University Of Finance & Administration
INTERNATIONAL BUSINESS
[NA_IB]
Ing. Pavla Břečková, Ph.D.
pavla.breckova@vsfs.cz
BMCF I TM I Prague
INTERNATIONAL BUSINESS
Part-time course = 4 guided consultations á 90 mins. (winter term 2010)
1. GLOBAL BUSINESS ENVIRONMENT & EXPORT
+ Case study setting
2. WORLD BUSINESS TERRITORIES and EMERGING MARKETS
+ Case study elaboration
3. INTERNATIONAL TRADE & FDI
+ prezentation of the Case study results
4. EUROPEAN MARKETS & PREDISPOSITIONS for working in IB
+ oral exam possible
2.
EXAM terms NA_IB
4 lectures / guided consultations [GC] (per 90 mins)
Completion: exam / 6 credits
Completion CONDITIONS:
 Active participation in the guided consultations
[active listening, discussing, reading, analyzing & interpreting of
economic articles or case study results, presence at GC – 50%]
 Case study elaboration & it’s prezentation
 Oral exam [prove of knowledge in IB]
If unfulfilled:
1. semester elaborated quality paper (methodics in IS – Study materials)
2. and oral or written exam
3.
CASE study / team work
CASE study on one of these topics:
1. BUSINESS TRENDS / opportunities in the next 10 years
Largest threats & opportunities from the point of view of
international business, where it (IB) is going. Areas where it is likely to
find the business opportunities during next 10 years + explain what
brought you to such results.
2. EXPORT STRATEGY
Mid term view (3-5 years). What it should lie in, generally - how
to support export (of CZ enterprises), concrete forms + in which business
and industry areas (if in any / if not in all of them) + explain why
3. Finding the COMPETITIVE ADVANTAGE for the Czech Republic
(and of the CZ businesses). Competitive advantage +
consequently what areas of business and industry should be preferential (if
any) + what to do for succeeding in international business from the point of
view of competitive advantage (micro and macro view). Possibly also what
kind of business environment (or changes in the present one) would help
developing the CZ businesses competitive advantage?
CASE study - elaboration
CASE study on one of these topics:
1. BUSINESS TRENDS / opportunities in the next 10 years
2. EXPORT STRATEGY
3. Finding the COMPETITIVE ADVANTAGE for the Czech Republic
ELABORATION:
 Elaboration in teams per 3-4 people
 Presentation of the results
- ppt possible, cca 10 min., structured way, clear outcomes
(solutions, results)
PREZENTATION:
- 29/11/2010
- up to 10 min. / all the team members should be involved
LITERATURE SOURCES
Woods, M.: International business. Basingstoke, Palgrave, 2001. ISBN: 0333-75979-6.
Wild, J., Wild, K., Han, J.: International business: the challenges of
globalization. 4th ed. – Pearson, Upper Saddle River, 2008. ISBN: 978-013-174743-6.
Griffin, R.W., Pustay, M.W.: International business: a managerial
perspective. 5th int. ed. - Upper Saddle River, Prentice Hall, 2007. ISBN:
0-13-233532-8
Czinkota, M.R., Ronkainen, I.A., Moffett, M.H.: International business. 7th
ed. - Australia. ISBN: 978-981-4246-05-7
PLEASE NOTE:
No need to have the literature permanently at disposal during semester
6.
GLOBAL BUSINESS ENVIRONMENT
 Session one is devoted to a discussion of the global context within which
IB must function in the 21st century.
 The aim is to describe the external framework which exists today and
which will influence company strategies in the international arena.
 There are clearly some factors that will be more important than others in
determining the likelihood of success in international markets:
 The state of the world economy and the rules and
regulations governing INT trade and investment are critical
 The political and social environment also impinges on
businesses, i.e. consideration of the role of culture in IB /
importance of cultural empathy to business success
International ENVIRONMENT
GLOBAL
MACRO
MICRO
8.
INTERNATIONAL BUSINESS [B_IB]
Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz
GLOBAL BUSINESS ENVIRONMENT
If a business is to be succesful – it needs to be aware of:
the GENERAL ENVIRONMENT – 2 levels of understanding
9.
BROAD
SPECIFIC
= relevant to most
companies
[includes economy,
political, tech. world
and sociological
issues]
= important to the
individual business
[includes customer /
supplier relations,
investor requirements,
workplace issues]
IB OPERATIONS
Manufacturing
10.
Assembling
Distribution
Selling
Principle of COMPARATIVE ADVANTAGE
 Absolute advantage
= a country has an absolute advantage over it trading partners if it is able to
produce more of a good or service with the same amount of resources or
the same amount of a good or service with fewer resources (copper, oil)
 Comparative
advantage
(David Ricardo 1772-1823)
= a country has a comparative advantage in the production of a good or
service that it produces at a lower opportunity cost than its trading partners
(relativity).
= units of production (people/machines) will be employed in those
processes in which they are relatively more productive (productivity)
 Opportunity cost (John Stuart Mill)
= is the value of the next-best choice available to someone who has picked
between several mutually exclusive choices
- opportunity costs are not restricted to monetary or financial costs: the real
cost of output forgone, lost time, swag, pleasure or any other benefit
11.
