International Business

International Business

Introduction

The global economy appears during this last century with a powerful economic integration, we have had a very strong international flux of goods and services capital and investments. Also a very expensive network of information and communication worldwide.

Such a situation allows companies to access new resources, new markets and also new sources of founding (ex : sponsorship, loans, stock exchange, government).

All this different points they will make the development of global companies, these companies represent important part of the production in the world but also employment and trade.

The 200 largest companies control almost 30% of the world GNP (Gross National Product).

85% of these companies have their headquarters in the Triade (US-Europe-Japan).

The success of these international groups is due to the extent of their knowledge and know-how  (= savoir faire) of technological, financial and economic field, but also their ability to operate in various area through targeted investments.

I) The factors of globalization of the economy :

a) the opening of borders and the creation of new economic areas :

The gradual removal or lowering of custom barriers allowed large areas of exchange between enterprises. In such areas, specially European Union, we have got also the harmonization of monetary, political and all what is linked with taxes.

European Union is an example of such market, and this EU allows large domestic market.

Other example is ALENA (North American free trade agreement in 1994). Its aim was to eliminate most tariffs and the reduction of non-tariffs barriers.

OMC = WTO = World Trade Organization.

ASEAN (Association of Nations of South Asia) has been built against communism in 1967. Ambition is to contribute to the development of the economy of Asian countries.

The MERCOSUR created in 1990 between Brazil, Argentina, Uruguay and Paraguay. For the opening of the borders. Rise of the economic liberalism.

Such approaches is reducing the power of the state in the world exchanges and the WTO is creating a new order. Means that the rules of WTO has to be applied by all the countries.

It helps to reduce trade barriers, abolition of practices which distort competition (ex : subsidies or dumping).

WTO put the non-discrimination principal has an important rule.

b) Liberalization of financial market :

The financial field is probably the one where the liberalization process is the most advance.

Communication sciences strongly developed in this field. Strong liberal approach.

And finally the regulation approach which has been adopted by the developed countries worldwide, such philosophy is helping the development of this liberalization.

c) The development of new technologies :

The new information and communication technologies are together with biotechnology and nanotechnology the major innovations of this century.

They tend to change deeply the management and the development of all organizations worldwide.

The convergence between all this technologies and the development of internet triggered an exceptional expansion of different forms of communication and access to information and knowledge.

We can also notice a decrease in transaction costs.

The new trade of consumption :

The level of utilization of household equipment goods, for instance telephones, cars, are quite similar.

It's an undeniable fact that the evolution of consumption is now marked by homogenization of food consumption patterns and there is also a growing demand for information on the quality, hygiene, traceability and origin of products. All this linked with health needs.

People are therefor increasingly faced with information of similar companies. Thus, levels of discrepancies (= differences) in term of expectations and needs tend gradually to fade.

Globalization also manifests itself culturally by a certain approximation of cultural references.

For instance, the broadcast of the same movies and Tv shows, also the development of similar musical and artistic trends. Also the same approach if we tend to consider the sports, cultural activities, etc… Maybe more true in the Western world.

However, this trend is not done uniformly and various studies are showing that this homogenization is often accompanied with elements of differentiation and identity claims.  

For instance, in the ethnic approach, religious…

If we are considering a business perspective, the stratification of the society is really significant if it affects the operation of business organizations.

For instance, in American society the high degree of social mobility and the extreme emphasis on individualism limit the impact of class background on business operations.

The same approach is true for Japan.

In a country such as Great Britain, the relative lack of class-mobility and the differences between classes have resulted in the emergence of class consciousness.

d) the optimization of the product life cycle :

In the Ricardian vision of comparative advantages, differences in relative prices were linked to the different conditions of production from one country to another.

The life cycle analysis of products, natural extension of the Ricardian theory, was recently reenforce.

According to this approach, new products appears in the most innovative countries that export them. During their life cycle, these products gradually loose their interest within the country and they are therefore abandoned by innovative countries and product by competitors from other countries which at its turn will export them.

The explanation of this theory is based on the evolution of the product and technology owned by the firm and its consequences in term of competitive advantages.

Chapter 1: The process of internationalization

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