International Business Integration Lecture 2
Lecture 2 n International Business n Definition: Business which crosses international borders
Lecture 2 n Types and sectors of international business n n n n n International trade Foreign manufacturing Transport Tourism Banking, Insurance and Financial services Advertising and Marketing Construction Retailing and Wholesaling Mass Media and Communication International HR Management
Lecture 2 n n Economy is now a GLOBAL ECONOMY with the ITERNATIONALIZATION of MARKETS – products produced by companies; GLOBAL BRANDING and “GLOBALIZATION” International Business is dominated by very large companies which operate across international borders. Companies operate in THREE ENVIRONMENTS: DOMESTIC, FOREIGN and INTERNATIONAL
Lecture 2 Types of International company: 1. Multinational company (MNC) “An organization with multi-country affiliates, each of which forms its own business strategy based on perceived market differences” (e. g. TESCO) 1. Global Company (GC) “An organization which attempts to standardize operations (i. e. manufacturing, marketing, distribution) in all functional areas but that responds to national market differences where necessary” (e. g. Mc. Donalds)
Lecture 2 A global firm searches the world for: n Market opportunities n Threats from competitors n Sources of products, raw materials and finance n Human resources
Lecture 2 n The Legal, Political and Cultural Context of International Business Managers must be aware of the legal, political and cultural context in which international business is carried out, since it will affect the success of business dealings
Lecture 2 International Law n Public International Law – includes those rules of law which govern the relations of states inter se (among themselves), particularly rules of war. n Private international law – (sometimes called Conflict of Laws) refers to that law which is applied in determining, for example, what system of State law should be applied in English courts in cases containing a ‘foreign’ element.
Lecture 2 Thus, Mr. Brown, a British citizen, makes a contract in Rome with Mr. Boussac, a Frenchman, for a supply of footballs to a team in Madrid. If Mr. Brown now takes action against Mr. Boussac in an English court of law for alleged breach of contract, the court will have to determine which law to be applied: English, Italian, French or Spanish. The rules of Private International Law will have to be consulted.
Lecture 2 Examples of Public International Law: n The United Nations and its Agencies n NATO n The European Union and its Treaties n WTO n Etc.
Lecture 2 The Cultural Context of International Business n Understanding the cultural aspects of international business is of crucial importance and is a challenge broadly speaking. Culture can be defined as: n “A system of learned behavior within which the individual lives and works. ”
Lecture 2 n n n Nevertheless, culture has to be “lived”, it cannot be “learned” National cultures can be seen as ‘group’ – China, Japan, India, Italy or ‘individualistic’ – USA, UK, Germany Culture is influenced by cultural, historical and political experience
Lecture 2 Elements of Culture: 1. Language: verbal and non-verbal 2. Religion 3. Values, Manners and Customs 4. Material Elements: economic infrastructure, health and educational system 5. Aethetics: sex in advertising, use of colors 6. Educational level 7. Social institutions: family, trade unions, colleagues, etc.
Lecture 2 How to deal with Cultural Diversity? Two schools of thought: 1. Globalization is a fact of life – “Business is business, around the world” 1. 2. The Pepsi approach. Cultural differences remain and are far from converging – Islamic boycott of Coke over Iraq war Companies must tailor business to different cultures
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