Business School

Seminar 1: Introduction and Globalisation

Housekeeping

• Safety
• Introductions
• Unit outline
Participation
Grade Criteria

Present, not disruptive

1-4  Tries to respond when called on but does not offer much.
 Demonstrates infrequent involvement in discussion.

Demonstrates adequate preparation

 Knows basic text, case or reading content, but does not show evidence of trying to
interpret or analyse them.
 Offers straightforward information (e.g., straight from the text, case or reading),
5-6
without elaboration or very infrequently (perhaps once a class).
 Does not offer to contribute to discussion, but contributes to a moderate degree
when called on.
 Demonstrates sporadic involvement.

Demonstrates good preparation

 Knows text, case or reading facts well, has thought through implications of them.
 Offers interpretations and analysis of issues (more than just facts) to class.
7-8  Contributes well to discussion in an ongoing way - responds to other students' points,
thinks through own points, questions others in a constructive way, offers and supports
suggestions that may be counter to the majority opinion.
 Demonstrates consistent ongoing involvement.

Demonstrates excellent preparation

 Has analysed topic concepts and issues exceptionally well, relating them to other
material (e.g., readings, course handouts, discussions, experiences, etc.).
 Offers analysis, synthesis, and evaluation of issues discussed, eg puts together pieces of
the discussion to develop new approaches that take the class further.
9 - 10
 Contributes in a very significant way to ongoing discussion: keeps analysis focused,
responds very thoughtfully to other students' comments, contributes to the
cooperative argument-building, suggests alternative ways of approaching material and
helps class analyse which approaches are appropriate, etc.
 Demonstrates ongoing very active involvement.
Group assignment instructions
• Your presentation should address the following issues:
– How your group went about researching the company and the extent of information
available. How you came to your conclusions in situations where there was little
information available
– Why is the company competing in the international market, rather than purely in the
domestic market?
• This might include commenting on their strategic objectives or their ability to take
advantage of opportunities as they arise
– How do they go (or did they go) about competing?
• This might include comments about their capacity to analyse potential new markets, their
approach to entering new markets, their use of corporate networks, their reliance on third
parties etc.
– Who are the main stakeholder groups for the company, and how well does the
company meet their needs and expectations?
– Your observations about the company’s performance in relation to:
• Understanding the environment in which it operates
• Planning
• Organising
• Leading and
• Controlling
Case options

• Volkswagon Automotive Germany

• Logitech Electronics Switzerland
• Airbus Aircraft manufacturing France
• Afterpay Fintech Australia
• Haier Home appliances China
• Uniqlo Clothing Japan
• Alibaba Online retail China
Take home assessment

• Similar structure to an open book exam.

• A fictitious company and/or scenario.
• A series of question related to planning, organising,
leading and controlling.
• Should take around two hours. Paper will be made
available after the final lecture – submission date
23/1/23.
Session objectives
• At the end of this session you should be able to:
– Discuss today’s competitive environment in
international business, as well as the major and
emerging players in the global economy.
– Identify key foundation concepts in international
management.
– Define the term “Globalisation”
– Understand some of the drivers of globalisation and
the importance of having a global mindset
International business activity
• The sum total of all business transactions that cross
borders
• Includes trade and foreign direct investment (FDI)
• Includes a firm’s suppliers, distributors, and customers
• Is impacted by a range of national and global regulators
• One estimate of the total value of international business
is:
– US $16.0 trillion in goods annually
– US $ 4.8 trillion in services annually
(Hill, Hult, Wickramasekera, Mackenzie & Gordon 2019)

– US $5.3 trillion in foreign exchange transactions every

day
(Hill, Hult, Wickramasekera, Liesch & Mackenzie 2017)
Changing context
• Traditionally, large companies from developed
countries have been the major players in international
business.
• In recent years, growth in world trade and output has
been growing at fastest rates in developing countries.
– Developing countries are expected to capture 50
percent of world GDP.
– Growth in developing nations has caused total global
GDP to more than double in a decade.
• Small companies have fueled much of the growth in
international business.
International business players