GLOBAL BUSINESS ENVIRONMENT
Awareness of the GENERAL ENVIRONMENT – 2 levels of understanding
12.
BROAD
SPECIFIC
= relevant to most
companies
[includes economy,
political, tech. world
and sociological
issues]
= important to the
individual business
[includes customer /
supplier relations,
investor requirements,
workplace issues]
Factors at BROAD level of IB understanding
– influences on the IB environment
FACTORS with SIGNIFICANT INFLUENCES on IB
(BROAD level of understanding IB)
POLITICAL
ECONOMIC
•
Integration of LDCs and
Centrally planned economies
into INT economy
•
Difficulties (& oppo)
raised by econ.inequalities
•
Role of OECD, WTO,
World Bank, EU commiss.
direction of INT
Trade & Investment
•
Environmental
concerns
•
Economic cycles
in 50 years waves:
Prosperity
Recession
Depression
Recovery
•
•
INFROMATION &
COMMUNICATION wave
(1980/90’)
driven via NETWORKS
(comps, tech based com.,
production, control systems)
•
13.
•
INT economic agreem.
(liberalisated trade & capital
flows) => led to establishing
REGIONAL ECONOMIC
GROUPINGS - 3 main
trading blocks TRIAD
GATT (1947-95) =>WTO
2 particular issues of
Importance for FUTURE:
Labour standards
Environmental issues
TRANSPORTATION
TECHNOLOGICAL
TRIAD – 3 main world trading blocks
NAFTA
•
•
North American Free Trade Agreement
USA, CANADA, MEXICO
EU
•
27 countries
ASEAN
•
•
•
14.
East & South-East ASIA
Indonesia, Malaysia, Philippines, Singapore and Thailand from 1967
Brunei, Burma (Myanmar), Cambodia, Laos and Vietnam
TRIAD – NAFTA
NAFTA
member states
• FREE TRADE
AREA
• From 1994
•
Population:
457 million
Density:
25.1/km2
• GDP/capita:
35,490 USD
• Water 7.4%
15.
TRIAD – EUROPEAN UNION
EU member states
•
Economic
UNION
•
GDP / capita:
39.729 USD
•
Population:
- 501 million
- density:
115.9/km2
•
Water 3.08%
16.
TRIAD – ASEAN
ASEAN
•
Free Trade
Area
•
GDP / capita:
5,131 USD
•
Population:
600 million
(8.8% of world
population)
- density:
135/km2
17.
WORLD BUSINESS
Features / consideration:
–
–
–
–
–
18.
Dollar / Euro ZONE
Business Culture
Law enforcement
Business Barriers
Business threats / opportunities
WORLD BUSINESS CHALLENGES
Few challenges which will need
to be faced by business if expanding
their international operations:
• increased competition arising from a greater
freedom of world trade
• changing distribution of economic activity
across the globe
• acceptance of changes in corporate
structures in order to match the strategic
changes required to survive the global
marketplace
19.
WORLD BUSINESS
possible PROSPECT
The interesting QUESTION
[from an economic perspective]
is what the above means for the future:
• the 19th century was dominated by Great
Britain and Europe as colonial powers
• the 20th century by the USA as the great
economic power
• the 21st century will be controlled by Asia,
and China in particular
20.
ECONOMIC INTEGRATION
Economic (monetary) & Political
union
Common market
Customs union
Free trade area
21.
21.
ECONOMIC INTEGRATION
Description I.
Free Trade Area:
Type of trade bloc, a designated group of countries that have agreed
to eliminate tarrifs, quotas and preferences on most (if not all)
goods and services traded between them.
It can be considered the 1st - 2nd stage of economic integration
(Preferential trading area)
Customs union
Composed of a Free Trade area with a COMMON EXTERNAL
TARIFF. The participants set up common external trade policy,
but in some cases they use different import quotas.
Purposes for establishing a customs union normally include
increasing econ. efficiency + establishing closer political and
cultural ties between members
It is the 3rd stage of economic integration
22.
ECONOMIC INTEGRATION
Description II.
Common / Single market
A single market is a type of trade bloc which is composed of a FTA (for goods)
with common policies on product regulation, and FREEDOM of
MOVEMENTof the FACTORS OF PRODUCTION (capital, labour) and of
enterprise and services.
The physical (borders), technical (standards) and fiscal (taxes) barriers among
the member states are removed to the maximum extent possible. These
barriers obstruct the freedom of movement of the four factors of production.
To remove these barriers the member states need political will and they have
to formulate common economic policies.
A common market is a first stage towards a single market, and may be limited
initially to a free trade area with relatively free movement of capital and of
services, but not so advanced in reduction of the rest of the trade barriers.
Economic union
23.
Type of trade bloc which is composed of a common market with a customs
union.
The participant countries have both common policies on product regulation,
freedom of movement of goods, services and the factors of production
and a common external trade policy.
EXPORT
What is?
–
when you trade something out of the country. In
economics, an export is any good or commodity,
transported from one country to another country in a
legitimate fashion, typically for use in trade.
