERNATIONAL MARKET
INDIRECT/DIRECT
EXPORTING
Trading Company
A firm that buys
goods in one
country and sells
them to buyers of
another country
LICENSING
A trade agreement in which
one company—the licensor—
allows another company—the
licensee—to use its company
name, product, patents,
brand, trademarks, raw
materials, and/or production
processes in exchange for a
fee or royalty
An attractive alternative to
direct investment when
political stability is in doubt
FRANCHISING
Franchising
 A form of licensing in which a
company—the franchiser —agrees to
provide a franchisee a name, logo,
methods of operation, advertising,
products, and other elements
associated with a franchiser’s business,
in return for a financial commitment
and the agreement to
 conduct business in accord with the
franchiser’s standard of operation
 Allows companies to enter international
marketplace without spending a lot of
investment.
JOINT
VENTURE
The sharing of the costs and
operation of a business
between a foreign company
and a local partner. Used in
countries forbidding direct
investment from foreign
companies or when the
company lacks resources or
expertise
DIRECT
INVESTMENT
The ownership of
overseas facilities
For companies who want
more control and are
willing to invest
considerable resources
May involve new
facilities or the purchase
of an existing operation
INTERNATIONAL
BUSINESS STRATEGIES
Multinational Strategy
 A plan used by international
companies that involves customizing
products, promotion, and distribution
according to cultural technological,
regional, and national differences
Global Strategy
 A strategy that involves standardizing
products (promotion and distribution)
for the whole world as if it were a
single entity
MANAGING IN THE GLOBAL
ENVIRONMENT
JG CHAPTER 6
GLOBAL ORGANIZATIONS
An organization that operates and
competes in more than one country
- Uncertain and unpredictable

Facts about PT Indofood Sukses

Mandiri
- 74% market share in Nigeria (in
2017)
- Joint venture between Tolaram
group Singapura and Salim Group
Indonesia
WHAT IS THE GLOBAL
ENVIRONMENT?
The set of global forces and conditions that operates
beyond an organization’s boundaries but affects a
manager’s ability to acquire and utilize resources

a. Task environment

The set of forces and conditions that originates with

suppliers, distributors, customers, and competitors and
affects an organization’s ability to obtain inputs and
dispose of its outputs. Influence managers daily

b. General environment
 The wide-ranging global, economic, technological,
sociocultural, demographic, political, and legal forces
that affect an organization and its task environment
 TASK
ENVIRONMENT
Suppliers

• Individuals and organizations that provide an organization with the

input resources that it needs to produce goods and services. Raw
materials, component parts, employees

Distributors

• Organizations that help other organizations sell their goods or

services to customers. Powerful distributors can limit access to
markets through its control of customers in those markets.

Customers

• Individuals and groups that buy goods and services that an

organization produces

• A manager’s ability to identify an organization’s main customer

groups, and make the products that best satisfy their particular
needs, is a crucial factor affecting organizational and managerial
success.
TASK ENVIRONMENT
Competitors
• Organizations that produce
goods and services that are
similar to a particular
organization’s goods and services
• Rivalry between competitors is
potentially the most threatening
force that managers deal with
BARRIERS TO ENTRY
Factors that make it difficult and costly for the organization to enter a
particular task environment or industry.

Economies of scale: Cost

advantages associated with
large operations

Brand loyalty: Customers’

preference for the products of
organizations currently existing
in the task environment.

Government regulations that

impede entry.
 THE GENERAL
ENVIRONMENT
Economic Forces
• Interest rates, inflation, unemployment, economic growth,
and other factors that affect the general health and
well-being of a nation or the regional economy of an
organization
Technological Forces
• Outcomes of changes in the technology that managers
use to design, produce, or distribute goods and services
Sociocultural Forces
• Pressures emanating from the social structure of a
country or society or from the national culture
Demographic forces
• Outcomes of change in, or changing attitudes toward,
the characteristics of a population, such as age,
gender, ethnic origin, race, sexual orientation, and
social class
THE GENERAL
ENVIRONMENT
Political and legal forces
• Outcomes of changes in laws and
regulations, such as deregulation of
industries, privatization of
organizations, and increased
emphasis on environmental protection
PROCESS OF GLOBALIZATION
The set of specific and general
forces that work together to
integrate and connect economic,
political, and social systems across
countries, cultures, or geographical
regions so that nations become
increasingly interdependent and
similar
FOUR PRINCIPAL FORMS OF CAPITAL THAT
FLOW BETWEEN COUNTRIES
Human capital
• The flow of people around the world through immigration, migration,
and emigration

Financial capital
• The flow of money capital across world markets through overseas
investment, lending and aid

Resource capital
• The flow of natural resources, parts, and components between
companies and countries, such as metals, minerals, lumber, energy, food
products, microprocessors, and auto parts
Political capital
• The flow of power and influence around the world using diplomacy,
persuasion, aggression, and force of arms to protect the right or
access of a country, world region, or political bloc to the other forms
of capital
EFFECTS OF FREE TRADE ON MANAGERS
• Lowering of trade barriers
• Opened enormous opportunities for
managers to expand the market for their
goods and services
• Allowed managers to now both buy and sell
goods and services globally
• Increased intensity of global competition
such that managers now have a more
dynamic and exciting job of managing
THE ROLE OF NATIONAL CULTURE
Values
Ideas about what a society believes
to be good, right, desirable and
beautiful
Norms
Unwritten, informal codes of conduct
that prescribe how people should act
in particular situations and are
considered important by most
members of a group or organization
HOFSTEDE’S CULTURAL
DIMENSIONS
Power Distance:
Indonesian being dependent on hierarchy, unequal
rights between power holders and non power
holders, leaders are directive.
Individualism:
a high preference for a strongly defined social
framework in which individuals are expected to
conform to the ideals of the society and the in-
groups to which they belong.
Masculinity:
status and visible symbols of success are important
but it is not always material gain that brings
motivation. Often it is the position that a person
holds which is more important to them because of
an Indonesian concept called “gengsi” – loosely
translated to be, “outward appearances”
HOFSTEDE’S CULTURAL
DIMENSIONS
Uncertainty Avoidance:
Javanese culture of separation of internal self
from external self. They will keep smiling and be
polite, no matter how angry they are inside.
Long-term orientation:
show an ability to adapt traditions easily to
changed conditions, a strong propensity to save
and invest, thriftiness, and perseverance in
achieving results.
Indulgence:
Indonesia has a culture of Restraint, a tendency to
cynicism and pessimism, leisure time and control
the gratification of their desires. People with this
orientation have the perception that their actions
are Restrained by social norms and feel that
indulging themselves is somewhat wrong.
DISCUSSION
SESSION