INTERNATIONAL BUSINESS

By

Dr. I WAYAN TANTRA, S.E.,M.M.

WHAT IS INTERNATIONAL BUSINESS?
International business as the study of
transactions taking place across national
borders for the purpose of satisfying the needs
of individuals and organisations.

The ‘classical’ view of international business has

been international trade, in the form of
exporting and importing.

International trade The exchange of goods and

services across international borders

Trade is about transactions between actors that

are physically located in different places.
According to the United Nations Conference on
Trade and Development (UNCTAD) the exports of
goods and services in 2017 was worth US$22,7 trillion,
an almost six-fold increase from US$4 trillion in 1990.
Multinational Enterprise (MNE)
Multinational Enterprise (MNE) is a multi-plant
firm that controls and coordinates operations in
at least two countries; or a firm that engages in
value-added international business activities,
that has affiliates in more than one country,
and whose operations and activities in different
locations are actively coordinated by one or
more headquarters organisations

International firms are responsible for about

one-third of global trade, much of which moves
between affiliates: that is, these goods and
services are being exchanged across borders
but within the same MNE.
Globalization
What Is Globalization?
Understand what is meant by the term globalization.
As used in this text, globalization refers to the shift
toward a more integrated and interdependent world
economy. Globalization has several facets, including
the globalization of markets and the globalization of
production.

The Globalization Of Markets

The globalization of markets refers to the merging of
historically distinct and separate national markets
into one huge global marketplace. Falling barriers to
cross-border trade and investment have made it
easier to sell internationally. It has been argued for
some time that the tastes and preferences of
consumers in different nations are beginning to
converge on some global norm, thereby helping
create a global market.2
THE GLOBALIZATION OF PRODUCTION
The globalization of production refers to the sourcing
of goods and services from locations around the
globe to take advantage of national differences in
the cost and quality of factors of production (such as
labor, energy, land, and capital).

The Emergence of Global Institutions

The World Trade Organization (WTO) (like the GATT
before it) is primarily responsible for policing the world
trading system and making sure nation-states adhere
to the rules laid down in trade treaties signed by WTO
member states. As of 2019, 164 nations that
collectively accounted for 98 percent of world trade
were WTO members, thereby giving the organization
enormous scope and influence. The WTO is also
responsible for facilitating the establishment of
additional multinational agreements among WTO
member states.
The Outcomes Of Globalisation
 Drivers of Globalization
1. DECLINING TRADE AND INVESTMENT BARRIERS
International trade occurs when a firm exports
goods or services to consumers in another country.
Foreign direct investment (FDI) occurs when a firm
invests resources in business activities outside its
home country.
2. ROLE OF TECHNOLOGICAL CHANGE
The lowering of trade barriers made globalization of
markets and production a theoretical possibility.
Technological change has made it a tangible
reality. Every year that goes by comes with unique
and often times major advances in
communication, information processing, and
transportation technology, including the explosive
emergence of the “Internet of Things.”

Implications for the Globalization of Production

As transportation costs associated with the globalization
of production have declined, dispersal of production to
geographically separate locations has become more
economical. As a result of the technological innovations
discussed earlier, the real costs of information processing
and communication have fallen dramatically in the past
two decades. These developments make it possible for a
firm to create and then manage a globally dispersed
production system, further facilitating the globalization of
production.
Understanding Interdependence In
Globalisation

Interdependence Mutual reliance between

groups of actors; individuals, firms, countries or
regions

Interdependence is the essence of

globalisation, and as usual, it is a continuum,
with firms, individuals and countries
demonstrating different degrees of
interdependence.

The key issues are the degree of centrality and

reciprocity.

Reciprocity refers to the degree to which the

reliance is two-way.
Regional Integration
One of the most visible outcomes of globalisation is
economic integration, and this is happening naturally
as a result of growing interdependence.

‘natural’ integration takes place because of growing

MNE and trading activities, and the greater
interdependence due to supranational
organisations, common institutions, etc., there is also
a process of formal regional integration.

There are several similarities between

globalisation and regional integration. Both are
processes and closely associated with cross-
border economic activity, although
globalization is more a consequence of
increased cross-border activity, while regional
integration is intended to cause it.
Both globalisation and regional integration are
believed to provide opportunities for more rapid
economic growth, associated in large part with
increased FDI and Trade
Mapping Globalisation
Implications for the Globalization of Markets
In addition to the globalization of production, technological
innovations have facilitated the globalization of markets.
Low-cost global communications networks, including those
built on top of the Internet, are helping create electronic
global marketplaces. As noted earlier, low-cost
transportation has made it more economical to ship
products around the world, thereby helping create global
markets. In addition, low-cost jet travel has resulted in the
mass movement of people between countries.

THE CHANGING WORLD OUTPUT AND WORLD

TRADE PICTURE
THE CHANGING FOREIGN DIRECT INVESTMENT
PICTURE
THE CHANGING FOREIGN DIRECT INVESTMENT
PICTURE

THE CHANGING NATURE OF THE MULTINATIONAL

ENTERPRISE
REFERENCE
1. Hill, C.W.L. (2021). International Business
Competing in the Global Marketplace 13th edition.
McGraw Hill Education, New York
2. Peng, M., Meyer, K. (2016). International Business,
2nd Edition. Cengage Learning, USA