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International Management (Fach) / Definitions (Lektion)

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• International Business The performance of trade and investment activities by firms across national borders.
• Elements of International Business -Globalization of Markets-International Trade-International investment-international business risks-participants: firms, intermediaries, facilitators, governments-foreign market strategies.
• Globalization of Markets ongoing economic integration and growing interdependency of countries worldwide.
• Internationalization the tendency of countries to systematically increase the international dimension of their business activities.
• International Trade Exchange of products and services across national borders, typically through exporting and importing.
• Importing/ Global Sourcing Procurement of products or services from suppliers located abroad for consumption in the home country or a third country.
• Exporting Sale of products or services to customers located abroad, from a base in the home country or a third country.
• The four risks of International Business Cross-Cultural RiskCountry/Political RiskCurrency RiskCommercial Risk
• Multinational Enterprise (MNE) A large company with substantial resources that performs various business activities through a network of subsidiaries and affiliated located in multiple countries.
• Small and Medium Size Enterprise (SME) A company with 500 or fewer employees
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• Born Global Firms A young entrepreneurial company that initiates international business activity early in its evolution, moving rapidly into foreign markets.
• Drivers of Market Globalization -Worldwide reduction of barriers to trade and investment-Market liberalization and adoption of free markets-Industrialization, economic development, and modernization-Integration of world financial markets-Advances in technology
• Dimensions of Market Globalization -Integration and interdependence of national economies-Rise of regional economic integration blocs-Growth of global investment and financial flows-Convergence of buyer lifestyles and preferences-Globalization of production activitiesGlobalization of services
• Societal Consequences of Market Globalization -Contagion: Rapid Spread of financial or monetary crises from one country to another -Loss of national sovereignty-Offshoring and the flight of jobs-Effect on the poor-Effect on the natural environment-Effect on natural culture
• Firm-Level consequences of market globalization: internationalization of the firm's value chain. -Countless new business opportunities for internationalizing firms-New risks and intense rivalry from foreign competitors-More demanding buyers who source from suppliers worldwide-Greater emphasis on proactive internationalization-Internationalization of firm's value chain.
• Value Chain The sequence of value-adding activities performed by the firm in the course of developing, producing, marketing, and servicing a product.
• What factors have contributed to the integration of world economies? making it possible to raise capital, borrow funds, and engage in foreign currency transactions.
• What are the drivers of globalization? -Worldwide reduction of barriers to trade and investment-Market liberalization and adoption of free markets-Industrialization, economic development, and modernization-Integration of world financial markets-Advances in technology
• Societal consequences of globalization -Contagion: Rapid Spread of financial or monetary crises from one country to another -Loss of national sovereignty-Offshoring and the flight of jobs-Effect on the poor-Effect on the natural environment-Effect on natural culture
• Firm-level consequences of globalization: so what does this all mean for companies? -Countless new business opportunities for internationalizing firms-New risks and intense rivalry from foreign competitors-More demanding buyers who source from suppliers worldwide-Greater emphasis on proactive internationalization-Internationalization of firm's value chain.
• Entry Strategies -Exporting-FDI-Franchising-Licensing
• MNEs often enter foreign markets through FDI (Because they have the cash)
• Licensor A firm that enters a contractual agreement with a foreign partner to allow the partner the right to use certain intellectual property for a specified period of time in exchange for royalties or other compensation.
• Franchisor A firm that grants another the right to use an entire business system in exchange for fees, royalties, or other forms of compensation.
• Foreign Direct Investment (FDI) MNE Operates in multiple counties, especially in Asia, Europe, and North America, by setting up production Plants, marketing subsidiaries , and regional headquarters.
• Exporting the sale of products or services to customers located abroad, from a base in the home country or a third country.
• Facilitators Independent individuals or firms that assist the internationalization and foreign operations of focal firms and make it possible for transactions to occur efficiently, smoothly, and on time. Have special expertise such as legal advice, banking, and customs clearance that assists focal firms in the performance of international business transactions.
• Cross-cultural risk A situation or event in which a cultural misunderstanding puts some human value at stake.
• Ethnocentric orientation Using your own culture as the standard for judging other cultures.
• Polycentric orientation A host-country mindset in which the manager develops a strong affinity with the country in which she or he conducts business
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• Geocentric orientation A global mind-set in which the manager is able to understand a business or market without regard to country boundaries.
• Comparative Advantage Superior features of a country that provide unique benefits in global competition, typically derived from either natural endowments or deliberate national policies.
• Competitive Advantage Distinctive Assets or competencies of a firm that are difficult for competitors to imitate and are typically derived from specific knowledge, capabilities, skills, or superior strategies.
