CHAPTER 1
GLOBALISING BUSINESS
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
What is Global Business?
International business
business (firm) that engages in international (cross-border) economic
activities or the action of doing business abroad
global business
business around the globe including both international (cross-border)
activities and domestic business activities
multinational enterprise (MNE)
firm that engages in foreign direct investments
foreign direct investment (FDI)
investments in, controlling, and managing value-added activities in
other countries
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Opening Case:
Thomas Friedman’s notebook
International business has become an integral part of many Businesses. Managing
international business activities – for example coordinating multiple suppliers of 30
major components – is challenging.
This book is about the challenges
faced by managers of firms
operating around the globe. It
explores, what determines the
success and failure of firms
engaged in international business.
How does Dell manage to deliver its computers fast and at low cost?
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Important Economic Terms
•
gross national product (GNP) –
– measured as the sum of value added by resident firms, households,
and government operating in an economy.
•
gross domestic product (GDP)
– total market value of all final goods and services produced within a
country in a given period of time usually a calendar year.
•
gross national income (GNI)
– GDP plus income from nonresident sources abroad – the term used by
the World Bank and other international organizations to supersede the
GNP term.
•
purchasing power parity (ppp) –
– adjustment made to the GDP to reflect differences in the cost
of living.
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
European and Global Business
•
International business (IB) is about:
– businesses (firms) engaging in international (cross-border) economic activities
– the activity of doing business abroad.
•
This book goes beyond traditional IB textbooks in two important ways:
1. We discuss issues worldwide as they are relevant to European businesses
and managers focusing on:.
• business in nearby countries,
• The institutions of the EU,
• small and medium-sized enterprises (SMEs),
• research by European scholars on these issues
2. We go beyond developed economies by devoting extensive space to
emerging markets.
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Triad – North America, Western Europe and Japan
BRIC – Acronym for the emerging economies of Brazil, Russia, India, and China
Group of 20 – Leaders of 19 major countries + EU who meet on biannual basis
to discuss global economic issues
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
A Unified Framework
Our ‘big question’ is:
“What determines the success and failure of firms around the globe?”
To answer this question, we focus on two core perspectives:
1. an institution-based view
2. a resource based view.
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Institutional Perspective
•
Doing business around the globe requires intimate knowledge about the
formal and informal rules of doing business in various countries.
– Some formal rules, such as the requirements to treat domestic and
foreign firms as equals, enhance the potential odds for foreign firms’
success.
– informal rules such as culture, norms and values play an equally
important part in shaping the success and failure of firms around the
globe.
•
an institution-based view suggests that the formal and informal rules of
the game, known as institutions, shed light on what is behind firms’
performance around the globe.
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Resource-based View
•
An Institution based view which views performance as determined only by
external environments has its limitations.
•
The resource-based view focuses on a firm’s internal resources and
capabilities.
•
the “liability of outsidership” infers the more a firm’s origins differ from the
host environment, the less the firm has experience in the host country and
the further away its nearest prior affiliate.
•
Firms as Coca Cola and Microsoft possess firm-specific resources that
enabled them to attain leadership positions around the globe.
– Hence the primary weapon of foreign firms is
overwhelming resources and capabilities that, after
offsetting the liability of outsidership, still result in
some significant competitive advantage.
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
What is Globalization?
Many people talk about globalization, yet they do not necessarily mean
the same thing.
Guillén (2001) defines it as ‘a process leading to greater
interdependence and mutual awareness (reflexivity) among
economic, political and social units in the world, and among actors
in general’
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Trends in Globalisation
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
The Global Economic Pyramid
The Base of the
Pyramid:
The majority of
humanity, about
four billion people,
make less than
€1500 a year.
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Closing Case:
GE innovates from the base of the pyramid
Does it signal news ways of managing innovation, knowledge transfer and corporate
growth in global companies?
The Mac 400 portable ultrasound by GE Healthcare is helping doctors in
rural areas, www.gereports.com
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Chapter Summary
1. Explain the concepts of international business (IB) and global business
• IB is defined as(1) a business (firm) that engages in international (cross
border) economic activities, and (2) the action of doing business abroad.
• This book places special emphasis on the challenges faced by European
businesses, and the challenges of emerging economies.
2. Articulate what you hope to learn by reading this book and taking this course.
• To better compete in the corporate world that will require global expertise.
• To enhance your understanding of what is going on in the global economy.
3. Identify one fundamental question and two core perspectives that provide a
framework for studying this field
• Our most fundamental question is: What determines the success and
failure of firms around the globe?
• The two core perspectives are (1) the institution-based view
• and (2) the resource-based view.
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Chapter summary continued…
4. Participate in the debate on globalization with a reasonably balanced and realistic
view.
• Globalisation has created unprecedented contacts between nations and
cultures, with both positive and negative consequences for individuals.
• Globalisation has been evolving in waves, with a major peak in the late
19th/early 20th century.
• The recent wave of globalisation has accelerated with the rising powers of
emerging economies, yet it remains volatile.
5.
Have a basic understanding of the global economy and broad trends.
MNEs, especially large ones from developed economies, are sizable economic
entities.
6. Draw implications for action and recognize your own biases.
• Globalisation requires business leaders to stay up-to-date with
economic, social and political developments around the world.
• Current and would-be business leaders need to be aware of their
own hidden pro-globalisation biases.
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Critical Discussion Questions
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning
Recommended Readings
For use with International Business
by Mike Peng and Klaus Meyer
1408019566 © 2011 Cengage Learning