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Unit 1-Globalization and International Business

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35 views4 pages

Unit 1-Globalization and International Business

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danielparajuli1993
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MBS Third Semester International Business

Brief Notes

‘A To Z Online Institute’

Credit : Shrawan Kumar Acharya

Course Details

Unit 1: Globalization and International Business LH 4

Concepts of globalization and international business; Forms of globalization; Reasons for


international business expansion; Drivers of market globalization; Domestic vs. international
business.

1. Concepts of Globalization and International Business

Globalization:

 Definition: Globalization refers to the process of increasing interconnectedness and


interdependence among countries, leading to the integration of national economies,
cultures, and societies into a global network.
 Key Aspects:
o Economic Globalization: Integration of markets, trade, and finance on a global
scale.
o Cultural Globalization: Spread of cultural influences and ideas across borders.
o Political Globalization: The role of international organizations and treaties in
shaping global governance.
o Technological Globalization: Rapid spread and adoption of technology
worldwide.

International Business:

 Definition: International business involves commercial transactions that occur across


country borders. It includes trade of goods and services, foreign investments, licensing,
and franchising.
 Scope:
o Trade: Export and import of goods and services.
o Foreign Direct Investment (FDI): Investment in foreign countries by
establishing operations or acquiring assets.
o Joint Ventures and Strategic Alliances: Partnerships between companies from
different countries.
o Licensing and Franchising: Granting rights to use intellectual property or
business models across borders.

1
2. Forms of Globalization

1. Economic Globalization:

 Involves the integration of national economies through trade, investment, and capital
flows.
 Examples: Global supply chains, multinational corporations, and international trade
agreements.

2. Cultural Globalization:

 The spread of cultural values, norms, and practices across countries.


 Examples: Global popularity of fast food chains, international media, and entertainment
industries.

3. Technological Globalization:

 Rapid dissemination of technology and innovation worldwide.


 Examples: Global internet usage, technology transfers, and the rise of digital economies.

4. Political Globalization:

 The influence of international institutions and governance frameworks on national


policies.
 Examples: The United Nations, World Trade Organization (WTO), and international
treaties.

5. Environmental Globalization:

 Global efforts to address environmental issues and promote sustainable development.


 Examples: International climate agreements, global environmental NGOs, and cross-
border environmental initiatives.

3. Reasons for International Business Expansion

1. Market Diversification:

 Expanding into new markets to reduce dependence on a single market and spread
business risk.
 Companies seek growth opportunities in emerging markets with large consumer bases.

2. Access to Resources:

 Sourcing raw materials, labor, and other resources from different countries.
 Example: Setting up manufacturing units in countries with cheaper labor costs.

2
3. Economies of Scale:

 Achieving cost advantages by expanding operations globally.


 Larger production volumes and global distribution help reduce per-unit costs.

4. Competitive Advantage:

 Gaining an edge over competitors by accessing new markets, advanced technologies, and
skilled labor.
 Example: Leveraging global talent pools for innovation and R&D.

5. Government Incentives:

 Taking advantage of favorable government policies, such as tax breaks, subsidies, and
investment incentives.
 Example: Special Economic Zones (SEZs) offering benefits to foreign investors.

4. Drivers of Market Globalization

1. Technological Advancements:

 The rise of the internet, communication technologies, and transportation improvements


have facilitated faster and more efficient global trade.
 Example: E-commerce platforms enabling global sales.

2. Liberalization of Trade Policies:

 Reduction of trade barriers, tariffs, and quotas by governments to promote free trade.
 Example: Regional trade agreements like NAFTA, now USMCA.

3. Growth of Multinational Corporations (MNCs):

 MNCs have played a significant role in spreading global business practices and products.
 Example: Companies like Coca-Cola and McDonald’s with global operations.

4. Global Consumer Demand:

 Increased awareness and demand for global brands and products.


 Example: The global market for smartphones and luxury goods.

5. International Institutions and Agreements:

 Organizations like the WTO and IMF promote global trade and investment.
 Example: The role of the WTO in regulating international trade rules.

3
5. Domestic vs. International Business

Domestic Business:

 Operates within the borders of a single country.


 Deals with a homogeneous market with relatively consistent consumer preferences and
regulatory environments.
 Faces fewer cultural, legal, and economic complexities.

International Business:

 Operates across multiple countries, dealing with diverse markets, consumer preferences,
and regulatory environments.
 Requires adapting business strategies to local cultures, laws, and economic conditions.
 Faces challenges such as currency exchange rates, political risks, and cultural differences.

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