• National Competitive Advantage Comparative+Competitive AdvantageThe competiveness of a countryin a particular industry results from conditions or elements on both the country (comparative advantage) and the firm level (competitive advantage)
• Determinants of National Competitive Advantage (Porter's Diamond Model) National prosperity is most often created, not inherited. It does not simplygrow out of a country's naturalendowments, its labor pool, its interestrates, or its currency's valueRather, a nation's competitivenessdepends on the capacity of its industry to innovate and upgrade.
• Porter's Diamond Model (the specifics - the 4 different elements in the diamond) -Demand conditions: examples-Factor conditions: examples-Related and supporting industries: examples -Firm strategy, structure, and rivalry
• Factor Conditions Quality and quantity of labor, natural resources, capital, technology, know-how, entrepreneurship, quality of research universities and other factors of production Example:An abundance of cost-effective and well-educated workers give China a competitive advantage in the production of laptop computers.Germany benefits from an abundance of highly-skilled engineers (which are are product of the education system) making firms depending on these skills extremely competitive.
• Demand Conditions the strengths and sophistication of customer demand.The idea here is that the more sophisticated the demand in a firm's home country is - the more innovative and productive it has to be to survive (idea similar to growing up in a tough neighborhood).This makes the company more competitive with other companies (from other parts of the world). Example:Japan is a denselypopulated, hot, and humid country with very demanding consumers. These conditions led Japan to become one of the leading producers of superior, compact air conditioners.
• Related and Supporting Industries the presence of suppliers, competitors, and complementary firms that excel within a given industry Example:The Silicon Valley in California is a great place to launch a computer software firm because it is home to thousands of knowledgeable firms and workers in the software industry. At the same time, there are many venture capital firms that help these companies to get started.
• Firm strategy, structure, and rivalry The nature of domestic rivalry, and conditions that determine how a nation's firms are created, organized, and managed.strong competitors in a nation help create and maintain national competitive advantage, since this pressure leads companies to innovate and improve continuously resulting in a strong competitive position of the country in these industries as a whole. Example:Italy has many top firms in design industries such as textiles, furniture, lighting, and fashion. Vigorous competitive rivalry puts these firms under constant pressure to innovate, which has propelled Italy to a leading position in design, worldwide.Another example is the consumer electronics industry in Japan (Sony, Nintendo, Sharp, NEC)
• Industrial cluster A concentration of businesses, suppliers, and supporting firms in the same industry at a particular location, characterized by a critical mass of human talent, capital, or other factor endowments. Example:Silicon Valley; pharmaceutical cluster in Switzerland; footwear industry in Pusan, South Korea; IT industry in Bangalore, India; fashion cluster in northern Italy; and Silicon Valley North near Ottawa, Canada.
• Globalisation - the process by which businesses or other organizations develop international influence or start operating on an international scale.
• Benefits of globalization - reduces marketing costs- same advertising - creates new market opportunities- levels uneven income stream
• Reasons for the pace of globalization - technological advances - recused cost of manufacturing, transportation and communication technologies- internet has enabled fast and 24/7 global communication, social media - electronic payment systems - increasing capital mobility- increasing trade - world trading systems and standards
• Globalisation of production - sourcing of goods and services from different locations around the globe to take advantage of national difference in cost and quality of factors of production to compete against rivals - skilled labor force can deliver services "around the clock"  Goals:- lower overall cost structure- improving the quality or functionality of their product- gain competitive advantage- access to technical expertise, low-cost workers
• Gross Domestic Product (GDP) Consumption + Investment + Government spending + Net exports - Currency value of all final goods and services produced within a country in a given period- Total income of a nation- Measure of nations economic well-being- perfect is 3-3,5%
• Pros and Cons of Globalisation Pros:- faster, cheaper Const:- bisphere destruction- spread of pandemics- migration provoked by poverty, insecurity, political instability
• Global Governance - brings together diverse actors to coordinate collective action at the level of the planet- provide global public goods, peace and security, justice systems for conflict, functioning markets and unified standards for trade and industry- continious process of balancing different interests  Forms and Formats- International Agreements (GATT)- International Organisations (WHO, WTO, World Bank, IMF)- G7, G20- Government, Civil Society, Businesses
• Multilateralism - solving problems together - instead of "my country first" - international cooperation- developer of common norms and rules - a system where states can meet and cooperate on common challanges and seek peaceful solutions- official meetings and events- interactions with NGOs e.g. Agenda 2030 for Sustainable Developments (SDGs)
• Different Forms and Formats of Global Governance The UN:- prevent new wars, stimulate economic development and well-being- all members have the same rights and obligations The World Bank: - fight poverty and improve living standards of people in the developing world The International Monetary Fund (IMF)- prevention of another global depression- secure financial stability, promote high employment and sustainable economic growth, reduce poverty around the world, tracking the global economy, promote exchange stability  Difference World Bank & IMF:- World Bank provides financing, policy advice and technical assistance- IMF keeps track of the economy globally  World Trade Organisation (WTO)- deals with rules of trade between nations- goal is to help producers of goods and services, exporters and importers with their business

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