Chapter 1

GLOBALIZATION
LECTURER:
DR WARIS ALI KHAN
 Objectives

◦ 1. Understand the concept of international business and its significance in the global economy.

◦ 2. Explore the processes of globalization in both markets and production, and their impact on
businesses worldwide.

◦ 3. Identify the various forces that drive globalization, including technological advancements,
economic policies, and cultural influences.

◦ 4. Examine the ongoing debate surrounding globalization, considering its benefits, challenges,
and implications for different stakeholders.

◦ 5. Analyze current issues related to the globalization of the world economy, such as trade
tensions, economic interdependence, and sustainability concerns.
 Lecture 1
Today’s Topics
1.1) Introduction to international business
1.2) Globalization of markets and production

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 International Business
International Business

• International Business refers to commercial transactions (sales and

investments) that take place across national borders.
• It involves the exchange of goods, services, technology, capital, and
knowledge among various countries.
 International Business
Importance of International Business
• Facilitates economic growth and development by promoting trade and
investment.
• Allows businesses to access new markets, resources, and talent.
• Enhances cultural understanding and fosters global cooperation.
• Drives innovation and competitiveness in the global marketplace.
 International Business
Motives for International Business
1. Market Expansion: Seeking new opportunities and customers in foreign
markets.
2. Resource Acquisition: Accessing raw materials, labor, and expertise
unavailable domestically.
3. Economies of Scale: Achieving cost efficiencies through production and
distribution on a global scale.
4. Risk Diversification: Spreading business risks across different markets
and regions.
5. Technological Advancement: Leveraging technology to enter and
compete in global markets.

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 International Business
Modes of Entry into International Markets
1. Exporting: Selling products or services produced in one country to
customers located in another country.
2. Licensing: Allowing a foreign entity to use intellectual property rights such
as patents, trademarks, or technology in exchange for royalties.
3. Joint Ventures: Collaboration between domestic and foreign companies
to establish a new entity and share resources, risks, and profits.
4. Foreign Direct Investment (FDI): Acquiring or establishing business
operations in a foreign country, which may involve setting up subsidiaries,
branches, or wholly-owned entities.

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 International Business
Challenges in International Business
1. Cultural Differences: Variations in language, customs, and business
practices.
2. Political Risks: Instability, government regulations, and geopolitical
tensions.
3. Legal and Regulatory Compliance: Navigating complex international
laws and trade agreements.
4. Logistics and Infrastructure: Transportation, communication, and
supply chain management issues.
5. Currency Fluctuations: Exposure to exchange rate volatility and financial
risks.
6. Ethical Dilemmas: Balancing profit motives with corporate social
responsibility.
 International Business
Examples of Successful International Businesses
• Coca-Cola: Operates in over 200 countries, adapting its marketing
strategies to local preferences.
• Toyota: Expanded globally through FDI and strategic alliances, becoming
a leading automotive manufacturer.
• Apple Inc.: Sources components from various countries, manufactures
products in China, and sells them worldwide.
• Unilever: Manages diverse brands and products catering to different
cultural and economic contexts.
• Alibaba Group: Facilitates e-commerce and digital payments, connecting
businesses and consumers globally.
 International Business
Imports
Goods and services purchased abroad and brought into a country
Exports
Goods and services sold abroad and sent out of a country
 Key Players in International
Business
▪Small and medium-sized companies –
the use of modern technology help to increase the competitiveness of
the SMEs in global market.
▪Components of Micro, Small and Medium
Key Players in International Business
Cont.…
Multinational corporation (MNC)
This is a business entity that has direct investments (in the form of
marketing or manufacturing subsidiaries) abroad in multiple countries.
Characteristics Of Multinational
Corporations
1.Global Presence: MNCs have operations in multiple countries, allowing them to
conduct business across borders and access various markets.
2.Diverse Operations: They engage in diverse business activities such as production,
distribution, marketing, and research and development across different countries.
3.Complex Organizational Structure: Due to their global operations, MNCs often have
complex organizational structures with headquarters, regional offices, and
subsidiaries spread across the world.
4.Cultural Diversity: MNCs deal with diverse cultures, languages, and business
practices in the countries where they operate, requiring them to adapt their
strategies and operations accordingly.
Key Players in International Business
Cont.…
Born global firm
This is a company that adopts a global perspective and engages in
international business from or near its inception.
▪Examples
A company started just for import and export business.
Characteristics of Born Global Firms

1.Global Orientation: Born global firms have a strong international orientation from
the outset. Their founders often have a global vision and seek to capitalize on
international opportunities from the early stages of the company's development.
2.Rapid Internationalization: Unlike traditional firms, born global companies rapidly
expand their operations into multiple countries soon after being established. They
leverage technology, networks, and partnerships to quickly establish a presence in
various markets.
3.Technology-driven: Born global firms often rely heavily on technology and digital
platforms to facilitate their international expansion. They leverage tools such as e-
commerce, digital marketing, and cloud-based collaboration to reach customers and
partners globally.
 Videos on International Business

https://www.youtube.com/watch?v=b2m2G8xMmBM

https://www.youtube.com/watch?v=lMdhfBQUhtI
 What is Globalization?
Trend toward greater economic, cultural, political, and
technological interdependence among national institutions
and economies.
 What is Globalization?
Globalization of Markets
Convergence in buyer preferences in markets around the world.
The Globalization of Markets
Globalization of Markets
•Definition: Globalization of markets refers to the merging of historically
distinct and separate national markets into one global marketplace.
•Factors driving market globalization:
• Technological advancements (internet, transportation, communication).
• Reduction in trade barriers (tariffs, quotas).
• Homogenization of consumer tastes and preferences.

•Examples: McDonald's, Coca-Cola, Apple, and Nike have successfully

penetrated global markets.

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The Globalization of Markets
◦ Coca Cola, Starbucks, Sony PlayStation, and McDonald’s hamburgers, IKEA
furniture
The Globalization of Markets
Implications of Market Globalization
•Opportunities:
• Access to larger consumer bases.
• Economies of scale in production and distribution.
• Increased competition leading to innovation and efficiency.

•Challenges:
• Cultural differences and localization requirements.
• Regulatory complexities in different markets.
• Risk of market saturation and over-reliance on global markets.

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Benefits of Globalization of Markets

◦Reduces marketing costs

◦Creates new market
opportunities
◦Levels uneven income streams
◦Local buyers’ needs
◦Global sustainability
Globalization of Production ?
Globalization of Production
•Definition: Globalization of production refers to the sourcing of goods
and services from locations around the globe to take advantage of
differences in cost, quality, and expertise.
•Factors driving production globalization:
• Cost considerations (labor, raw materials, overhead).
• Access to specialized skills and technology.
• Risk diversification and flexibility in supply chains.

•Example: Apple's iPhones are designed in California but manufactured

in China and other countries.

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Globalization of Production ?
Implications of Production Globalization
•Opportunities:
• Cost savings through outsourcing and offshoring.
• Access to specialized resources and expertise.
• Flexibility in responding to market demands and changing conditions.

•Challenges:
• Quality control and coordination across geographically dispersed
facilities.
• Ethical considerations regarding labor standards and environmental
impact.
• Vulnerability to disruptions in global supply chains (natural disasters,
political instability).

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Globalization of Production ?
Benefits of Globalization of Production

◦Access lower-cost workers

◦Access technical expertise
◦Access production inputs