• Multinational corporations
– Businesses that have direct investments abroad in
multiple countries
• Entrepreneurs and small businesses
– Competitive advantage based on customisation,
information and communication technology (ICT)
and network structures make international business
a viable option
Managing in the global marketplace

Managing an international business is different

from managing a domestic business
– Managers face a greater and more complex range of
influences and problems.
– Competition is intense.
– International companies must work within the limits
imposed by government intervention and the global
trading system.
– International transactions require conversion of currency
and are exposed to foreign exchange rate risk.
International management perspectives

• Ethnocentric
– Home country orientation
• Polycentric
– Host country orientation
• Geocentric
– World orientation
A global mindset
• Tolerance
– Sensitive awareness of the beliefs and practices of
other people
– Acceptance that those beliefs which conflict with your
own are equally valid
• International business skill set
– Management knowledge and skills such as designing
effective overseas marketing strategies, managing risk,
communicating across cultures
• Application
– Keeping up with social, political and economic events
and trends
Knowledge and skills fundamentals

• Understanding of the international environment

including risk assessment
• Understanding of culture
• Understanding of regional trade
• Understanding of market entry options
• Cross-cultural interpersonal skills
• Applying those skills to identify opportunities and threats
in the international business environment
Some of the challenges facing
international business
• International Volatility
– Ethnic and religious tensions
– Cultural differences.
– Political uncertainty and upheavals.
– Corruption and fiscal mismanagement.
– Trade disputes and new competitors.
– Volatility in commodity prices (eg energy, iron ore).
– Volatility in currency values.
• Technological Sophistication
– Lack of ICT infrastructure in some locations.
 Globalisation

• The trend towards greater integration

and interdependence among national
institutions and economies
• This term is often used in a very
broad way to cover a range of trends
• Includes globalisation of markets,
production and services
Drivers of globalisation
• Two macro factors seem to underlie the trend
towards greater globalisation
– Declining trade and investment barriers: the decline in
barriers to the free flow of goods, services and capital.
– The role of technological change: particularly the dramatic
developments in recent years in communication,
information processing and transportation technologies.
– The evolution of globalisation has been accompanied by the
development of global institutions to support international
transactions
Drivers of globalisation
Declining trade and investment barriers
• After WWII, the industrialised countries of the West began the
process of removing barriers to the free flow of goods, services and
capital between nations.
• Under GATT, over 100 nations negotiated further decreases in
tariffs and made progress on a number of non-tariff issues.
• Under the WTO, a mechanism now exists for dispute resolution and
the enforcement of trade laws.
• A push to cut tariffs on industrial goods, services and agricultural
products.
• This has increased international trade (both exporting and
importing), world output and foreign direct investment.
Globalisation of markets
• Globalisation of markets
– The convergence of buyer
preferences in markets around
the world
– Global products can allow cost
reductions due to standardisation,
or can permit export opportunities
when home markets are saturated
Globalisation of production
• Globalisation of production
– The dispersal of production
activities to locations around
the world that are:
• Low-cost

• High-quality producers of a
particular good

• Co-located with essential

process inputs
– Offshoring as a form of
outsourcing
Globalisation of services

• Services are typically

consumed at the same
time and place that they
are produced, but
technology can overcome
geographic constraints
– Call centres in India and
Philippines (BPO)
– Data and text exchange
via email or intranet
Attitude of governments to trade
• Fundamentally governments have two options – they
can allow free trade or they can intervene in
international trade
– Free trade
• Pattern of imports and exports that would result in the
absence of trade barriers
– Government intervention is usually for one or more of
the following reasons
• Political

• Economic

• Cultural
Political motives

• To protect jobs
• To preserve national security
• To respond to “unfair” trade
• To gain influence with other countries
Economic motives

• To protect infant industries

• To pursue strategic trade policy
Cultural motives

• To protect cultural integrity in respect of language,

religion or customs
Trade interventions

• Trade Promotion • Trade Restriction

– Subsidies – Tariffs
– Export financing – Quotas
– Foreign trade zones – Embargoes
– Special government – Local content requirements
agencies – Administrative delays
– Currency controls
FDI intervention

• As well as intervening in trade, governments

impose restrictions on, or encourage foreign direct
investment in various sectors of their economy
Globalisation today

• Is globalisation terminally ill?

