CHAPTER 19
NEW HORIZONS
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Copyright © 2011 John Wiley & Sons
1. Understand the many changing
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Learning
Objectives
dimensions that shape international
business
2. Comprehend the future impact of
globalization, its effect on trade
negotiations, and the trade-offs
between international collaboration
and national sovereignty
3. Understand the various factors
needed for the future success of firms
in international markets
4. Be informed about different career
opportunities in international
business
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The International Business
Environment
 The Increased Role of Government
 International trade activity affects domestic policy now
more than ever
 Failures that triggered the economic crisis of 2008:
 Caused
a loss of confidence in “American-style capitalism”
 Demonstrated the resilience and underlying strength of
market economies
 Revealed the importance of emerging markets
 Showed the extent of interconnectedness among markets
worldwide
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U.S. Congress Passes Financial Reform
Congress gave final approval in July 2010 to the most ambitious
overhaul of financial regulation in generations and shifting the
government's focus to the significant task of implementing them.
The final Senate vote came almost two years after the nation's financial
system nearly collapsed. It was a significant legislative victory for
President Obama, who had pledged to rein in the reckless Wall Street
behavior behind the crisis and to right the government regulation that
failed to prevent it.
Source: http://www.washingtonpost.com/wp-dyn/content/article/2010/07/15/AR2010071500464.html
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The Increased Role of Government
 Increased government involvement is needed to
tackle:
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Climate Change
Energy
Consumption
Environmental
Damage
Poverty
Malnutrition
Food Security
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The International Business
Environment
 Governments will need to coordinate policies that affect
the international business environment

Trigger mechanisms are specific acts or stimuli that set off reactions
 As the need for collaboration among governments grows,
it will become more difficult to achieve consensus
 Policymakers need a better understanding of the nature
of international trade issues



Trade balance issues are short-term in nature
Competitiveness issues are much more long term
Short-term issues are often attacked with long-term trade policy
measures, and vice versa
 Governments face an accelerating technological race
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Terrorism
 The challenges resulting from terrorism are among
the highest priority issues for global marketing
decision makers
 Approaches proposed to address root causes of
terrorism include education, improved nourishment,
and the ability to control one’s own destiny
 Terrorism may have exaggerated consequences in
developing nations
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Corruption
 Consequences of Corruption:
Unsafe
Products
Structures
that
Collapse
Shoddily
Built Roads
HighPriced
Purchases
 Globally, corruption is estimated to comprise
between 5 and 20 percent of contract amounts
 Types of corruption payments:
 Paying a government official to do something that should not
be done
 Facilitating payments – Paying someone to do something they
are supposed to do
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Corruption
 U.S. Congress passed the Foreign Corrupt Practices
Act (FCPA) in 1977, making it illegal for publicly held
companies to bribe foreign officials
 In the years since, U.S. business activity declined in
those countries in which government officials
routinely received bribes
 38 countries now subscribe to the OECD rules that
prohibit the bribery of public officials
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Planned versus Market Economies
 International business has facilitated the movement
toward market economies
 Russia and the countries of eastern and central
Europe continue to be attractive for international
investment due to relatively low labor costs
 Market activities alone may not be enough to ensure
the achievement of individual happiness

Companies must respond to changing societal requirements
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Global Frictions and the North-South
Relationship
 The division between developed and less-developed
countries (LDCs) will continue
 According to the World Trade Organization, 2.6
billion people live on less than $2 per day
 Environmental protection will continue to be an
issue
 In light of divergent trends by different groups, three
scenarios are possible:
Continued
International
Cooperation
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Confrontation
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Isolation
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Emerging Markets
 The 2008 economic crisis revealed key differences in
economic vitality among countries


Companies in new markets are rebounding more quickly
China and India experienced GDP growth in 2009 when most
nations were in decline
 Shifts in Economic Power:



China is the player to watch
India will continue to be the other major player
ASEAN nations are developing strength through trade liberalization
 In the western hemisphere, Brazil continues to grow and
progress in trade liberalization
 Uncertainty is an issue in emerging economies
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Focus on Politics: Export Control
Reform is Necessary
Export controls are a principal means of defending
a nation’s high technology advances over its
potential adversaries. As of late, the practices of
many countries are ineffective and lacking
efficiency. National security and economic
interests demand that export control reform
becomes a priority.
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Values: Assimilation or Divergence
 Cultures around the globe will continue to become
more similar to each other
 The use of English as a business language can create
resentment and hostility
 Businesses will shift from western-dominated
management approaches to more inclusive and
integrated ones that include Asian cultural elements
 Ongoing culture clashes will continue, often giving a
boost to fundamentalism
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The International Financial
Environment
 2008 global financial and economic crisis revealed:
 Major vulnerabilities in the functioning of global financial
markets
 Errors in the common wisdom about financial instruments
and risk management
 Weaknesses in regulatory structures
 Given the close links among financial markets,
shocks in one market quickly translate into rapid
shifts in others
 A looming concern is the international debt load
of the United States
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Changes in the Global Financial System
 Emerging markets play a larger role in global finance
 The basis of global economic decision making shifted
from the G-7 to the G-20
 Chinese government and sovereign wealth fund have
emerged as major institutional investors and sources
of capital
 Governments around the world have vastly increased
their roles in the financial system with the
emergence of increased regulations
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The Effects of Population Shifts
 The population discrepancy between less-developed