Why to aim to
world
business
territories?
Why export is
good
for economy /
country?
EMERGING MARKETS
What is an emerging market?
–
–
–
–
–
Emerging markets are nations with social or business activity
in the process of rapid GROW and INDURSTRALIZATION.
Currently, there are 28 emerging markets in the world, with the
economies of CHINA and INDIA considered to be by far the two
largest.
The ASEAN–China Free Trade Area, launched on January 1,
2010, is the largest regional emerging market in the world.
An emerging market economy (EME) is defined as an
economy with low to middle per capita income.
• Such countries constitute approximately 80% of the global
population, and represent about 20% of the world's
economies. The term was coined in 1981 by the World Bank.
One key characteristic of the EME is an increase in both local
and foreign investment (portfolio and direct). A growth in
investment in a country often indicates that the country has
been able to build confidence in the local economy
EMERGING MARKETS [EM]
entering
Special problems related to entering EM
–
Lack of information (problematic data
collection)
EM’s market-potential analysis:
–
–
–
–
–
–
–
–
Market SIZE
Market INTENSITY – estimates wealth, buying
power
Market GROWTH rate – GDP, energy
consumption etc.
Market CONSUMPTION CAPACITY – spending
capacity (% of middle class, core of buying power)
Commercial INFRASTRUCTURE – chanels for
com./distrib.
Economic FREEDOM – free market principles
domination
Market RECEPTIVITY – market ‘openness’
Country RISK – of doing business
VIETNAM
•
•
•
•
•
•
•
80 million people
est. 1945
division into 2 parts (Hanoi /
Saigon – Ho Chi Minh City)
Vietnam war 1963 – 73
Member of ASEAN
Elements of free trade
principles
Dynamically developing
VIETNAM
VIETNAM
+
• competitive advantage:
persistence, hardworking, humility
• education – better avg.in
south Asia (no illiteracy)
• not developed country
but growing rapidly (7-8%)
• relations (1/4 million of
V.studied in CZ –
backbone of V.economy)
29.
• bad infrastructure
• no history and exp. in
industry / engineering
• corruption
• QM missing => low VA
industries, no experience
• business culture (no longterm relations / businesses)
• very low law enforcement
• not fully liberalised envi
VIETNAM
Business doing
– Patience, long meetings / negotiations
– No long contracts – chaos: changing mind,
no reliability in European understanding (effort
to satisfy)
– No business drive in Euro perception
(enq./offers – lengthy via email)
– Personal contacts necessary / local
– No win-win (‘loss of face’ danger)
– Business cards handling
– ‘YES’ even if meant NO
CHINA
CHINA
+
• hard-working
• education – in towns and
industry areas
• no-VA parts (or
normalised) very cheap
• massive gov. investments
in infrastructure
• railways net / HSR (but
due to industrialization too
busy)
32.
• rising prices
• only large series /
payments in advance
• control (necessity of
Chinese citizen in the
business) - not fully
liberalised envi
• quality instability (no
sustainable Q)
• fractionalism
• no ENVI issues / labour
conditions
CHINA
Business doing
–
–
–
–
–
Smiles not usual in business
Nepotism, preference of family members
Patience – time to succeed
Seniority respect
Double check of mutual understanding /
samples precision etc.
– Contract – precision (parameters, samples
– signed etc.)
TAIWAN
TAIWAN
– Republic of China
– Capital: Taipei
– Population: 23
million
- Density: 668 /km2
TAIWAN
+
• extremely hard-working
• good knowledge of English
(EU/USA education)
• industrial tradition (cca 30
years)
• no-VA parts (or normalised)
very cheap
• flexibility & professional
approach (enq./ sampling /
quality)
• ISO norms not a formality
• good infrastructure: airport /
HSR
• fully free market
36.
• raw materials import –
dependence on China
• changing EUR / USD
• status manipulation +
pretending “made in
Taiwan” (PRC reality)
• frequent typhoons
(supplies postponing)
TAIWAN
Business doing
–
–
–
–
–
–
Professional, very polite
Business cards handling
Quick response / sticking on agreed
Willingness to sort out the claims
No need to double-check understanding
In machine production – taking shoes off in
offices
– Strong green teas at business meetings
INDIA
INDIA
– Capital: New Delhi /
largest: Mumbai
– Language: Hindi,
English
– Population:
1,118,521,000
- Density: 361 /km2
- GDP per capita:
3,100 USD
INDIA
+
-
• good education, English
• distinctive ability
• bank sector highly
developed
• secluded economy
(extremely high import
taxes)
• large market with over
1mld. people / growing
purchasing power
• changing EUR / USD
• productivity
40.
INDIA
Business doing
– English
– Demanding negotiations, long
(several hours)
– Half-truths common
– Compromise necessary (Indian bargaining) + keep the positions
(manipulation resistance)
– Agreements – sticking on
INTERNATIONAL BUSINESS - BMCF / TM - winter term 2010
Thank you for your attention
Ing. Pavla Břečková, Ph.D.
pavla.breckova@vsfs.cz