– Sustainability of locating production in low labour cost
countries
– Brexit
– ‘Trumpist’ attitude toward trade
– European countries’ attitudes to asylum seekers
– Security and terrorism
 The emergence of global
institutions

• Over the past 60-plus years, a number of important

global institutions have been created to:
– help manage, regulate and police the global
marketplace
– promote the establishment of multinational
treaties to govern the global business system.
International Institutions

• Global institutions that support international

transactions
– IMF
– WTO
• Regional institutions that support international
development and trade eg
– Asian Development Bank
International Monetary Fund

• Commenced 22 July 1944

• The IMF describes itself as “an organization of 188
countries (as of April 2012), working to foster global
monetary cooperation, secure financial stability, facilitate
international trade, promote high employment and
sustainable economic growth, and reduce poverty.”
• The organisation's stated objectives are to promote
international economic cooperation, international trade,
employment, and exchange rate stability, including by
making financial resources available to member countries
to meet balance of payments needs.
World Trade Organization
• Commenced 1 January 1995
• Administers GATT and other related agreements
– Goods (GATT), services (GATS), intellectual property
(TRIPS), dispute settlement, policy review
• 164 member countries
• 25 countries have observer status
• Provides a forum for discussion of trade matters and
the settlement of disputes between countries
– Dumping
– Subsidies
General Agreement on Tariffs & Trade

• GATT (1947)
– 23 growing to 128 countries in 1994
– Most favoured Nation status
– 8 rounds of talks in various countries over last 50
years, mostly relating to tariffs
– Uruguay round of talks 1986 – 1994, more wide
ranging, from intellectual property to agricultural
issues, to WTO
– Doha round commenced in 2001, agriculture subsidies
in developing countries – 2005 and 2006 deadlines not
met – 2007 members agreed to resume talks – 2008
talks broke down
Regional Trading Blocs
• The Triad
– Western Europe (EU – 1958, 1992)
– Asia (ASEAN - 1967)
– North America (NAFTA - 1992) / USMCA 2019 -
• Other Regions, eg
– Australia and New Zealand (CER - 1983)
– Commonwealth of Independent States – Armenia,
Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova,
Russia, Tajikistan, Uzbekistan (Turkmenistan, Ukraine,
Georgia)
– South Asian Free Trade Area - Bangladesh, Bhutan,
India, Maldives, Nepal, Pakistan, Sri Lanka - 1.8 billion
– Mercosur - Argentina, Brazil, Paraguay, Uruguay,
Venezuela, Bolivia, plus associates Chile, Columbia,
Ecuador, Guyana, Peru, Suriname
The European Union (EU)
• Largest and most integrated
common market in the world
with 450 million consumers.
• 19 member states have
adopted common currency and
monetary policy.
• Most people still think of
themselves as British, French,
Danish or Italian, and are wary
of giving up too much power to
centralised institutions, or of
giving up their national culture.
• Brexit
Global Managers and the E.U.

• Global managers face two major tasks with respect

to the E.U.
– How firms outside Europe can deal with a market
giving preference to insiders
– How to deal effectively with multiple sets of national
cultures, traditions, and customs within Europe.
North America
• The North American Free Trade
Agreement (NAFTA) between
the United States, Canada and
Mexico has created a single
market of 360 million
consumers.
• Renamed USMCA after
negotiations in 2018
• Has potential for expansion in
South America as trade
liberalisation among Latin
American countries progresses.
Asia