nations and the industrialized countries will
continue to increase
In the industrialized world a population increase will
become a national priority
In the developing world a population stabilization
will be desired
Population balance between males and females may
become a key concern
Mobility of the workforce has increased, as there are
now more opportunities to pick up and move
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Global Shifts in Population
The dynamics of global population growth differ dramatically across
the major regions of the world. In the developed countries, the current
annual rate of growth is less than 0.3 percent, while in the rest of the
world the population is increasing almost six times as fast. These
demographic differences, combined with widening economic
disparities, are increasing the pressures of migration from the lessdeveloped to the developed world. How the developed countries
respond to the growth of immigration pressures will have a major
impact on their demographic and economic futures.
Source: http://www.rand.org/pubs/research_briefs/RB5044/index1.html
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The Technological Environment
 We are now a global village due to communication





and technology advances
The Internet is democratizing global business,
making it easier for global retail brands to emerge
Technology makes it easier to start a new business
High technology will continue to be controversial
(especially in genetics)
Funding of technological advancement will continue
to be a struggle
Technology advances will increasingly allow
sophisticated new products at lower costs
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Emerging Online Giants
THEY may not have the name recognition of a Google or a Yahoo!, but
they can claim to belong in the same league.
The websites of Digital Sky Technologies (DST) account for more than
70% of page-views on the Russian-language internet. Naspers is
Africa’s biggest media group, both offline and online. And Tencent is
China’s largest Internet company by market capitalization—and the
third-largest in the world.
These firms are increasingly making their presence felt beyond their
home markets. Between them they have invested in dozens of internet
firms around the globe.
Source: http://www.economist.com/node/16539424?story_id=16539424
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Globalization and Friction
 Globalization will continue but will go beyond the
economic dimension to a much broader level
 Trade negotiations will continue to be difficult due to
different goals:
Countries
who Grow
Countries
who Make
Countries
who Create
Countries
who
Coordinate
 Trade negotiations will be shaped by restructured
composition of global trade
 Desire to be self-sufficient results in oversupply in
some areas
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International Planning and Research
 Expected changes
 Firms will need to respond to governmental concerns
 Societal concerns will need to be addressed with greater
expectations for greater corporate social responsibility
 Reputation management will grow in importance
 Increased competition will create a need for more
niches and specialization
 Companies will learn to prepare for the long term
 Governments will demand that private business
practices not increase public costs and serve
customers equally
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International Product Policy
 Environmental concerns will affect product planning
 Firms will have to plan for a final stage in the product life





cycle, the “post-mortem” stage
Businesses can expect increased public attention to
sustainability issues
Worldwide introduction of products will occur more
rapidly
More strategic alliances and partnerships
Due to security concerns firms will seek domestic sources
of supply
A new meaning associated with the made-in dimension
in country-of-origin labeling
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Distribution Strategies
 Traditional distributors are finding new ways to
expand their offering
 New distribution alternatives are becoming available
through changes in technology
 Link to distribution systems is crucial on the
business-to-business level
 More sophisticated distribution systems will
introduce new uncertainties and fragilities into
corporate planning
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International Pricing
 International pricing competition will become
increasingly heated
 Forward pricing – Distributing development
expenses over planned sales volume will become
more difficult to do
 Even for consumer products, price competition will
be substantial
 Firms will work to reduce the price sensitivity of
their customers
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Focus on Culture: Ensuring Student
Safety Abroad
With more than 154,000 U.S. students studying
abroad, ensuring their security has become a major
issue. Universities are not only giving advice, but
also planning responses to crises. Varying degrees
of perceived anti-American sentiment worldwide has
made university administrators very security
conscious.
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Careers in International Business
 Further Training – Graduate school and study abroad
 Employment with a Large Firm


Large MNCs constantly search for personnel
Want language ability and solid business training
 Opportunities for Women in Global Management


There are some advantages for a woman in an overseas position
Larger companies send more women overseas
 Employment with a Small or Medium-sized Firm



Often begins with exporting
Could be importing for small firms
Excellent training ground
 Self-Employment


Being a consultant requires expert knowledge
Specialized services offer opportunities
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