• Association of Southeast Asian

Nations (ASEAN)
– Established 1967
– Originally Indonesia, Malaysia,
Philippines, Singapore, Thailand
– More countries subsequently joined
– Mutual respect for sovereignty, non-
interference in internal affairs, no use
of force, effective cooperation
– Trade issues now becoming more
important
– ASEAN Free Trade Area (AFTA) 31
December 2015
Asia
• Japan and the Four Tigers
– Japan, Singapore, Hong Kong, Taiwan, and South
Korea – provided most of the capital and expertise for
Asia’s developing countries through 1980s and 1990s.
• China
– Now a major economic player in the region with GDP
of nearly US$17 Trillion (IMF, 2021)
• “Bamboo Network”
– Overseas Chinese generate output of US$500bn
China’s ascendance in global trading
• One Belt, One Road
• Favorable Competitive and Market Factors
– Cheap labour and low costs foster competitive intensity.
– 1.3 billion potential consumers.
– Internal growth (infrastructure).
– Developing strong positions in high-tech industries.
• Challenges
– Imported, rather than home-grown “innovation.”
– Weak legal and regulatory systems; reliance on guanxi to
conduct business.
– Limits on foreign competition in “strategic” industries.
– Growing domestic affluence and rising labour costs.
Asia
• Asia-Pacific Economic Cooperation (APEC)
– First forum in Canberra 1989
– 21 member countries
– 50% of world GDP, 40% of trade, 70% of growth
– Operates on open dialogue with no binding agreements
or treaty obligations
– Aims to create an environment for safe and efficient
movement of goods and services across borders
TPP and TPPII
• Trans-Pacific Partnership (TPP)
– 13 November 2011
– Australia, Brunei Darussalam, Chile, Malaysia, New
Zealand, Peru, Singapore, Unites States, Vietnam
– Investor-state dispute settlement issues
• Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (TPP11)
– 8 March 2018
– Separate agreement, but refers to TPP, and includes
most of its provisions
– Australia, Brunei Darussalam, Canada, Chile, Japan,
Malaysia, Mexico, New Zealand, Peru, Singapore and
Vietnam
– 500 million people (6.7% of world), GDP USD$10.6
Trillion (13.3% of world)
Other regions
• The Central and Eastern European bloc, post-
communism, has created a new market of 430 million
people.
• Impediments to business growth include lack of
capitalist structure and systems to reproduce Western
management practices.
• The economic situation and the often unacceptable
level of government intervention discourage foreign
investment in less developed countries (LDCs).
• Assessing the risk-return tradeoffs and keeping up
with political developments in the LDCs are two of the
many demands on international managers.
Bilateral agreements

• Generally cover five areas

– eliminates tariffs and other trade taxes
– countries agree they won't dump products at a
cheap cost.
– governments refrain from using unfair subsidies
– the agreement standardises regulations, labour
standards, and environmental protections.
– They adopt each others' copyright and intellectual
property laws.
Bilateral Agreements - Advantages
• They increase trade between the two countries. They
open markets to successful industries. As companies
benefit, they add jobs.
• The country's consumers also benefit by lower costs.
They can get products that are two expensive without
the agreement.
• They are easier to negotiate than multilateral trade
agreements, since they only involve two countries.
This means they can go into effect faster, reaping
trade benefits more quickly. If negotiations for a
multilateral trade agreement fails, many of the nations
will negotiate a series of bilateral agreements instead.
Bilateral Agreements –
Disadvantages

• They can cause less successful companies to go out

of business. Companies often can't compete with a
more powerful industry in another country.
• When tariffs are removed, companies lose their
protected price advantage. As they go out of
business, workers lose jobs.
• Bilateral agreements can often trigger competing
bilateral agreements between other countries. This
can whittle away the advantages the FTA confers
between the original two nations.
G7 and G20 Countries
G7 G20
• Canada • Argentina • Japan
• France • Australia • Mexico
• Germany • Brazil • Russia
• Italy • Canada • Saudi Arabia
• Japan • China • South Africa
• United Kingdom • France • South Korea
• United States • Germany • Turkey
• European Union • India • United Kingdom
• Indonesia • United States
• Italy • European Union
Examples of other International
Organisations

• Commonwealth of Nations (formerly British

Commonwealth)
– promotion of democracy, human rights, good
governance, the rule of law, individual liberty,
egalitarianism, free trade, multilateralism and world
peace.
• Commonwealth of Independent States (former
Soviet Union Republics)
– coordinating powers in the realm of trade, finance,
lawmaking, and security.